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PV Systems Have Gotten Dirt Cheap

In many areas of the country, electricity from a photovoltaic system now costs less than electricity from the grid

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Three photovoltaic arrays have been installed on the roof of this remodeled home in Falmouth, Maine.
Image Credit: Jesse Thompson
Three photovoltaic arrays have been installed on the roof of this remodeled home in Falmouth, Maine.
Image Credit: Jesse Thompson
The installed cost of PV systems has been dropping for years.

Something strange has happened to the price of photovoltaic (PV) systems in the last year. PV has gotten dirt cheap.

Honestly, it’s gotten cheaper faster than our office has realized, and we try to stay up on these things. Worse, we’ve realized we haven’t been making proper recommendations to our clients because of it.

It’s also shifting some of the underpinnings of our typical design analysis in strange ways, and it looks like there are some unexpected consequences we haven’t yet figured out.

In April 2010, a PV system cost $8 a watt

Here are the numbers. I have a note from April 2010 listing installed residential photovoltaic systems as costing $8,000 per kW capacity before state and federal tax credits, currently 30% off retail. In our area, a one-kilowatt PV system (about 4 – 5 solar modules) generates about 1,300 kWH per year. If you bought 1,300 kWH of electricity from our local utility (burning natural gas, fuel oil, hydro and coal), they would charge you $0.16 / kWH, or $208 / year.

If we’re conservative in our expectations, the PV array you bought would last you 25 years, and make you $5,200 of electricity over its working lifetime, assuming electricity prices never increase. No one believes costs will stay where they are, but it makes the math easier, and we’re being conservative, right? Isn’t that’s what us green builders and designers do?

So there’s the issue: we paid $8,000 for a system that only makes us $5,200 of electricity over its lifetime, and we have to start piling on tax credits and inflation assumptions and lots of other complicated financial math to make those panels “worth it” to our clients. It’s been a stretch.

Now, the cost of a PV system has dropped to $4.50 a watt

Now for 2011: the latest prices we’ve been getting for PV are $4,500 per kW before tax credits. It’s dropped 45% since last year. A colleague who posts here, John Semmelhack, recently got a quote for a ground mounted 9 kW system of $4,100 per kW!

So now our system that makes us $5,200 of electricity costs us $4,500. See where we’re going? PV is now cheaper than dirty electricity in our area. Why aren’t we all crying this from the rooftops? This is a really big deal!

Let’s try the math a different way: 1,300 kWH * 25 years = 32,500 kWH generated over the life of the panels. At $8,000 / kW, that’s $8,000 / 32,500 kWH = $0.25 / kWH, 53% more expensive than dirty electricity, but good for the planet.

That’s been our sales pitch: virtuous, but not for everyone. But $4,500 / 32,500 kWH = $0.14 / kWH, which is 15% cheaper than dirty electricity. PV is the cheapest electricity you can buy in our area — before you take tax credits into account!

So that’s Maine. Let’s take those same panels to New York City, where electricity can cost $0.25 / kWH, pile on the generous NYC tax credits and federal tax credits, and the final figure is $0.10 / kWH. You’ll end up 60% cheaper than utility electric. It boggles the mind.

We are rapidly approaching grid parity

So, what does this all mean?

• It means we’re not far off from PV being the cheapest source of electricity you can buy everywhere in the whole country, even in the parts of the country with access to cheap and toxic coal electricity. Is that time five years away? Ten years away? It doesn’t really matter; either one is a very short length of time, and we should get ready for that and pay attention.

• We have a financing problem, not a PV cost problem. Add a 5% loan at 25 years onto that $0.14 / kWH system, and the price rises to $0.24 / kWH. If you and I had access to the 1% loans the federal government is giving Goldman Sachs, we’d be all set, but we don’t. So let’s start considering the tax credits a financing rebate instead of a solar system rebate, because if you take your tax credit and pay down your principal you’ll end up right around $0.17 / kWH in our area, and that’s close to what our utility charges right now. This is where policy can help: to advocate for solutions to this financing issue.

• Our design sequence might change. Roof size will be a big design limitation for net (plus)-zero single-family housing design, and we might be using this to decide on our optimal insulation packages instead of kBTU / SF / year, and this comes from a certified Passive House consultant who has spent years in the efficiency trenches.

