Solar’s declining costs good news for consumers

lt-solar-price-dropIt is becoming easier for individuals and businesses to tap into renewable energy and reduce dependence on coal-fired plants as national average prices for solar systems drop in the U.S.

Solar system costs have been declining thanks to cheaper installation rates and lower module prices, according to a Lawrence Berkeley National Laboratory study.

The study shows solar system prices dropping more than 30 percent in the U.S. between 1998 and 2008. The most significant drop has been in the prices of small, residential photovoltaic (PV) solar systems.

The four percent drop between 2007 and 2008 was due to a decline in module prices, which had been fairly stagnant from 2005 to 2007. The drop from 1998 to 2007 was mainly due to a reduction in costs not associated with the modules, including installation.

“The decline in installed costs from 2007 to 2008 appears to be attributable largely to a reduction in module costs,” reported the authors of the study. “In contrast, the decline in total installed costs from 1998 to 2005 is associated primarily with a reduction in nonmodule costs (which may include items such as inverters, other balance of systems hardware, labor, and overhead).”

The study also compiled international price data. Small, residential PV system costs in Germany ($6.1/watt) and Japan ($6.9/watt) in 2008 were lower than in the U.S. ($7.9/watt).

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Researchers found solar system costs to vary widely from state to state. The cheapest systems are in Arizona and California, with averages of $7.3/watt and $8.2/watt, respectively. The most expensive systems were $9.9/watt in Ohio and Pennsylvania.

The authors took this data, along with the international price comparisons from countries with widespread solar energy use, to suggest that U.S. prices will continue to fall in the near-term with larger-scale development.

On the downside, the study showed a reduction in the average amount of direct cash incentives offered by state and local PV programs over the ten-year period, along with federal after-tax investment incentives.

Though the national average in state-offered incentives declined during this period, programs that encourage solar vary widely from state-to-state.

The Berkeley lab findings are summarized in more detail in the following press release.

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