“Dramatic” Solar Price Reductions Will Only Continue

Solar prices have been in a sharp decline for several years now, due primarily to massive drops in PV module pricing, but a new report has shown that solar prices will only continue to fall as price reductions spread to inverters, trackers, and even labor costs.

The new report was published by GTM Research this week, entitled U.S. PV System Pricing H2 2016: System Pricing, Breakdowns and Forecasts, and investigates the solar system pricing stack across market segments and the impacts that pricing drops will have.

Solar PV module prices have been dropping for some time, due primarily to a significant oversupply issue. Module prices will also continue to fall, having already fallen 33.8% since the first half of 2016, affecting overall solar system pricing, particularly in the utility-solar market, where solar modules account for a much larger slice of the bill — fixed-tilt utility-scale solar have seen prices dropped 17.4%, while single-axis tracking projects have seen their prices drop by 14.9%. The report also notes, however, that while solar module price drops have had a significant impact on utility-scale solar prices, “aggressive market entrants in the inverter and racking markets are also pushing prices down rapidly.”

H1 & H2 2016 EPC/Installer System Pricing by Market Segment ($/Wdc)

The author of the report, GTM Research solar analyst Ben Gallagher, acknowledged quarter-to-quarter and year-to-year price drops for the solar industry have been the norm for some time now, but “in the past six months, these price drops have been more dramatic than anything we’ve seen since 2011 or 2012.” Further, Gallagher adds that “It’s not just the price drop for modules, but the entire balance-of-system hardware ecosystem that’s seeing tremendous price pressure.”

Further price drops have been seen across several aspects of the chain, including $0.01/Wdc from the first half of 2016 to the second half for labor costs, while residential solar prices have fallen by 8.6%.

The report also claims that 2017 is going to be a “negative growth” year for the solar industry, even as the “dramatic” downward trend of solar prices continue. “Solar hardware firms will need to not only compete on price, but they’ll have to provide an additional value to the EPC — to reduce installation time or help reduce soft costs,” concluded Gallagher. “Not everyone will succeed at that, but the smarter firms will survive.”