• The tax credits worked and should be celebrated. Let’s claim success on this one. Government encouragement did kick-start the industry and allow it to gain enough strength to compete head-to-head against dirty fuels. This is good thing, it worked exactly like it was supposed to. Let’s not forget this in our discussions: PV didn’t get cheaper all by itself, but it sure did it faster and cheaper than nuclear, fossil or bio-fuels did in their history. Take a look at this graphic for some context.

• All of us in the green building community need to start talking about this more to our clients and friends. We didn’t believe the math when we first saw it, but our local solar installer backed me up and says his biggest problem is getting the word out, not proving it works. This change has happened fast, it’s not common knowledge yet.

Anticipating the naysayers

And to speak to the quick and easy responses:

• Yes, I know net-zero doesn’t mean you make enough electricity in the winter to power your own house, and something else has to power up to fill the gap. But please, this is a problem we would love to face. Personally I think that Spain, who just made 30% of their entire electricity production from renewables, will figure this out nicely for us before we face this issue.

• As well, I know that net-zero is not enough, and we need to be working on restorative design and surplus renewables production to make up for the last century of fossil fuel damage. But please, anyone who uses this as an excuse not to do the right thing needs to be spending their free time at their state capital arguing for feed-in tariffs to allow homeowners to be allowed to sell a surplus. Right now, any surplus our clients make gets a nice thank-you note from CMP, they don’t get to earn a cent for helping out their neighbors’ electricity supply.

• Insulation is tougher than PV. Sure! Don’t stop building high-quality houses; the need for better buildings isn’t going to change. A building built to Passive House standards will be a tougher, more resilient and durable house than one built to a lesser standard. I would build to that standard myself if it was my new house, but let’s not use greenhouse gas destroying insulation methods to do it. That’s just absurd at this point.

• Stop talking about payback. Please. I haven’t seen a client yet get excited about payback. It’s almost always used instead as an excuse for inaction. Cheaper electricity than the electricity they are buying from their utility right now? That is something that gets our clients excited…

If you don’t believe me, do the math yourself

Lastly, don’t believe me; I’m just an architect, and we’re famous for not being that good at math. At our office, we’ve developed a PV cost calculation spreadsheet to speed these calculations.

Everyone needs to add their own recent experience, and back check this analysis to make sure we’re not just blowing smoke.

But, other smart people are saying the same thing. I didn’t pull it out of thin air.

Perhaps a better future is actually possible?

Jesse Thompson is an architect at Kaplan Thompson Architects in Portland, Maine.



  1. Mike Eliason | | #1

    This may be a regional
    This may be a regional anomaly (at least for now)... But when we look at cost of PV for PH and near-PH modeled projects here in the NW - we're still seeing that even w/ PV at $4.50/watt that we can't recoup the cost of the system - even taking into account annually increasing rates. At least, not in 25 years. This is due to two functions - severe lack of sun (parts of AK get as much as we do), and electricity rates significantly less than the Northeast. I think on average, a PV panel in the NE is also going to produce something like 25% more annually than Seattle.

    I also think the issue of consumption needs to be addressed significantly before adding production - especially after talking with Alex Wilson about resiliency this weekend. Simply focusing on the production side will require additional outputs from energy companies as new buildings are brought online. If consumption’s not addressed – then you run into significant issues like not having enough roof area. Add in the difficulty of urban areas, larger buildings, certain typologies (e.g. hospitals) and it can get tough to pencil out quickly. Though by reducing consumption down to PH levels, it’s possible to create buildings that are powerhouses – that is, produce more energy than they consume. This is the restorative bit, which is something I’m shocked LBC doesn’t require.

    Generally, though, I feel that in most instances it would be better to separate consumption and production. Individual systems are great for that individual building, but in terms of global impact, it is nearly zero. I’d rather see those costs localized into microgrid/DER solutions that could have a stronger impact globally. Leave production to the power companies, but force them to bring renewables/cleaner sources online.

    Furthermore, the cost of achieving PH in this country will only go down as people figure out how to optimize their projects (which can go a long way!) and manufacturers on this side step up with better windows/doors, etc.

  2. Jesse Thompson | | #2

    Regional variations

    It's definitely regional. California and the northeast (which make up 25% of the total population of the US) are the early break even areas with their current high electricity costs. The PNW with weak sun and cheap hydro will come later, but it seems clear it will come even there sooner than we expected.

    I attached our spreadsheet for folks to test this out on their own, but the link might be a bit hidden at the end:

    I'd be curious to hear what the regional variances are and how far off we are from cheap PV nationwide.

