Solar Declines in Price by More than 30%, But Don’t Credit the Panel

Solar dropped in price more than 30 percent between 1998 and 2008, according to a new study from Lawrence Berkeley National Lab, and most of the time the decline can be attributed to things that aren't made of silicon.

The average cost of going solar dropped from $10.80 a watt in 1998 to $7.50 a watt in 2008. From 1998 to 2007, the decline was largely fueled by lower marketing and overhead costs, cheaper inverters, and other balance of system costs.

It was only between 2007 and 2008 where slides in module costs began to dominate the discounts. Solar went from a blended average of $7.8 per watt in 2007 to $7.50 per watt in 2008. The 2007 to 2008 shift makes sense. From 2004 to 2008, the industry suffered under a prolonged shortage of silicon that kept module prices high.

The numbers do not include government-sponsored incentives. The report examined data from 52,000 residential and non-residential installations.

The average net installed cost with after-tax incentives stood at $5.40 per watt for residential PV and $4.20 per watt for commercial in 2008. The figure rose slightly from 2007 to 2008 as the decline in incentives outpace the drop installed costs. That's why installers earlier this year said that solar prices weren't going down despite the proliferation of panels.

Prices vary by region. Solar in 2008 cost around $7.30 per watt in Arizona, $8.20 per watt in California and $9.90 per watt in Pennsylvania. Interestingly, the cost of residential solar systems in 2008 was less than similarly sized commercial systems erected in 2007 by 60 cents per watt.

In new constructions, building-integrated PV cost 90 cents more per watt, $8.30 cents per watt versus $7.4 cents per watt, than standard rack mounted modules.

Further reductions are possible. On a flat playing field not counting incentives, residential solar cost $6.1 per watt in Germany and $6.9 per watt in Japan in 2008, or significantly less than the $7.5 per watt price in the states. Neither Germany nor Japan are cheap labor destinations.

The average state or utility incentive, meanwhile, came to $2.1 to $2.4 per watt, representing a 50 percent decline since 2002.  

A whole mess o' data from the report can be found here.