Installed Solar Costs Declining Due To Government Policy


The average cost of going solar in the U.S. declined by more than 30% from 1998 to 2008 – a trend that can be largely attributed to the success of market-building policies at the state and local levels, according to a new report from the Lawrence Berkeley National Lab.

The report, titled ‘Tracking the Sun II: The Installed Cost of Photovoltaics in the U.S. from 1998-2008,’ also found that after a three-year plateau, costs decreased by 3.6% from 2007 to 2008, marking a pivotal year for the U.S. solar industry.

In addition, average installed costs as paid by the system owner prior to receipt of any incentives declined from $10.80/W in 1998 to $7.50/W in 2008, which is equivalent to an average annual reduction of $0.30/W, or 3.6% per year in real 2008 dollars. The primary driver over that 10-year period was a reduction in non-module costs, such as the cost of labor, marketing, overhead, inverters and the balance of systems.

In contrast, the decline in costs from $7.80/W in 2007 to $7.50/W in 2008 is primarily attributable to wholesale module costs, which decreased by approximately $0.50/W over this period, the report adds. PV installations benefit from significant economies of scale, suggesting that support for larger systems and larger markets drives down costs.

The report also found that the installed cost of solar varies widely by state – with low costs found in Arizona, California, and New Jersey – an indicator that more mature markets driven by strong incentives help reduce the cost of solar.

Total after-tax incentives from federal, state and local governments also declined from 2007 to 2008. The decreased incentives outpaced the drop in installed costs, leading to a slight rise in the net installed cost of both residential and commercial systems.

The full report is available here.

SOURCE: Lawrence Berkeley National Lab

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