  3. jbmoyer | | #3

    Efficiency v. Production

    Interesting article. Thank you for discussing the importance of building high performance structures. I was curious what your building enclosures typically look like.

    And for you other builders out there, I ask the same question-- For projects that include renewables, what are the R-values of your wall and roof assemblies?

    Is this chart of "High R-value Recommendations" from BSC appropriate for projects including solar?

  4. Jesse Thompson | | #4

    Brett, Our technical standard

    Our technical standard for houses in the Northeast typically starts in the range of what we call the "NESEA house" around here. Walls @ ~R-40, Roofs @ ~R-40-60, ~R-20 underslab insulation, triple glazed windows. Air source heat pump, monitor heater or simple one-zone radiant heating system with good fresh air ventilation.

    Houses like this in the northeast climate end up with modeled energy use ranges from ~13 kBTU / sf / yr to ~4.75 kBTU / sf / yr depending on how much passive solar availability there is (urban, rural, remodel, etc).

    When we work in the mid-Atlantic region we can downgrade to ~R-30 - 35 walls, R-40 roofs, triple or double glazed windows, and usually still reach Passivhaus conservation levels.

  5. user-1044812 | | #5

    PV in the PNW
    Definitely regional. We are building a Net-Zero house, and the system that is going on the house is costing ~$6'425/kW. There is a local production incentive of $0.15 and local power prices are between $0.085 and $0.11.

    I did the math for my own house, and it would basically double my power bill at 0% interest and triple it at 5%. Taking the production credit into account (only guaranteed for the next 8 years), I am at double my current power bill with 5% ROI. In other parts of the country, given the right roof exposure, it would be an easy decision.

    Glad you hit on the insulation issue because it is so cheap to do in construction. Hard to go back and do that later! When we are done, I am betting the cost to insulate the home to a level better than code (R35 walls and R50 roof) will be less than 10% the cost of the PV.

  6. AAD2 | | #6

    PV Cost calculation spreadsheet
    I took a look at that spreadsheet and I'm not certain what number is supposed to be entered in cell A8. Is it the total kWh produced per year?

  7. Jesse Thompson | | #7

    Cell A8

    Correct, that's the kWH produced by a 1 kW capacity array. More sun, more production from the same panel. Seattle might only make 1,009 kWH /year, Los Angeles 1,528 kWH.

    There are some sample locations down at the bottom left of the spreadsheet already input, or you can generate your own at the PVwatts website:

  8. Jason Peacock | | #8

    The times they are a changin'.
    Great write up Jesse.

    Brace yourself for the increasing cost of oil (peak oil) in the next few years and the demand for PV ramping up. I recently visited California and there seemed to be PV everywhere. It's great to see that grid parity is possible currently and looking more viable in the near future. Each one of us in design and construction community needs to do the best we can with what we have and push each client to do the same. I've grown tired of living in a world where big oil money with blood on its hands still rules the world.

    Be the change you want to see.

    See my dream design realized at

    Jason Peacock, LEED AP
    Maine Green Building Supply
    Platinum Green Inc.

  9. stepco | | #9

    Cheaper is great, but WHY is it cheaper?
    I'm all in favor of renewables. But when I see the price of something drop by half in a year, my first thought is that it's because manufacturing has been shifted to China, and that the price drop is being paid for by exploited workers who have no political rights and by burning huge amounts of very dirty coal. I'd love to hear that this is not the case, that the price drop was caused by technical advances, or economies of scale. Does anyone know the answer to this?

  10. GBA Editor
    Martin Holladay | | #10

    Response to Steve
    Your analysis is basically correct. Chinese manufacturers have the lowest PV module prices, and that is driving all of these changes to the industry.

  11. teRhb9JP6g | | #11

    Hawaii Average is $25.47 per kw hour
    Good article. Here in Maui, where electricity is created from mostly diesel generators, we paid an average of $25.47 per kw hour in 2010. Solar makes a ton of sense here as the sun is around on most days. They are adding wind power...but it makes more sense to me to go solar, where you don't damage the views. But that's just me.

