The Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) found that the price of solar photovaltaic systems dropped between 1998 and 2007 in large part to non-module costs. Those non-module costs include drops in labour, marketing, overhead, inverters and balance of systems.
Sustainable Business: The study 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 $10.50/Watt in 1998 to $7.60/W in 2007, equivalent to an average annual reduction of $0.30/W, or 3.5% per year in real dollars.
…The cost reduction over time was largest for smaller PV systems, such as those used to power individual households. Also, installed costs show significant economies of scale. Systems completed in 2006 or 2007 that were less than 2 kW in size averaged $9.00/Watt, while systems larger than 750 kW averaged $6.80/W.
Installed costs were also found to vary widely across states. Among systems completed in 2006 or 2007 and less than 10 kW, average costs range from a low of $7.60/Watt in Arizona, followed by California and New Jersey, which had average installed costs of $8.10/W and $8.40/W, respectively, to a high of $10.60/W in Maryland.
…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 investment tax credits (ITCs). As a result of the increase in the federal ITC for commercial systems in 2006, total after-tax incentives for commercial PV were $3.90/W in 2007, a near-record high based on the data analysed in the report. Total after-tax incentives for residential systems, on the other hand, averaged $3.1/W in 2007, their lowest level since 2001.
Because incentives for residential PV systems declined over this period, the net installed cost of residential PV has remained relatively flat since 2001. At the same time, the net installed cost of commercial PV has dropped—it was $3.90/W in 2007, compared to $5.90/W in 2001, a reduction of 32%, thanks in large part to the federal ITC.