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Green Building News

Cost of Installed Solar Continues to Fall

The downward price trend for small photovoltaic systems continues into 2015, but a new annual report finds wide variations in cost

PV costs are coming down. The cost of photovoltaic systems has shown a steady decline. The trend continued into 2015.
Image Credit: Lawrence Berkeley National Laboratory

The median installed cost of small photovoltaic (PV) systems continues its downward march, with 2014 showing the fifth consecutive year of significant price reductions, according to an annual report from the Department of Energy’s Lawrence Berkeley National Laboratory.

Installed prices for both residential and non-residential PV systems finished last year were 40 cents per watt lower than they were the year before. The decline for large non-residential PV installations was even sharper, 70 cents per watt, the latest Tracking the Sun report said.

And in the first six months of 2015, PV prices in some larger states dropped by another 20 cents to 50 cents per watt.

The lab reported “tremendous variability” in PV pricing: For residential systems installed in 2014, 20% were sold for less than $3.50 per watt while another 20% sold for more than $5.30 per watt. In Arizona, 20% of residential installers posted median prices at or below $3 per watt last year, compared to the median price in the U.S. of $4.30 per watt.

The wide swing in prices is due to a variety of factors, the Lab said, including differences in system design and components, market and regulatory conditions, and installer-specific quirks.

“The continued decline in PV system pricing is especially noteworthy given the relatively stable price of PV modules since 2012,” a press release accompanying the report said. Lower costs could instead be attributed to lower “soft costs”: marketing, system design, installation labor, permitting, and other non-module expenses.

“The fact that such variability exists underscores the need for caution and specificity when referring to the installed price of PV, as clearly there is no single ‘price’ that uniformly and without qualification characterizes the U.S. market, or even particular market segments, as a whole,” said lead author Galen Barbose of the Lab’s Electricity Markets and Policy Group.

4 Comments

  1. Alan B | | #1

    It sounds like labour costs
    It sounds like labour costs are the wildcard here, the panel costs are already very low but installation does not get cheaper because companies need to make a profit and employees need to make a living (though many companies are interested in marching down to minimum wage, however customer pricing does not go down much, the employer pockets the increasing difference).

  2. D Dorsett | | #2

    It's not the labor cost.
    The biggest variation in soft-costs for residential PV is primarily customer-acquisition & marketing (advertising and quoting bids) followed by the number ov layers and difficulty of permitting & inspection by city/state/utility, etc. Labor is something like the 3th or 4th highest line item cost that makes up the final installed cost, behind the module & hardware cost, and the contractor margins & financing. Labor is comparable to the customer acquisition costs on average, but the particulars vary. Sometime permitting & inspection is as large or larger than the labor content.

    In more mature competitive markets in he US where the permitting is streamlined and PV is a generally accepted & known commodity the soft costs are much smaller. For larger commercial or utility scale projects in Texas $2.50/watt isn't rare. In competitive state markets like MA or NJ, $3-$3.50/watt or less is pretty common even on 5-7kw rooftop systems, and these are NOT low wage states with lax rules about unlicensed electrical worker.

    If there is a wildcard it is the degree of local policy & utility support for distributed PV. Time is money, and processes that delay permitting & inspection, or requiring sign-off from multiple organizations adds a huge amount of cost to a small-scale project. In mature markets like Germany where the installers are licensed and the nation has uniform regulation and connection rules around PV, the client can call multiple installers, get quotes within a week, get in installed, and the INSTALLER files all of the paperwork AFTER the thing is already up & running. Average cost of a 5kw system in Germany is under $2USD/watt. In Australia it's not quite as pain-free as in Germany, but it's about as competitive, and costs there are around $2/watt for a 5kw rooftop. Again, these are not cheap-labor nations with lax regulation.

    RMI did a rough estimate of the breakdown of total & soft costs a few years ago. The numbers have shifted by now, but it's not totally out of whack:

    http://www.rmi.org/Content/Images/simple_bos_figure_1.jpg

    You'll note that the average labor cost in Australia is higher than the US average, but the net cost lower. In Germany the labor costs are a bit more than half that of the US, a symptom of high productivity of busy & well trained crews, not low labor rates. In the hotter markets in the US the labor cost is getting down toward German levels, but the other soft costs are still higher.

  3. Alan B | | #3

    I didn't know that Dana, it
    I didn't know that Dana, it appears what the guys around here are telling me is incorrect.
    It would be a very good idea for the US to leverage the knowledge on lowering costs, otherwise the current cost may become the price floor which would slow the adoption rate and number of panels installed.

  4. Daniel Young | | #4

    It can be labor
    I have to disagree Dana, at least partially.

    Whenever these studies come out, i half put my head in my palm. I never see the clarity i think is needed when talking about Solar PV prices on this scale.

    Your are right that in magnitude, the average systems labor is 4-5th in line. But labor can be the number with the largest swings within a given market. Just think about the labor difference between putting a system on a ground mount where you have to mobilize twice (once to pour the foundations, a second time to install the rest of the array), vs a roof mount. Or the difference between installing an array on a 4/12 shingle roof on a one story house, vs a 12/12 metal roof that might be 20-25ft above grade. In each case, you may be looking at 2-3x the labor for one vs the other.

    You make a good point on labor being different in really busy markets, and in those areas it may well be the case (i hear though that some symptoms of that level of speed can be some really poor install quality), but that still really goes to the overall labor costs again, not the variability. All i can do is speak for my region (lower midwest).

    Maybe i'm just getting picky on magnitude vs variability though:)

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