    Armchair Builder

  12. RMGheHhbJx | | #12

    Couple of Ideas Jogged Loose.
    First thought that comes to mind is about the "Payback" caveat toward the end of the article. We build in the northwest where power is about .08 cents/kwh. We have been building energy star into new homes for a net cost to the builder of about $1,500 after rebates and all costs(before the 2011 standards went into effect). That's about $6.25 per month on your mortgage(@ 5%) to save up to $30 to $60 per month on a 1,500 to 2,400 square foot home, depending on how poor the code house is constructed by a builder with little or no training on what's important behind the sheet rock. Even though you can't get that ROI anywhere else unless you are a loan shark, people still shrug their shoulders unmoved by the facts. They will pay $30 more per month FOR LIFE so they can spend $1,500 on upgraded carpet. It defies logic.
    The other comment I wanted to make was to agree with the "reduce the use" idea by another respondent. I can do Sips, ductless, tankless, and other shell improvements resulting in a HERS score of 41 on a 1,560 sq ft home for $11,000. This is a good benchmark to indicate that you are ready to add renewables, but with my luck convincing a buyer to spend $6.25 a month to save $30+ per month, I feel this isn't good enough. My current project is targeting construction costs equal to "standard" construction while achieving incredible control over the indoor air and very low power bills. Instead of targeting passive level construction, my goal is to take ample control of the shell to allow smaller more cost efficient mechanical assemblies to make up any additional costs in the shell. My current project also promises to achieve close to 1 ACH@50Pa making extremely improved indoor air quality a possibility.
    So much for my thoughts. Anyone interested in the entire product mix, let me know. It's pretty exciting.

  13. wXNu27omxe | | #13

    More thoughts on costs/benefits of PV
    I think Martin and Steve are mostly correct. The Chinese PV makers have huge inventories that are driving prices down. But there is another, more constant factor. I was Chief Technology Officer for a PV supplier. PV costs are coming down as a result of technical improvements (higher system efficiencies and lower system costs). Over time this will certainly make PV a low cost source of power. Volume production will obviously make this happen faster

    It occurred to me that one element is missing from the analysis (I think). Anytime you save money vs earn more money, those savings are not taxed as income, whereas new income is taxed at your highest marginal rate. If you put PV on your roof your have to account for this if you compare it as an investment that produces taxable income. Not sure I'm being clear about this, but basically, if your marginal tax rate is 20% then the financial instrument has to produce 25% more income than the PV savings to be equivalent to the PV investment. That ought to go into the analysis. Obviously a mortgage deduction makes this more complicated, but according to my builder, all his clients are paying cash. For them, that makes PV even more attractive. Since I believe tax rates are likely to go up, as will energy costs, this makes PV a compelling option for my wife and I as we commence building our retirement home, even before we factor in our environmental and political concerns.

    Another thought. I've worked in the Silicon industry for 25 years. The bogie of 25 year lifetimes for solar cells is largely driven by financial types who want a simplified and conservative way to compare alternatives. I'd bet a lifetime closer to 50 years for a quality solar cell built on monocrystal Silicon will be the norm. I do not believe that thin film cells, and non-Silicon based cells will have that sort of life. I suspect that non-Silicon cells will have trouble lasting 20 years and represent a more problematic recycling issue due to the composition of the substrate.

    Thanks to Jesse for this post. It's a very exciting development.

    Richmond, VA

  14. GBA Editor
    Martin Holladay | | #14

    Response to Frank
    I agree that predictions that PV modules will last 25 years are conservative.

    If you didn't see it, here is my report on tests I performed on my 30-year-old PV module: Testing a Thirty-Year-Old Photovoltaic Module. The module is now more than 31 years old -- back up on the roof, and still performing fine.

  15. wXNu27omxe | | #15

    Response to Martin
    Yes, Martin, I did read your account of testing your solar cells. It gave me confidence that my instincts about the materials might be on track. I really appreciate that you checked them and shared the result with all of us. Payback calculations are the devil's own playground, IMO. I've been in R&D for over thirty years. Having led the commercialization of a dozen high tech products and processes that have earned in excess of $1B. I can authoritatively say that accountants and finance departments stifle far more innovation than tax policies :-). Seriously though, there are so many places that where you an "get your thumb on the scales" in these calculations, they aren't for the faint of heart. When we got funding for our solar startup, one of our economist advisors told me, "they (the Venture Capitalists) will go with their guts, force the financial models to agree, give you the money you want and insist it represents 51% of your business to get controlling interest". He was spot on! Information and data, like what I find here at GBA is essential to good decisions and choices. I appreciate that you and the contributors here hold everyone's feet to the fire.

    Richmond, VA

  16. leighadickens | | #16

    cheaper solar means cheaper solar for utilities too
    I have had very much the experience you described, where I budgeted an array at $7 a watt and then spoke to a local solar contractor, who happily informed me that $4.50 a watt was the reality now.

