TODAY’S STUDY: THE WHOLE SOLAR PRICE STORY
Tracking the Sun VI; An Historical Summary of the Installed Price of Photovoltaics in the United States from 1998 to 2012
Galen Barbose, Naïm Darghouth, Samantha Weaver, and Ryan Wiser, July 2013 (Larence Berkeley National Laboratory)
As the deployment of grid-connected solar photovoltaic (PV) systems has increased, so too has the desire to track the cost and price of these systems. This report helps to fill this need by summarizing trends in the installed price of grid-connected PV systems in the United States from 1998 through 2012, with preliminary data for 2013. The analysis is based on project-level data for more than 200,000 individual residential, commercial, and utility-scale PV systems, representing 72% of all grid-connected PV capacity installed in the United States through 2012.
It is essential to note at the outset what the data presented within this report represent. First, the data are historical, focusing primarily on projects installed through the end of 2012, and therefore do not reflect the price of projects installed more recently (with the exception of the limited set of results presented for systems installed in the first half of 2013); nor are the data representative of prices currently being quoted for prospective projects to be installed at a later date. For this reason and others (see Text Box 1, within the main body), the results presented in this report may differ from current PV price benchmarks. Second, this report focuses on the installed price of PV – that is, the up-front price paid by the PV system owner, prior to receipt of incentives. As such, it does not capture trends associated with PV performance or other factors that would affect the levelized cost of electricity for PV, nor does it capture trends in the net cost to the owner after receipt of all incentives. Finally, the underlying data collected for this report include third party owned (TPO) projects where either the system is leased to the site-host or the generation output is sold to the site-host under a power purchase agreement. For a subset of TPO systems, the installed price data represents an appraised value rather than a transaction price, and those projects were removed from the data sample (see Section 2 and Appendix A for further details).
The report presents one set of installed price trends for residential and commercial PV systems, and another set for utility-scale PV. In all cases, installed prices are identified in terms of real 2012 dollars per installed watt (DC-STC), prior to receipt of any direct financial incentives or tax credits.
Key findings for residential and commercial PV are as follows:
• Installed prices continued their precipitous decline in 2012, falling year-over-year by $0.9/W (14%) for systems ≤10 kW, $0.8/W (13%) for systems 10-100 kW, and $0.3/W (6%) for systems >100 kW. Among projects installed in 2012, median installed prices were $5.3/W for systems ≤10 kW, $4.9/W for systems 10-100 kW, and $4.6/W for systems >100 kW.
• Partial data for the first six months of 2013 indicate that installed prices have continued to fall, with the median installed price of projects funded through the California Solar Initiative declining by an additional $0.5/W to $0.8/W (10-15%) depending on system size, relative to systems installed throughout all of 2012.
• The recent decline in installed system prices is largely attributable to falling module prices, which fell by $2.6/W from 2008 through 2012 (based on average annual selling prices), representing roughly 80% of the drop in total PV system prices for ≤10 kW systems over the same period. Movements in global module prices, however, do not necessarily translate into an immediate, commensurate change in the price paid by the system owner, with some evidence that system prices have lagged behind changes in module prices.
• Over the longer-term, installed system prices have fallen also as a result of reductions in non-module costs (which may include such items as inverters, mounting hardware, labor, permitting and fees, customer acquisition, overhead, taxes, and installer profit). For example, non-module costs for ≤10 kW systems declined by approximately $2.5/W from 1998 to 2012, constituting 38% of the reduction in total installed system prices over that period. In recent years, however, non-module costs have remained relatively flat while module prices fell rapidly, and as a result, non-module costs have grown significantly as a share of total system costs.
• Cash incentives provided through state and utility PV incentive programs (i.e., rebates and performance based incentives) have fallen substantially over time, offsetting much of the installed price reductions from the perspective of customer-economics. From 2011 to 2012, the median pre-tax value of cash incentives provided through the PV incentive programs in the data sample declined by an amount equivalent to 50% to 150% of the corresponding drop in installed prices, depending on system size. Over the course of the past decade, the reduction in cash incentives equaled 82% to 88% of the installed price decline.
• International experience suggests that greater near-term price reductions in the United States are possible, as the median installed price of small residential PV installations in 2012 (excluding sales/value-added tax) was just $2.6/W in Germany, $3.1/W in Australia, $3.1/W in Italy, and $4.8/W in France, compared to $5.2/W in the United States.
• The distribution of installed prices across projects is quite wide. For example, among ≤10 kW systems installed in 2012, roughly 20% of systems had an installed price less than $4.5/W, while a similar percentage was priced above $6.5/W. The price distribution has narrowed somewhat over time, though no discernible narrowing has occurred in recent years.
