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.
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
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.