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Good News for Consumers: Solar PV Costs Continue to Fall

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Lost in the stirrings over the recent collapse of two American-based solar manufacturing firms (Solyndra and Evergreen Solar) is the more important news that the U.S. solar industry has made tremendous strides reducing costs in the last couple years, leading to record-breaking growth and investment.

Workers installing solar panels on a Milwaukee residence

Photo: Midwest Renewable Energy Association

Late last week, the Department of Energy’s Lawrence Berkeley National Laboratory (LBNL) released Tracking the Sun IV, its fourth annual assessment of trends in the installed cost of grid-connected solar photovoltaic (PV) systems in the United States. Analyzing a data set that includes 116,000 residential, commercial, and larger utility-scale PV systems (representing 79 percent of all PV capacity connected to the U.S. power grid), LBNL found that the cost of installing a PV system in 2010 was $6.20 per installed watt, an impressive 17 percent reduction over 2009 levels. The trend is continuing in 2011, according to LBNL, with preliminary data from the California Solar Initiative showing another 11 percent (or $0.70/watt) decline in installation costs through June compared with 2010.

Record-breaking growth

Lower costs are translating into record-breaking growth for the solar industry. In 2010, installations of PV systems doubled in capacity over the previous year and the value of the U.S. solar market grew by two-thirds (from $3.6 billion to $6.0 billion), according to the Solar Energy Industries Association’s annual market report.

Cost reductions coming from multiple directions

Perhaps the most encouraging finding in the LBNL report is that “non-module” expenses (i.e., expenses unrelated to the solar panel unit itself), including things like installation labor, mounting hardware, permitting, and other overhead, are responsible for about 40 percent of the decline in installed cost. While the wholesale price of PV modules has been falling for several years on the global market, thanks largely to an increased supply of lower-cost silicon and new competition from foreign manufacturing, non-module costs remained relatively flat from 2007 to 2009, before dropping 18 percent in 2010 (see figure below). This trend is important because it shows that solar’s cost-cutting capacity is not one-dimensional, and the industry’s recent growth is leading to greater economies of scale, competition, and innovation in a diversity of areas. It is a good sign for consumers and evidence of a healthy and viable industry.

Installer-Reported Component-Level Costs for Behind-the-Meter Solar PV

Installer-Reported Component-Level Costs for Behind-the-Meter Solar PV

Source: LBNL 2011.

Continued policy support needed

The good news out of the LBNL report also illustrates the effectiveness of existing policies that both encourage investment in technology innovation and sustain stable, long-term market demand. Policies like renewable electricity standards, tax or cash incentives, and public-private R&D partnerships have all played an important role in driving these cost reductions. Rather than pull back at this critical stage, as some members of Congress and other state leaders would have us do, we need to instead keep our foot on the accelerator and maintain the momentum that has been gained. Doing so will deliver further cost reductions, and allow solar power to play an increasingly integral role in securing a clean and sustainable energy economy.

Posted in: Energy

About the author: Jeff Deyette is a senior energy analyst with expertise on the economic and environmental implications of renewable energy and energy efficiency policies at the state and federal level. He holds a master’s degree in energy resource and environmental management & international relations. See Jeff's full bio.

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One Response

  1. Warren says:

    New York Times reports nearly one-fifth of American solar manufacturers filed for bankruptcy or closed this year. That’s a 20% failure rate that is somehow being smoothed over and made to look ‘natural’. Talk about smearing lipstick on a pig!

    Let’s not seriously suggest there has been too little subsidization of solar – there’s been plenty enough coddling to set the industry up for competitive failure…and no amount of additional subsidy can correct that political calamity. We have invited the Chinese to eat our lunch on this one and they are more than happy to oblige. Silver lining is when the intellectually flawed underlying technology fails to deliver after we’ve installed all those imported solar panels we can shift the blame onto the Chinese!