• Installed prices exhibit significant economies of scale, with a median installed price of $7.1/W for systems ≤2 kW completed in 2012, compared to $4.4/W for commercial systems >1,000 kW. The installed price of utility-scale systems is even lower, as discussed further below. To a limited extent, these economies of scale help to explain the long-term decline in median installed prices, as typical PV system sizes have grown over time.
• Installed prices vary widely across states. Among ≤10 kW systems completed in 2012, for example, median installed prices range from a low of $3.9/W in Texas to a high of $5.9/W in Wisconsin, potentially reflecting a number of differences in state and local factors (e.g., market size, permitting requirements, competitiveness of the installer market, labor rates, sales tax exemptions, and incentive levels).
• Installed prices of the third party owned (TPO) systems retained in the data sample, which represent the sale price between an installer and a customer finance provider, are similar to the installed prices reported for customer owned systems. The growing prominence of third party ownership therefore does not appear to have had a significant direct impact on the overall median installed price trends presented within this report (given that appraised value systems have been removed from the data sample).
• Small PV systems with microinverters have higher installed prices than those with central inverters, with a differential in median installed prices of $0.4/W (8%) for ≤10 kW systems installed in 2012, and a similar differential in 2011. The increasing penetration of microinverters has thus modestly dampened the installed price decline for small systems. In contrast, among larger systems sizes, no appreciable difference in installed price is evident between those with microinverters and those with central inverters.
• Installed prices are moderately higher for systems with high-efficiency modules. Among systems installed in 2012, the median installed price of those with module efficiencies >18% was roughly $0.5/W higher than for those with module efficiencies in the 14-16% range (the range typical of systems with standard polysilicon modules).
• Systems with Chinese-brand modules generally have lower installed prices than other systems, with an installed price differential of $0.3/W to $0.4/W among 2012 systems, depending on system size, and somewhat larger differences in prior years. However, focusing more narrowly on systems with module efficiencies of 14-16% (the range within which most Chinese-brand modules fall), the installed price differential between systems with Chinese and non-Chinese modules was considerably smaller.
• Installed prices for systems installed at tax-exempt customer sites are moderately higher than for similarly sized systems at residential and for-profit commercial customer sites. Among 2012 systems, the median price of tax-exempt systems was $0.3/W to $0.8/W higher than for residential and commercial systems, depending on system size range.
• The residential new construction market offers potential price advantages relative to residential retrofits. In particular, over the 2008 to 2012 period, the median installed price of rack-mounted systems in new construction was $0.2/W to $1.1/W lower than for comparably sized retrofit systems, when focusing on systems 2-4 kW in size (the size range typical of PV in residential new construction).
• Within the new construction market, BIPV systems exhibit significantly higher prices than rack-mounted systems, with a difference in median installed prices ranging from $0.7/W to $2.3/W over the 2008 to 2012 period. That comparison, however, does not account for any avoided roofing materials cost associated with BIPV.
• Within the residential and commercial market, ground-mounted systems with fixed-tilt have higher installed prices than similarly sized roof-mounted systems. In 2012, the median installed price of ground-mounted systems was $0.1/W to $0.7/W higher than that of roof mounted systems, depending on system size (with a larger differential for smaller systems).
• The installed price of residential and commercial systems with tracking is, not surprisingly, notably higher than for fixed-tilt, ground-mounted systems. Among systems installed in 2012, the median installed price premium for tracking systems ranged from $0.7/W to $1.7/W (15% to 32%), depending on system size (again, with a larger differential for smaller system sizes). This difference in installed prices is roughly on par with the increased performance of tracking systems relative to fixed-tilt systems.
This report separately summarizes installed price data for utility-scale PV projects, defined for the purposes of this report as ground-mounted projects larger than 2 MW, and includes only fully operational projects for which all individual phases are in operation. Several important features of the utility-scale PV project data are worth noting, in addition to those noted earlier for the dataset as a whole. First, the sample size of utility-scale projects is relatively small (190 projects in total), and includes a number of smaller (i.e., 2-10 MW) projects and several projects with “atypical” characteristics, which may have higher installed prices than the prototypical large utility-scale PV projects currently under development. Second, reported installed prices for utility-scale projects often reflect transactions (e.g., EPC contracts or PPAs) that occurred one or more years before project completion. In some cases, those transactions may have been negotiated on a forward looking basis, reflecting anticipated costs at the time of project construction. In other cases, the transactions may have been based on contemporaneous component pricing (or a conservative projection of component pricing), in which case the installed price data may not fully capture recent reductions in module costs or other changes in market conditions.
