Chapter 6 The Demand for Solar PV Energy in the United States
6.1 The Decline in Price for Solar PV
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Chapter 6 The Demand for Solar PV Energy in the United States
The demand for solar PV energy in the United States has grown impressively over the last 10 years. California’s PV market has overshadowed the rest of the nation, but recently several other states have made impressive strides to develop their own PV markets. Government incentives are still an important catalyst for PV market growth, and the states with the more favorable incentives also lead the nation for PV installations. As the main federal incentives are set to expire or drastically reduce in the end of 2016, there is much unknown about what will replace those incentives as the impetus towards continued PV market growth in the U.S.
6.1 The Decline in Price for Solar PV26
Overall, declines in PV module prices have occurred at a faster pace than declines in the installed prices, and even more so the last several years. Several years ago, PV module prices accounted for 50 to 60 percent of the total installed price of PV systems. In the year 2011, the average global price of PV modules as a percentage of the total installed cost for a PV system smaller than 10 kW was just 21 percent. Non-module costs are a much larger percentage of the installation cost for PV systems than in recent past.
The bottom-up price for the average residential PV system fell by 26 percent from the fourth quarter of 2010 ($5.90/W) to the fourth quarter of 2011 ($4.39).27
26 Information in this section is sourced from Feldman et al. (2012) and SEIA (2013f).
The bottom-up prices for the average commercial rooftop PV system fell by 28 percent from the fourth quarter of 2010 ($4.74) to the fourth quarter of 2011 ($3.43). The bottom-up price for the average fixed-tilt utility-scale PV systems fell by 29 percent from the fourth quarter of 2010 ($3.93) to the fourth quarter of 2011 ($2.79). During the same time, the average price for utility-scale PV systems with one-axis tracking systems fell 26 percent, from $4.54/W to $3.37/W. Most of the price declines in PV systems quoted at the end of 2011 were due to decreases in PV module prices. The amount of the price decline
27 The term “bottom-up” refers to price quotes by developers in the fourth quarter of particular year for a PV system to be installed the following year.
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attributed to cheaper PV modules was 66 percent for residential, 73 percent for commercial rooftop, and 80 percent for utility-scale PV systems. Decreases in balance of system (BOS) costs also were reflected in the price declines, such as increased module efficiency, improved labor efficiency, and improvements in supply chain management.28
For PV systems installed in the year 2011, the average price for residential and small commercial systems in the United States of 10 kW or less averaged $6.13/W for the total installed price. Commercial PV systems that were larger than 100 kW averaged
$4.87/W to install in the same year. The average price to install utility-scale PV systems averaged $3.42/W. The total number of all PV systems installed in the U.S. in 2011 was more than 150,000.
Depending on the size of the PV system, the average price for installed residential and commercial PV systems in the U.S. declined 5 to 7 percent each year from the year 1998 to 2011. The average price dropped from 11 to 14 percent from the year 2010 to 2011. Bottom-up figures place 2012 average installed prices at $4.39/W for average-sized residential systems (5.1 kW), $3.43/W for average-sized commercial rooftop systems (221 kW), and $2.79/W for average-sized fixed-tilt utility-scale systems (191.5 MW).
Overall, these average price estimates show a 25 to 29 percent decrease in installation prices from the fourth quarter price quotes from 2010.
The average price declines of PV systems from the year 1998 to 2011 did not always occur as consistent yearly declines. Between the year 1998 and 2005, the price for PV installations declined substantially. In the years between 2005 and 2009, the rate of PV system price declines lost momentum as the PV supply chain was faced with tremendous global demand. Since the year 2009 the cost to install PV systems has dropped markedly as the supply chain expanded and economies of scale have grown for both PV equipment and installations.
The price for utility-scale installations declined from an average of $6.21/W for projects installed between the year 2004 and 2008 to less than $4.00 for those installed in 2009 and 2010. The average price for utility PV projects in the year 2011 was $3.42/W.
Large differences in prices of particular utility-scale PV installations were also apparent
28 Balance of system costs refers to costs associated with installing PV systems other than the main PV components, such as PV modules and inverters.
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in the U.S. in the year 2011. Prices per installed watt ranged from $2.45 to $6.26. For utility-scale installations that were larger than 10 MV, prices ranged from $2.80/W to
$3.50/W. “The projects smaller than 10 MW span a broader range, with most projects priced between $3.50/W and $5.00/W” (Feldman et al., 2012).
In the year 2011, the average installed price for PV systems 2 kW or less was
$7.69/W. In the same year, PV systems larger than 1 MW averaged $4.48/W to install.
The most substantial differences in price per installed watt in terms of economies of scale can be seen from PV systems 2 kW or less to those 5 to 10 kW in size. But even PV systems 5 to 10 kW in size can vary greatly in installed price per watt. “Among 5–10 kW systems, for example, the 20th and 80th percentile values span $4.98/W to $6.89/W”
(Feldman et al., 2012).
