According to the Department of Energy’s (DoE) Lawrence Berkeley National Laboratory, the overall decline in the installed cost of solar PV systems is mostly the result of decreases in non module costs, such as the cost of labour, marketing, overhead, inverters, and the balance of systems. 

The study, Tracking the Sun: The Installed Cost of Photovoltaics in the U.S. from 1998–2007, examined 37,000 grid-connected PV systems installed between 1998 and 2007 in 12 states. It found that average installed costs, in terms of real 2007 dollars per installed watt, declined from US$10.50/W in 1998 to US$7.60/W in 2007, equivalent to an average annual reduction of 30 cents/W or 3.5% per year in ‘real dollars.’

Size and location matter

The study also revealed other information about differences in costs by region and by installation type. The cost reduction over time was largest for smaller PV systems, such as residential systems. Also, installed costs show significant economies of scale. Systems completed in 2006 or 2007 that were less than 2 kW averaged US$9.00/W, while systems larger than 750 kW averaged US$6.80/W. This suggests that PV costs can be driven down through sizable deployment programmes, according to the authors of the report.

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 2006 or 2007, those systems installed in residential new construction cost 60 cents/W less than comparably-sized systems installed as retrofit applications.

The study also found that direct cash incentives provided by state and local PV incentive programs declined over the 1998-2007 study period. Other sources of incentives, however, have become more significant, including federal incentive tax credits (ITCs).