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Cost of Installed Solar Power is Sinking Like a Stone by Tina Casey Triple Pundit, November 28, 2012

Here's some good news if you're thinking of installing solar panels on your property. According to a new report from the Lawrence Berkeley National Laboratory, the cost of installed solar power dropped significantly in 2011, going into 2012, compared to 2010 prices.

The facts and figures are all in the latest edition of Berkeley Lab's annual photovoltaic price report, Tracking the Sun, which also includes historical trends going back to 1998 for more than 150,000 solar installations in 27 states.

The "soft costs" of installed solar power

The report zeroes in on the overall cost of installing a photovoltaic system rather than on just the cost of the solar cells themselves, and that's an important distinction.

The Department of Energy has estimated that solar cells currently account for only half the total cost of a typical solar installation. The other half consists of "soft costs" including permits, inspections, grid connections and other add-ons.

What this means is that developing new low cost, high efficiency solar cells helps to lower the overall cost of solar power, but it only gets you so far along the road. The other half of the equation is streamlining the installation process.

Fortunately for consumers, the solar industry has not been left to tackle the problem on its own. In his first term, President Obama launched the SunShot Initiative under the Department of Energy, with the goal of supporting both new solar cell technologies and more efficient, less costly installation models.

That includes a new competition to develop low cost rooftop solar installations, and another competition to develop simple "plug and play" solar modules.

How far did the cost of solar power fall?

For residential and commercial solar installations completed in 2011, Berkeley Lab reported a drop of about 11 to 14 percent compared to 2010, depending on the size of the system. California prices fell another 3 to 7 percent in the first six months of 2012.

Berkeley Labs attributes much of the drop to the reduced price of solar cells, which have been "falling precipitously" since 2008.

Looking at the long term trend since 1998, soft or "non-module" costs fell an impressive 30 percent by 2011, though not much of that decline has occurred in recent years.

For the cost of installed solar power, size matters

For residential and commercial systems smaller than 10 kilowatts (kW), the installed cost was $6.10 per watt in 2011. For commercial systems of 100 or more kW, the cost was only $4.90 per watt.

The utility scale installations of more than 2,000 kW did even better, at $3.40 per kW, and the report's authors noted just yesterday that prices have dropped even further in recent months.

Aside from size, the report also noted a number of other factors. The installed cost of solar power varied substantially from state to state, installations on newly constructed homes were typically much lower than retrofits on existing homes, and building-integrated solar systems were typically more expensive than rack-mounted systems.

Interestingly, Berkeley Labs found that solar installations at tax-exempt sites were generally more expensive than at residential or commercial sites.

The extra-soft cost of solar power

On a somewhat sour note, Berkeley Labs found that the reduced cost of solar installations has been offset by the expiration or reduction of state-based rebates and other incentives for solar power.

In other words, from a solar customer perspective you could look at the whole thing as a wash.

On the plus side, many residential and commercial customers have been motivated by considerations other than raw costs. For residential customers who can afford to invest in "extra-soft" costs, the satisfaction of reducing one's personal carbon footprint contributes a non-cash value to the ledger books.

For businesses, on site solar installations can provide a significant promotional and public relations tool that makes up for the lack of government incentives.

On balance, though, if the solar industry is going to be truly competitive, it deserves the same level of government support that has long benefited the oil, gas and coal industries.