In the year 2012, the average price per installed watt for residential PV systems stood at $5.04. Non-residential PV systems averaged $4.27/W and utility PV plants averaged $2.27/W to install in 2012. “Of the 3,313 MW installed in 2012, 1,300 MW (39.2%) came online in the fourth quarter, making the quarter by far the largest in the history of the U.S. solar market” (SEIA, 2013f). It was also the single biggest quarterly expansion for both the residential and utility PV markets, almost double the second largest quarterly expansion, which happened in the second quarter of 2012. From the first quarter of 2012 to the first quarter of 2013, the average cost to install a PV system dropped by 24 percent to $3.37/W. Solar panels have now declined by 60 percent since the beginning of 2011.
The average price for all types of PV installations combined decreased by over 26 percent in the year 2012 from the year 2011. However, the price per watt of residential PV installations fell by 18 percent in 2012 from 2011, and non-residential prices fell by only more than 13 percent. The large overall decrease in installation prices was mostly attributed to the largest share of PV installations in the U.S. coming from the utility sector, and the fact that the utility sector also showed the largest decline in installed prices per watt than any other PV sector.
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Table 6-1: PV System Installation Prices Per Watt
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2010-2012Unit: USD
PV System Type 2010 2011 2012 Average Price Decline 2010-2012 (%)
Residential 6.42 6.18 5.04 21.5
Non-Residential 5.71 4.92 4.27 25.2
Utility 4.05 3.20 2.27 44
All PV Combined 5.13 4.08 3.01 41.3
Source: SEIA (2011, 2012, and 2013f).
Residential PV prices in the major states for residential PV declined the most, including states such as California, Arizona, New Jersey, and Massachusetts. The price per watt for residential PV systems fell below $4.00 in a number of states. In the fourth quarter of 2012, residential PV averaged $5.04 nationwide, down from $6.16/W in the fourth quarter of 2011. The average price to install non-residential PV fell from $4.65/W to $4.27/W. “SREC states, such as New Jersey and Massachusetts, saw the most significant price declines” (SEIA, 2013f).29
Despite the declines in the average prices for installed PV systems in the United States, PV systems can vary greatly in price depending on the state as well as the individual project. In the year 2012, residential PV systems cost less than $4.00/W to install in many places, but could reach as high $7.00/W or more. Non-residential PV systems varied even more in price, from as low as $2.25/W to as much as $8.00/W.
Utility PV plants also vary in price, but this is not surprising considering the vast differences in size and design between what are considered utility-scale PV plants. Large PV plants (50 or more MW) with simple designs are cheaper to install per watt than a much smaller plant that includes dual-axis tracking for its PV panels.
Some examples of the regional differences in price for PV systems in the year 2011 include an average price of $4.90/W for systems 10 kW or smaller in the state of Texas compared to $7.60/W in Washington, D.C. The average installed price for PV
29 SREC stands for Solar Renewable Energy Certificate. SREC markets involve a trading scheme linked to electricity generated by PV systems that is designed to better ensure compliance with renewable energy portfolio standards (RPS). Nine U.S. States and Washington, D.C. are using SRECs (Bird et al., 2011).
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systems 10 to 100 kW in size was about $5.00/W in both Florida and Nevada, but $7.2/W in Texas. Larger and more mature PV markets would be expected to have lower prices for system installation. However, California is by far the largest PV market in the U.S., but the cost to install PV systems in that state is relatively high. Higher electricity prices and better government incentives for solar PV also tend to translate into higher system cost. The higher calculated value of the PV system results in higher prices commanded by the installers. The level of competition between installers also affects the prices they are able to seek to for their services.
Besides economies of scale affecting the price of the PV systems, other factors such as site-specific differences and the differences in experience and level of integration by the installers can also be determining factors. Several other factors can affect the system prices for utility-scale PV projects. These include: differences in compliance costs for regulations on public and private land, whether land for the project is leased or owned, and climate considerations affecting project design.
For PV systems as a whole, there can be differences in permitting and administrative costs, as well as the cost to interconnect with the utility grid. Regional differences in labor cost also affect installations prices. Different states also have different conditions within their PV markets that can affect the value and pricing of PV systems, such as average levels of radiant energy from the sun and the typical characteristics of their systems such as size, mounting structures, and the use of tracking equipment. Different installers may also require different fees for similar PV projects.
Differences in sales tax rates also affect PV prices and can lead to regional differences as high as $0.40/W.
In comparison to a mature solar PV market such as Germany, the price for PV system installations in the United States is substantially higher. Given that PV component prices between the two countries are similar, much of the differences in prices can be attributed other inputs that affect system costs. In the year 2011, the average price for a PV system ranging in size of equal to or less than 10 kW was $6.13/W in the U.S., but the price quoted for the same size PV systems in Germany was only $3.40. For PV systems in the U.S. ranging from 10 to 100 kW the price was $5.62/W vs. only $3.10/W
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in Germany. PV systems greater than 100 kW averaged $4.87/W in the U.S., while similar systems in Germany averaged $2.60/W.