Solar really is getting cheaper, report says
Solar incentives seem to be working to both increase the number of solar installations in the U.S. and bring down the initial cost, according to a report released Wednesday by the Lawrence Berkeley National Laboratory.
"Findings...show that, after a three-year plateau, costs decreased by 3.6 percent from 2007 to 2008, marking a pivotal year for the American solar industry," said the report (PDF).
Broken down into real 2008 dollars, the report estimated that the actual cost of installing photovoltaic solar systems--excluding tax credits or financial incentives--was $10.80 per watt in 1998 versus $7.50 per watt in 2008.
That initial cost to the installer dropped significantly once incentives and tax credits were factored in.
Last year, the average cost of installation was $2.80 per watt for residential photovoltaic, when incentives and tax credits are counted, and $4.00 per watt for commercial.
The report attributed rising fuel prices since 1998 and government incentives for alternative energy to the solar market boom. There has been a significant increase in photovoltaic installations in the U.S. since 2007. Of the 566 megawatts of solar added to the U.S. grid since 1998, an estimated 293 megawatts of photovoltaic were added in 2008 alone. That recent uptick was attributed in part to "more lucrative" federal investment tax credits adopted for commercial photovoltaic systems in 2006.
If that figure of 566 megawatts seems low given the plethora of solar installation announcements from private and public organizations over the past few years, keep in mind these figures are for grid-connected systems only.
The report data evaluated the cost outlay for 52,000 residential and commercial installations, about 71 percent of all the grid-connected photovoltaic systems that were installed in the U.S. between 1998 and 2009. The report data did not include cost outlay for those residential or commercial systems operating off the grid.
But the report did include outside data for comparison of markets.
It showed that the recent growing popularity of solar is not just a U.S. phenomenon. About 5,948 megawatts of photovoltaic were installed globally in 2008 compared to 2,826 megawatts in 2007. Spain was the largest photovoltaic market in terms of installation in 2008, followed by Germany and then the U.S., according to the report.
Undoubtedly, the global installation figure will increase even more dramatically in the coming years. China alone has announced plans for large-scale photovoltaic installations ranging from 500 megawatts in Baotou, Inner Mongolia to 2,000 megawatts in Ordos City, Inner Mongolia. In the U.S., First Solar has been given rights to develop a 550-megawatt plant in California.
In a software-driven world, it's easy to forget about the nuts and bolts. Whether it's cars, robots, personal gadgetry or industrial machines, Candace Lombardi examines the moving parts that keep our world rotating. A journalist who divides her time between the United States and the United Kingdom, Lombardi has written about technology for the sites of The New York Times, CNET, USA Today, MSN, ZDNet, Silicon.com, and GameSpot. E-mail her at candacelombardi@gmail.com. She is a member of the CNET Blog Network and is not a current employee of CNET. 
Can you site a reference to this statement? IN CALIFORNIA, NONE OF THE SOLAR PV INSTALLERS HAVE QUOTED ME CHEAPER THAN $5.00/WATT AFTER ALL REBATES!!!
The AVERAGE $2.80 PER WATT for residential after all incentives and tax credits are counted would be a miracle. Because this is AVERAGE VALUE, then half of those installed would be cheaper than $2.80/WATT, and the other half more expensive than $2.80/WATT. Can you name example of companies in California that have net installation costs (after rebates and incentives) in the $2.00 to $3.60/watt range? Assuming that this is a normal curve with a standard deviation of $0.25/watt, then what I am asking for is a 99.99% probability that there exists such company given the quoted average.
So can you name one please?
Note that California has switched to a credit based on the amount of power produced, not percentage of the purchase price. So if you don't have a roof to place panels at an optimal south-facing slope you won't get the full credit per panel-watt, and you don't get more credit for installing more expensive equipment.
The quoted costs are misleading because we care about kWh/day generated, not kW at standard test conditions. So a horizontal panel rated in W in upstate NY might be compared equally with a latitude-sloped panel in Tucson, even though the kWh/day are very different. A better figure is $/Wh-day.
From the report, "In 2008, average net installed costs ? that is, installed costs minus the combined after-tax value
of state/utility cash incentives plus ITCs ? stood at $5.4/W for residential PV and $4.2/W for
commercial PV, an increase over 2007 levels of 1% and 5%, respectively."
The after-subsidy cost is not declining due to declining incentives:
"... average after-tax incentives ranged from a low of $2.5/W in California to a high of $5.1/W in New
York. The high level of incentives provided in New York contributed to it being the state with the
lowest net installed cost for residential PV systems installed in 2008, averaging $3.5/W. At the
other end of the spectrum was Vermont (which had the second-lowest residential incentives after
California), with an average net installed cost of $6.9/W.
The report also notes decline for approved systems in 2009: total cost from $7.80 in 2008 to $6.70/W in 2009, before incentives.
One interesting part of the report notes, that in CA when the subsidies were increased, the installation cost rose by the same amount, so net cost was the same.
The devil is in the details.
;)
You can also use finance charges plus depreciation instead of amortized cost and compare that with the retail value (your rate at your current tier) of the electricity produced.
If you pay in cash, the question then becomes an opportunity cost of investment: "Will I be better off putting my money in a stable portfolio and pay off my electricity from the proceeds?" The answer has been always yes, indicating that at the current pricing of the solar PV, it would be financial suicide to invest on it. If the price really do come down, then it would be wise to install.
All of the solar PV installers will steer you away from such straight-forward financial calculations. And they don't include the total cost in the calculations. They don't also include the insurance of the panels, the related maintenance costs. And when they do account for inflation, they assume unrealistically high rate of increase of electricity bills, high tier level, and unrealistically low finance charge computations. All of these bias are being done to mask the fact that at their current pricing, the solar PV are not feasible in reality.
The break-even price will vary depending where you are. In my case, if the price come down to less than $4/watt before rebates, then the amount of electricity produced would be able to pay for the amortized payments.
This report is dead wrong on the average price of the installed solar PV. It hasn't come down to sane levels at all especially at the residential retail.
- by FreeCleanSolar October 24, 2009 10:41 AM PDT
- So many numbers; so much confusion. Here's a simple way to think about installing solar panels.
- Like this Reply to this comment
-
(13 Comments)The fact is that installing solar panels for your home or business can cut your electric bill to $0 today. For example, if you spend $200 per month for electricity, then you will spend $81,979 over 25 years, including a low annual price inflation rate of 2.5%. No matter how you calculate it, you will save money with a $5,000 to $25,000 solar panel system. Remember, you can pay the utility for 25 years, with annual price increases, or you can pay a lot less with solar power.
If you are worried about the upfront cost for solar panels, there are many financing and leasing programs available to homeowners with good credit. Some loans are tax-deductible too.
To do something about this today, visit <a href="http://FreeCleanSolar.com">FreeCleanSolar.com</a> to search a nationwide network of 500 local solar installers. You can also find information about state solar rebates, federal tax credits, solar financing and leasing, system costs and the benefits of going solar. The bottom line is that many home and business owners can afford solar power today.