Clean Power

Published on March 11th, 2015 | by Joshua S Hill

25

Solar System Pricing Dropped By 9% In 2014

March 11th, 2015 by  

Solar system pricing dropped by 9–12% over the course of 2014, according to new research published by GTM Research and the Solar Energy Industries Association (SEIA).

As part of the partnership’s US Solar Market Insight, 2014 Year-in-Review report, the authors provided national solar PV system pricing based on tracked wholesale pricing of major solar components and data collected from major installers, with the national average pricing supplemented by data collected from utility and state programs.

Accordingly, system costs dropped by 9–12% over the course of 2014, depending on the market segment. Costs have been driven down almost across the board, thanks to competition amongst hardware suppliers, more efficient installation and operations, industry scale, and more aggressive bidding — nevertheless, PV module costs have remained relatively stable, with total installation costs for utility-scale and large commercial-scale systems falling below $2.00/W DC, and have now fallen under 2011 module costs.

US National Average System Costs by Market Segment

GTM-6

While the majority of analysis is constricted to the paid report, GTM and the SEIA provided substantial information in the executive summary of the report given to outlets.

National residential system costs came in at a weighted national average of $3.48/Wdc in the fourth quarter of 2014, which represents a 3.3% decrease quarter over quarter.

Residential Turnkey Rooftop PV System Installed Costs, Q1 2014-Q4 2014

GTM-7

The residential PV market has seen the sharpest cost declines of the three solar PV segments, with a weighted average pricing in the segment falling by $0.40/Wdc from 2013. Soft costs still account for 60% of system costs, but “tremendous cost-reduction efforts resulted in more efficient installations and operations throughout 2014.

Medium-scale costs were $2.25/Wdc for the fourth quarter of 2014, with a full-year blended average of $2.36/Wdc, representing a 20% decline year-over-year.

Non-Residential Turnkey Rooftop PV System Installed Costs, Q1 2014-Q4 2014

GTM-8

National utility costs also dropped, with fixed-tilt utility systems coming in at $1.55/Wdc in the fourth quarter, and costs for systems installed in Q4 2014 coming in as low as $1.40/Wdc and as high as $2.10/Wdc.

Utility Turnkey PV System Turnkey Pricing, Q1 2014-Q4 2014

GTM-9


Buy a cool T-shirt or mug in the CleanTechnica store!
 
Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech daily newsletter or weekly newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.

Tags: , , , , , ,


About the Author

I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.



  • Ronald Brakels

    Now this isn’t necessarily a direct comparison as conditions differ between the two countries, but in Australia the median sized rooftop solar installationn has dropped by about 14% a year over the past couple of years. The United States should be catching up to the world leader in this area, not falling further behind. But as more people get rooftop solar installed, prices will come down, so hopefully the US will see double digit annual price drops soon.

  • JamesWimberley

    A 9% annual drop in prices is in line with the long-term global learning curve for solar. The default prediction is that 2015 will look pretty similar.

  • MarTams

    If you buy solar PV panel grid tied system and hire licensed contractor to install it, the cost is about $2.75/Watt in our area before tax credits.
    Panels have lowered their prices but not the install and soft costs. The permitting process could be standardized made online and free. Often the savings via the packaging of panels that makes the installation rapid and labor minimized are not passed down to the customer unless the instalers faced competition.

    • vensonata

      MarTams, that is a good price. What area?

  • vensonata

    I’d like to read some commenters on what they think $3.48 watt really means. That is residential rate fully installed before subsidies. The question is: what is the cost per kwh if you pay cash for the system. Not the levelized cost of electricity from the NREL site since they presume a 7.5% loan. Does “lifetime production” make sense as a way of calculating the price per kwh? That is based on a 35 year life (or longer) total production divided by the total cost of system. Is it necessary to figure the “cost of money” for valid calculation?

    • globi

      In Germany it would be the price of the entire system paid to the “Solarteur” (the company that sells the PV-system and installs it).
      Small residental systems including everything (modules, inverters, planning, installation etc.) are around €1.3 /W before taxes (in the US one gets a tax credit and in Germany one pays a sales tax). link.

