Report: Solar Costs Are Falling

Costs for solar installations for houses and large buildings are falling, and the trend is expected to continue. Lawrence Berkeley National Laboratory has a new report out this morning detailing the reduction between 2007 and 2008, as well as providing some interesting and sometimes surprising data points.

The drop in cost, which LBNL measured as a not-insignificant 30 percent between 1998 and 2008, was driven by just about everything except for solar cells, meaning mostly labor and installation. Nothing surprising there; installation companies that were once inefficient startups are growing up and learning to be more cost effective.

But the process stalled out recently, with little change happening between 2005 and 2007. Take a look at the graph below. Costs were virtually static for three years, then started falling again.

The block to progress was high demand in a rapidly expanding market. A number of companies during this period couldn’t grow quickly enough to keep up with all their new customers.

Last year the picture changed. On average, solar cost $7.50 per watt, having gone down 30 cents from the year before. That trend should be continuing this year, with another kicking in — solar module costs are finally beginning to go down, as well.

Solar panel manufacturers have been engaged in a rough-and-tumble recessionary battle for customers even as the price of their raw product, silicon, has gone through a dramatic decrease.

Now, the odd details that caught my eye:

• While big commercial and government projects can buy solar modules more cheaply, all the other costs — labor, compliance, overhead and so forth — don’t benefit from scale, instead remaining similar to residential installations.
• Installed costs are actually lower for residential than commercial or government systems; the latter two only win out because they get more incentives.
• Even with installed cost per watt dropping, the net installed cost remaining after incentives are applied is increasing, because the incentives are phasing out. If they wait, people could pay more for solar, not less.

With the future of some government incentive programs uncertain, it’s tough to tell whether individuals will suffer for holding out a year or two. Installed costs without incentives in the United States remain almost $2 higher than in Germany, the world’s largest solar market, so there’s obviously room to improve.

Thin-film solar panels are also coming onto the market. Made with cheaper materials, they were saving anywhere from 60 cents to $1.50 per watt at the time the study was written. (The gap may be smaller now, with the price of silicon falling.)

There’s plenty more hidden away in the report itself, if you’ve got an eye for figures.