The Cost Of Half A Billion Solar Panels Keeps Going Down, Down, Down

Presidential candidate Hillary Clinton has pledged that if she wins the Oval Office this fall, by 2020 there will be a lot more solar panels in the US. That’s more, as in half a billion total. That number sounds a little intimidating but in fact it’s do-able, and it keeps getting more do-able as the cost of solar keeps falling.

So, exactly how much is the cost of solar is falling, and why? The answers are important because they underpin all sorts of critical decisions in terms of US energy policy.

For that, we turn to the National Renewable Energy Laboratory, which has just come out with its solar cost report for the first quarter of 2016.

The NREL Solar Cost Report

You can find the full report at the NREL website under the title, “U.S. Solar Photovoltaic System Cost Benchmark: Q1 2016.”

For those of you new to the solar topic, that’s photovoltaic as in solar cells. Solar thermal projects are not included in the report.

The NREL report does include all of the factors that go into the cost of a solar installation. That includes “soft costs” such as labor, overhead and permits as well as the solar cell hardware itself.

Interestingly, the report also takes profit into consideration:

NREL uses a “bottom-up” modeling method to construct total capital costs by quantifying the typical cost of each individual system and project-development component, largely through dialogues and interviews with solar industry collaborators. The results represent total installed system costs from the perspective of the PV project developer or installer, including net profit in the cost of the hardware.

The aim here is to strive for a consistent methodology that gives you a firm basis for tracking changes over time. Since NREL has been producing the report since 2009, that adds up to a significant body of knowledge about the trajectory.

Yes, The Cost Of Solar Is Still Falling

The new NREL report has lots of good news for clean power fans:

The modeled costs for the first quarter of 2016 were down from the fourth quarter of 2015 by 6 percent, 4 percent, and 20 percent in the residential, commercial, and utility-scale sectors, respectively.

That utility scale drop of 20% looks especially impressive, but NREL cautions that is most likely a one-off related to bankruptcy, resulting in fire sales.

Otherwise, the factors pushing down costs across the board are:

…lower module and inverter prices, increased competition, lower installer and developer overheads, improved labor productivity, and optimized system configurations.

Inverters don’t grab headlines the way that new solar cell efficiency records do, but they are a key part of the installed cost of solar power (inverters convert the DC current into a usable AC current).

If you’re into tracking costs by watt, here’s the lowdown:

The costs fell to $2.93 per watt of direct current for residential systems, $2.13 per watt of direct current for commercial systems, and $1.42 per watt of direct current (Wdc) for utility-scale systems for fixed-tilt utility-scale systems, and $1.49 Wdc for one-axis-tracking utility-scale systems.

Zeroing In Soft Costs

NREL claims a “high degree of resolution” for its methodology, and that’s important because it enables policymakers to focus on low-hanging fruit for further cost reductions.

According to NREL, the rate of cost reduction in solar modules has slowed, so the proportion of soft costs has risen:

In the first quarter of 2016, soft costs accounted for 58 percent of residential system costs, 49 percent of commercial system costs, and 34 percent of utility-scale system costs.

The relatively high proportion of soft costs provides incentive for policymakers to focus on game-changing advances in areas other than solar cell efficiency.

Financing has been one area of focus, including arrangements that enable low income communities and households to afford solar power.

That’s why you’ll see the Energy Department providing support for startups and organizations like RE-volve, which has established a low cost solar seed fund with an assist from volunteer college students.

Why Half A Billion Is A Modest Goal

If half a billion still sounds intimidating, the Clinton campaign has been clear that half a billion (that’s a billion as equal to 1,000 million in common usage) refers to total installations. In other words, the half-billion clock has already started ticking.

When you break down the numbers, things are looking pretty good for the Clinton plan. According to the Solar Energy Industries Association’s latest market outlook update, 1.1 million US homes already have rooftop solar installations.

Now consider that each of those installations consists of multiple panels (the average for SolarCity, for example, is 24).

Throw in the commercial rooftop sector and the ground-mounted sector, and the numbers really start to add up.

Vehicle-mounted panels are another area in which solar growth could blossom (the company eSolar provides a good example of an up-and-comer in this sector).

In addition, the solar panel numbers only tell part of the US solar industry story. There is also growth potential in thermal systems, building-integrated materials, daylighting, and wearable and mobile devices.

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Image (screenshot): via NREL.