(Photo by Pieter Morlion via Creative Commons)
(Photo by Pieter Morlion via Creative Commons)

Cross-posted from EarthTechling with permission

By Pete Danko

Thanks to plunging panel prices, the cost of going solar continued its steady decline in 2011, according to a new government report, and indications were the trend was continuing into this year.

“The median installed price of residential and commercial PV systems completed in 2011 fell by roughly 11 to 14 percent from the year before, depending on system size, and, in California, prices fell by an additional 3 to 7 percent within the first six months of 2012,” the U.S. Department of Energy’s Lawrence Berkeley National Laboratory said in a statement that accompanied its annual Tracking the Sun report [PDF]. “These recent installed price reductions are attributable, in large part, to dramatic reductions in PV module prices, which have been falling precipitously since 2008.”

According to the report, the median installed price of PV systems that went in last year was $6.10 per watt for residential systems and commercial systems smaller than 10 kilowatts, and $4.90/W for commercial systems larger than 100 kW.

The report emphasized, however, that installed prices vary widely across states: “Among ≤10 kW systems completed in 2011, for example, median installed prices range from a low of $4.9/W in New Hampshire to a high of $7.6/W in Washington D.C., potentially reflecting a number of differences in state and local factors (e.g., market size, permitting requirements, the competitiveness of the installer market, labor rates, sales tax exemptions, and incentive levels).”

The decline in cost has of course helped grow solar, but the report pointed out that “reductions in cash incentives and falling solar renewable energy certificate prices have offset recent installed price reductions to a large extent.” The median pretax value of cash incentives provided by states and utilities is down between 21 and 43 percent from 2010, and 80 percent since peaking in 2002.

In compiling the report, the lab looked at installations dating back to 1998, when installed PV went for nearly $12/W. While the decline since then has been fairly steady, the big plunge came from 2008 through 2011, during which module prices fell by a whopping $2.10/W.

Other costs associated with installing a system – labor, marketing, overhead, inverters and the hardware known as “balance of system” – were also in decline, though not nearly at the rapid pace of modules. Bringing down non-module costs has been a chief goal of the Obama administration and solar advocates.

“The drop in non-module costs is especially important,” said report co-author Ryan Wiser of the lab’s Environmental Energy Technologies Division, “as these costs can be most readily influenced by local, state, and national policies aimed at accelerating deployment and removing market barriers.”

Even with the steep overall declines of recent years, the report said “international experience suggests that greater near-term price reductions in the United States are possible,” noting that residential PV installations in 2011 were running about $3.20/W in Germany and $4/W in Australia, well under the comparable U.S. cost of $6/W.

On the utility-scale side, the report also found cost declines, although nailing down figures was a challenge due to large variations. “As a rough measure,” the report said, “the capacity-weighted average installed price declined from $6.2/W for projects installed during 2004-2008, to $3.9/W for projects installed during 2009-2010, and to $3.4/W for projects installed in 2011.”