With those caveats in mind, key findings for utility-scale PV are as follows:
• Among projects completed in 2012, the capacity-weighted average installed price was $3.3/W for systems with crystalline modules and fixed tilt, compared to $3.6/W for crystalline systems with tracking and $3.2/W for thin-film, fixed-tilt systems (though the sample sizes for these latter two configurations are relatively small).
• The installed price of utility-scale systems varies considerably across projects. Among the 106 projects in the data sample completed in 2012, for example, installed prices ranged from $2.3/W to $6.8/W, and similar levels of variability are evident in earlier years as well. This variation partly reflects differences in project size and configuration, though other factors are also clearly important.
• Discerning a time trend for the installed price of utility-scale PV is challenging, given the small and diverse sample of projects. Among crystalline, fixed-tilt systems, capacity weighted average prices fell by $2.8/W between the 2007-to-2009 period and 2012. In the latter years of the historical analysis period, however, those price reductions slowed, with just a $0.2/W decline from 2011 to 2012. In contrast, thin-film systems exhibited relatively little installed price movement between the 2007-to-2009 period and 2012.
• Installed prices are somewhat lower and more uniform for larger utility-scale systems. Most projects >10 MW installed in 2012 ranged in price from $2.5/W to $4.0/W. Projects ≤10 MW were clustered within a similar range, but with a sizeable tail to the distribution with 20% of projects exceeding $4.0/W and several above $5.0/W.
• As to be expected, utility-scale systems with tracking generally have higher installed prices than fixed-tilt systems. Among crystalline systems installed in 2012, the capacity-weighted average price of systems with tracking was $0.3/W higher than fixed-tilt systems if comparing utility-scale systems of all sizes, and was $0.5/W among systems >10 MW.
• The price differential between utility-scale systems with crystalline and thin-film modules has varied considerably over time. Among fixed-tilt projects installed in 2012, the differences in installed prices were negligible, with thin-film systems registering a capacity weighted average installed price $0.1/W lower than crystalline systems. This contrasts to earlier years in the historical period, where thin-film systems enjoyed a sizeable price advantage.
Conclusions and Policy Implications
The number of PV systems installed in the United States has grown at a rapid pace in recent years, driven in large measure by government incentives. Given the relatively high historical cost of PV, a key goal of these policies has been to encourage cost reductions over time. Efforts to drive cost reductions have also been led by the U.S. DOE’s SunShot Initiative, which aims to reduce the cost of PV-generated electricity by about 75% between 2010 and 2020.
Available evidence confirms that the installed price of PV systems (i.e., the up-front cost borne by the PV system owner) has declined substantially since 1998, though both the pace and source of those cost reductions have varied over time. Prior to 2005, installed price reductions were associated primarily with a decline in non-module costs. Starting in 2005, however, installed price reductions began to stall, as the supply-chain and delivery infrastructure struggled to keep pace with rapidly expanding global demand. Starting in 2008, global module prices began a steep downward trajectory, driving installed price reductions of 40% among residential and commercial installations from 2008 through 2012.
Non-module costs, in contrast, have remained relatively stagnant since 2005. Trends in nonmodule costs may be particularly relevant in gauging the impact of state and utility PV deployment programs. Unlike module prices, which are primarily established through global markets, nonmodule costs consist of a variety of cost components that may be more readily affected by local policies – including deployment programs aimed at increasing demand (and thereby increasing competition and efficiency among installers) as well as more-targeted efforts, such as training and education programs. Historical non-module costs reductions from 1998-2005 suggest that PV deployment policies have, in the past, succeeded in spurring cost reductions; however, the fact that non-module costs have remained largely unchanged since 2005 highlights the potential need to identify new and innovative mechanisms to foster greater efficiency and competition within the delivery infrastructure.
Preliminary data for California systems installed in the first half of 2013 indicate that installed prices have continued to decline. Notwithstanding this success, further price reductions will be necessary if the U.S. PV industry is to continue its expansion as incentive programs ratchet down financial support. Given the limits to further reductions in module prices, additional deep reductions in installed prices will require significant reductions in soft costs.
Lower installed prices in Germany and other major international markets suggest that deep nearterm soft cost reductions in United States are, in fact, possible and may accompany increased market scale. It is also evident, however, that market size alone is insufficient to fully capture potential near-term cost reductions, as suggested by the fact that many of the U.S. states with the lowest installed prices have relatively small PV markets. Achieving deep reductions in soft cost may require some combination of incentive policy designs that provide a stable and straightforward value proposition, targeted policies aimed at specific soft costs (for example, permitting and interconnection), and basic and applied research and development.