    • vensonata

      Maybe I should clarify my question. A 5 kw solar array installed in Phoenix Arizona will cost $17,500. (Based on $3.50watt). That 5 kw system will produce 5×1800 kwh per year = 9000kwh per year. It will do that for 35 years (with some small loss in the last ten years). The total production over its lifetime is 35 x 9000 = 315,000kwh. So to determine cost per kwh we divide price $17,500 by lifetime production 315,000kwh and the result is: 5.5 cents per kwh. So the question is, is that an acceptable way to get a real cost per kwh? (I am not including cleaning etc) I am also including the micro inverter as having a lifespan as long as the panels.
      If 5.5 cents is close to reality what is anybody waiting for? So now I need somebody who knows how money works (I don’t) to talk about why my numbers are so low.

      • Chuck

        ‘If 5.5 cents is close to reality what is anybody waiting for?’ That’s the question most all of us with pv systems are asking! Fundamentally though I think it is as simple as folks seeing $17,000 as a lot of money (even if you explain to them it is a good long term investment). That same $17,000 can get you a new car, a new kitchen or a heck of a vacation. Poor investments but instant gratification.

        • Will E

          prices must come down in USA.
          strong dollar. offers here, the Netherlands, are 1 euro a kwh.
          so at 1 dollar you pay 5000 dollar for 5000 kwh.

          • Chuck

            yes, we have issues.

        • Jenny Sommer

          Waiting for sub 1€ stick on PV +cheap battery storage. I can do the electric installation stuff on my own.

      • Will E

        this is the way to calculate.
        only thing is that 3.50 dollar watt is expensive. the price here is
        1 euro a watt installation cost,
        the Netherlands.
        strong dollar, prices must come down for you, now you got 5.5 cents kwh
        when installation cost go to 2 dollar
        you get 3 cents a kwh.
        this energy well never runs dry.
        and like your comment

      • globi

        Most people amortize over 20 years not 35 years. (Even though the modules may last 50 years).
        Also, the inverter may need to be replaced after 10 years.
        Furthermore, you should also take a module-degradation of 0.5% per year into account.

        • Bob_Wallace

          I suspect your 10 year life expectancy for inverters is pretty low. I know a lot of people who are off grid and inverter failures just aren’t happening. My current inverter is about 15 years old and one I installed about 25 years ago in a different house is still going strong.

          Module degradation is clearly lower than 0.5% per year.

          From a NREL megastudy of solar panel lifespan.

          . For monocrystalline silicon, the most commonly used panel for commercial and residential PV, the degradation rate is less than 0.5% for panels made before 2000, and less than 0.4% for panels made after 2000. That means that a panel manufactured today should produce 92% of its original power after 20 years, quite a bit higher than the 80% estimated by the 1% rule.

          http://www.nrel.gov/docs/fy12osti/51664.pdf

          The oldest array we know about lost 0.1% per year over 35 years.

          http://www.presse.uni-oldenburg.de/einblicke/54/files/assets/downloads/page0009.pdf

          • eveee

            If you feed me the numbers for everything, inverters, insurance, operation and maintenance, first cost, interest rate, assumed period of payback, I can compute the cost/kwhr. (probably) Taxes might make it too complicated. 😉

          • globi

            Some Germans just reduce the amortization rate to 10 years and ignore all the rest. (Then they know that they are on the safe side).

          • eveee

            Yes. It feels good for me to do the numbers. I like to have solid ground when discussing the subject. But its easier to do something simple like what you suggested.
            I find FITs and Net Metering more difficult to understand. Thats how the analysis must be done given those realities. In the US, the net metering, PPA, or lease must be evaluated. Any subsidies may need to be taken into account if purchasing.

        • vensonata

          globi, thanks for the numbers. Yes I think people do use those numbers which could make people spend their money on some other investment. That is why I think sites such as Cleantechnica should have a robust discussion about these numbers…things have changed. For instance the lifespan of a “string” inverter is perhaps 15 years (my own two 4.5kw inverters are behaving flawlessly at 15 years old) but these “micro inverters” come with 25 year warranties now, they can be pre installed on the panel at the factory and share the panel warranty. Also “double sided glass” PV now have 30 year warranties! So this is what I mean by new info needing to be disseminated.

      • eveee

        The analysis is complicated by compound interest. In an economic analysis, the future worth of electricity generated may be assumed to be a series of equal annual values. (it could be extended to shorter time intervals) Based on an assumed interest rate, the net present value could be balanced against the energy production to yield a cost/kwhr.
        The first part of this analysis is to calculate an equal series of annual payments that are equal to the first cost.
        A – annual payment
        P – present worth
        i – interest
        n – number of periods

        A = P x [i(1+i)^n]/[(1+i)^n -1]

        where ^n means to the power n.
        don’t worry if that formula is too complicated, a simpler method using already worked out values for i, n, P, and A are tabulated in text and reference books.

