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R2D2 says: “Beep beep boop!”

An obscure provision in the stimulus act has led to a dramatic decline in the cost of small-scale solar power installations, according to researchers at Lawrence Berkeley National Laboratory.

According to the report (warning: HUGE PDF), a key factor pushing down solar costs was the removal of a $2,000 cap on federal investment tax credits for installations. The provision, part of the American Recovery and Reinvestment Act, let to a 24% decline in the average net installed cost for residential solar systems.

But that’s not the only thing contributing to the decline in solar costs. Some other findings:

  • On average, without factoring for tax credits and financial incentives, solar costs have declined by about 3.2% per year from 1998-2009, remained relatively flat in 2009, and are expected to decline significantly for 2010, in some places by as much as 16%.
  • Wholesale equipment costs have been declining faster than installed system costs. The researchers suspect the rapid cost decline in 2010 may be partially explained by the industry catching up with these lower wholesale prices.
  • Residential systems were cheaper to install than similarly sized commercial systems.
  • Installations on newly constructed buildings were cheaper than retrofit systems to the tune of about $1.60 per watt.
  • Local factors: permitting requirements, labor rates, etc., have a strong impact on installation costs. Costs varied from state to state, from a low of $7.10 per watt in Texas to $9.60 per watt in Minnesota.
  • Full disclosure: I’m neither an economist nor an expert on solar power, so I welcome additional insights from the report.

    (Photo by r_neches via Creative Commons)

    Ken Paulman

    Ken is the director of the Energy News Network at Fresh Energy and is a founding editor of both Midwest Energy News and Southeast Energy News. Prior to joining Fresh Energy, he was the managing editor for online news at Minnesota Public Radio. He started his journalism career in 2002 as a copy editor for the Duluth News Tribune before spending five years at the Spokesman-Review in Spokane, Washington, where he worked as a copy editor, online producer, features editor and night city editor. A Nebraska native, Ken has a bachelor's degree from the University of Nebraska-Lincoln and a master's degree from the University of Oregon. He is a member of the Society of Professional Journalists and Investigative Reporters and Editors.