    Cheaper solar means cheaper solar for everybody, utility and homeowner alike. I'm not sure who it will make sense to have predominately producing the cheap solar, the utility or the homeowner. While I'd like it to be the homeowner, I'm not convinced that will end up making the most sense. The regulatory environment under which power production happens is still pretty crucial.

    Even at this low price solar is a still moderately tough proposition here because of the regulatory structure. Under one setup here in NC, the power company gives solar producers a rebate and allows net metering, but sets you up with time of use rates instead of flat rates. The time of use rates pack a hefty demand charge of $5 per KW during peak hours--which can effectively kills the "net-metering" goal by charging you for creating demand even though your total energy use might even out with solar production. It makes it difficult to apply savings from extra summer production toward winter, and it makes it extremely different to do preliminary financial analysis, because the actual ability to nullify your existing electric bill depends highly upon your actual patterns of usage. I like the tool that you developed, but under this setup and probably many others in the country it's not a thorough enough analysis to actually tell you what the cost will be. I am hopeful that the cheaper solar becomes, the less time of use charges and other weird utility rules will matter, because it'll become cheap enough that folks who just want solar can get it and they'll even go off grid if grid-tied isn't favorable. Yet I can also see the point where it's so cheap that utilities just start doing it themselves, rather than paying independent producers, and I think that's a further uncertainty for grid-tied systems starting up now and hoping to pay themselves back down the road.

  17. stepco | | #17

    Response to: cheaper for utilities, too
    Someone correct me if I'm wrong, but a I think the majority of the KwHr price consumers pay covers the costs of distribution, overhead, management, etc..., and a much smaller portion actually covers the cost of making the electricity (generation). So (unfortunately), solar will have to get a lot cheaper still for it to make economic sense for utilities to use it. And if large-scale fracking keeps the price of gas low, it seems like it might take a real technical breakthrough for solar to compete with it (again, unfortunately). Which is why we need a carbon tax, to reflect the costs of the damage fossil fuels are doing to the planet, and allow renewables to compete on a level playing field.

  18. David_Gregory_CZ3_CA | | #18

    One more Naysayer - on 'tax credits worked'...
    Not to be a wet blanket, but...

    Solar is cheap partially because China is subsidizing production for export (flouting WTO rules) with cheap land and capital, and last I heard largely ignoring environmental best-practices, (eg. re: polysilicon production / waste disposal). Western manufacturers have had to cut prices to stay competitive, but that drains capital from real (R&D) innovation (vs. 'financial' innovations)...correct me if I'm wrong?

    Let's keep running the numbers, and if it makes sense for someone to go PV, well, they should go for it. Certainly it's not just the China factor that's driving down costs, but 45% drop suggests something more than technological guess is massive externalities - fiscal, environmental, political...

    I just worry that we've painted ourselves into a corner with so much focus on climate change, and have lost the bigger picture.


  19. user-1044645 | | #19

    Thanks for sharing!
    Thanks for sharing the good news, Jesse! If we can make the economics work in Maine, it's shocking that this isn't starting a wildfire in other parts of the country. We recently did the math and it worked out that a PV system pays a better dividend than an annuity product:

    Regarding financing - it has been slower in our service area (ME and NH) than other parts of the country, due to comparatively small state rebates, but there seems to be continued progress, in particular thanks to the factors you're bringing up: high costs of energy on one end and dramatically dropping costs in PV prices on the other. Compared to markets like CA, NJ and MA it's all quite small but it's still growing at an impressive rate, and national parties are starting to take notice.

    Another cool tool - we have a "Calculator" - granted, it uses ME numbers but you can size a system pretty quickly based on your current electric bill and look at some example systems we've installed in New England:

    - Fred
    ReVision Energy
    Portland, ME

  20. JohnOB | | #20

    Power Companies take back.
    On your article, PV Systems Have Gotten Dirt Cheap, people calculate payback

    compared with buying electricity from the local power company. In San Diego,

    SDGE is trying to make more money off the grid tied PV folk by instituting a

    Grid Use Fee and instead of kilowatt traded for kilowatt they want to buy

    from PV owers at $0.04 and sell back at $0.14 per KW. Looks like the best

    system here will be a battery backup system like off-grid and use the grid

    only when absolutely necessary, which probably would not be very often in San


    John Harris


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