The Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) released a new study, “Tracking the Sun II: The Installed Cost of Photovoltaics in the U.S. from 1998–2008,” showing that the average cost of solar photovoltaic (PV) systems declined by more than 30 percent from 1998 to 2008. Within the last year of this period, costs fell by more than 4 percent.

The number of solar PV systems in the United States has been growing at a rapid rate in recent years, as governments at the national, state and local levels have offered various incentives to expand the solar market. With this growth comes a greater need to track and understand trends in the installed cost of PV.

“A goal of government incentive programs is to help drive the cost of PV systems lower. One purpose of this study is to provide reliable information about the costs of installed systems over time,” said Ryan Wiser, the report’s co-author.

According to the report, the most recent cost declines are primarily the results of a decrease in PV module costs.

“The reduction in installed costs from 2007 to 2008 marks an important departure from the trend of the preceding three years, during which costs remained flat as rapidly expanding U.S. and global PV markets put upward pressure on both module prices and nonmodule costs. This dynamic began to shift in 2008, as expanded manufacturing capacity in the solar industry, in combination with the global financial crisis, led to a decline in wholesale module prices,” the report states.

In contrast, cost reductions from 1998 through 2007 were largely due to a decline in nonmodule costs, such as the cost of labor, marketing, overhead, inverters and the balance of systems.

The study examined 52,000 grid-connected PV systems installed between 1998 and 2008 in 16 states. It found that average installed costs, in terms of real 2008 dollars, declined from $10.80 per watt in 1998 to $7.50 per watt in 2008, equivalent to an average annual reduction of $0.30 per watt or 3.6 percent per year.

The report also found that installed costs varied widely across states. Among systems completed in 2008 and less than 10 kilowatts in size, average costs range from a low of $7.30 per watt in Arizona, followed by California, which had average installed costs of $8.20 per watt, to a high of $9.90 per watt in Pennsylvania and Ohio. Based on these data, and on installed cost data from the sizable German and Japanese PV markets, the authors suggest that PV costs can be driven lower through large-scale deployment programs.

The study also found that the new construction market offers cost advantages for residential PV systems. Among small residential PV systems in California completed in 2008, those systems installed in residential new construction cost $0.80 per watt less than comparably sized systems installed in rooftop retrofit applications.

The full report may be downloaded at eetd.lbl.gov/ea/emp/re-pubs.html.