Isra-Mart srl:US solar PV costs fall, but still lag behind Japan and Germany

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A comprehensive report from the Lawrence Berkeley National Laboratory (LBNL) released today, shows that installation costs of solar photovoltaics (PV) in the US are still lagging behind those in other countries, despite a boom in solar installations across the country and an array of policies designed to drive down prices.

LBNL's Tracking the Sun report analysed 78,000 grid-connected solar PV systems installed in the US and found that the average installed cost was $7.5/W across the country, with Texas now the cheapest state in which to produce a single watt of PV energy at $7.1/W, and Minnesota the most expensive at $9.6/W.

It also found that average installation costs had decreased 30 per cent over the past decade, falling from $10.80/W in 1998 to $7.7/W by 2009. However, the report noted that US costs are still significantly higher than those obtained in those countries that have pioneered the deployment of solar panels, such as Germany and Japan, where average installed costs stand at $4.7/W and $5.9/W respectively.

Galen Barbose, a researcher at LBNL and the report's lead author, said deployment scale greatly affected installed cost, pointing out that Germany had around 10,000MW of capacity and Japan around 2,500MW by the end of 2009, compared with just 1,300MW in the US.

But policies such as the California Solar Initiative are beginning to take effect, he said.

"There are a whole host of policies out there designed to support solar, so that in the future it will be competitive without the need for subsidy," he observed. "Because of all these policy efforts it's essential we know what the actual cost of solar is.

"One has to be careful with emulating policy in other countries, producing one policy in one country and reproducing it in another won't yield the same results. The good thing about the US is that we have 50 states and everyone is doing something a bit different – it's kind of like a laboratory and some states will figure out what can be reproduced in other states."

Although 335MW of grid-connected PV capacity was added in 2009 across the US, as states scrambled to meet their renewable portfolio standards targets for 2010, costs to consumers remained flat despite a 10 per cent drop in wholesale prices in 2009, the report said.

But these falling costs have now been passed on to consumers, according to LBNL's preliminary data, which shows PV costs in the first 10 months of 2010 dropped sharply by $1/W in California and $1.2/W in New Jersey.

Rosalind Jackson, director of development at Vote Solar, a non-profit organisation that advocates policies to stimulate the renewables market, said: "Tracking the Sun is the single most comprehensive report on installed costs – that is, the actual cost to end users – of solar photovoltaic projects across the United States. Although, comparing US installed costs to other strong global markets in Europe and Asia, it's clear that there is still plenty of room for continued progress. But the report confirms anecdotal evidence we've seen that solar costs are dropping significantly for US energy consumers and utilities."

The report brings a ray of hope to the renewable energy industry at a time when incentives are declining and renewables face potential exclusion from the extension of the Treasury Grant Program, established as part of the American Reinvestment and Recovery Act 2009.

Jackson urged Congress to resolve the uncertainty surrounding the grant programme and reach a compromise deal that allows for its extension before it expires at the end of the year.

"The Treasury Grant Program is one key programme that's building the market to support economies of scale and lower costs – the Treasury Grant is particularly important for keeping all that positive momentum going through economic downturn," she said. "Pulling the rug out from under that pillar of the market puts these larger cost reduction trends at risk – along with a whole lot of jobs and economic opportunity."