        The capital recovery factor A/P for 5% interest over 20 years is

        0.08024

        That means, for example, that the annual worth of a net present value of 10,000 dollars at 5% interest and 20 years of equal payments is 802.40 dollars.

        In our case, because of compound interest, future payments must be larger than a simple sum of equal payments P/n.

        Lets take your case. P = 17,500. Then A = 1404.20

        cost/kwhr = 1404.20/9000 = 0.156.

        It really should be accounted on the basis of 25 years. The
        A/P for that at 5% is 0.07095

        That yields cost/kwhr = 0.13795/kwhr

        That means we can compute that to reach 0.10/kwhr, we need a first cost of 12,685, under the assumed conditions.

        Since utility installed costs are half as much, its easy to see why utilities are embracing utility solar. The simplified assumptions in this case do not include O and M, salvage, taxes, and administrative costs, or inverter replacement cost. Thats why the lowest cost unsubsidized utility rate was just under 0.06/kwhr, not 0.05/kwhr.

        While Phoenix has an unusually high insolation, we can compute that we need lower than 2.537/watt costs to get less than 0.10/kwhr solar PV rates.

        Given the falling BOS costs and panel costs, we are going to see residential solar equivalent rates dropping below 0.10/kwhr soon in the US, and those rates are already realizable in places like Germany and Australia.

        • vensonata

          Evee, that is a good answer. The next thing I think about is: what is the “avoided cost of electricity”. In Phoenix the rate is about 13 cents kwh. At 9000 kwh year that is $1170, avoided cost. So in 15 years one would have paid the same or more to the utilities as the cost of the PV array. There is still 20 years left (at least) of lifespan where one would save (assuming rates did not go up!) $23,400. So that is another way of looking at it, isn’t it? I am genuinely asking, since I am a naive amateur in these money issues, but I know there are people out there who do this kind of thinking for a living.

          • globi

            Yes it is and your own PV system is also a good protection against inflation.

          • eveee

            I like this calculator, but its limited. You can’t lower the installed rate below $4/watt, for example and it uses insolation relative to Minnesota.

            They apply the ITC, which also helps.

            If it works with these numbers, and you are anywhere south of Minnesota, …. 🙂

            There are many calculators online.

            http://www.dnr.state.mn.us/energysmart/why/calculator.html

          • eveee

            Even though I did some calculations, its a bit more complicated than I showed. The Minnesota calculator gives a good insight into that.

            Your question regarding payback can be seen in some of the calculators that show when your net flow is out or in. At the payback point it reverses to a net inflow paying you back.

            Here is the NREL solar payback calculator.

            http://pvwatts.nrel.gov

            It makes things simple, but it does not show the nice graph of payback vs time.

            This one shows the payback vs time, but its inputs are compacted. On the plus side, it gives you an insight into other factors you might not have considered, like depreciation. It does not include the ITC, like some calculators.

            http://www.sunearthtools.com/solar/payback-photovoltaic.php

    • JamesWimberley

      Any economist will tell you that it is correct o include the cost of capital. If you didn’t spend your savings on solar kit, you could invest them elsewhere. What is questionable is the high 7.5% rate. What low-risk investments are available to householders that yield anything like that? It’s an appropriate rate for equity capital in medium-risk uses, like developing utility farms for later sale to low-risk investors like Buffett. 5% real would be a high rate for householders.

      See the IPCC WG3 report, Annex III (link), for examples of the difference that the cost of capital makes to the costs of different forms of power generation.

      • vensonata

        James, thanks for that…so they are assuming that one could invest the money elsewhere and at 7.5% you could pay your utility bill with interest you earn. That interest on $17,500 at 7.5% is $1312 per year. True, the utility bill that the array displace is 9000 kw x 13 cents. $1170. So yes, that also zeroes your utility bill just like the solar, but the investment doesn’t get any compound interest since it is being spent every year on electricity, and meanwhile inflation is diminishing the value of the original $17,500 while the electric rate is climbing at 5% per year. So in the end, the money is shrinking, the bills are expanding, and it starts to look like the solar would have been a pretty good investment after all!
        Now this is merely my very amateur thinking about this money issue, I am completely over my head in that world!

Back to Top ↑