The Lawrence Berkeley National Laboratory’s recent report, Tracking the Sun III, found that the price of solar power is continuing to go down. Most recently driven by expanded manufacturing capacity and the global financial crisis. While prices went down little in 2009, compared to 2008, early results from 2010 show a greater drop in prices of solar.

The average installed cost of solar systems in the U.S. that were completed in 2009—prior to direct financial incentives or tax credits—was $7.5 per watt, basically the same as in 2008. That’s 3 cents per watt less than the averages in 2006 and 2007.

“From 1998-2009, capacity-weighted average installed costs declined by about 3.2 percent (or three cents per watt) per year, on average, starting from $10.80 per watt in 1998,” the report found.

While the report focused on 2009, it said preliminary 2010 data from the California Solar Initiative (CSI) and New Jersey showed that there was a significant decline in average installed prices in 2010. Systems installed through the CSI program in the first 10 months of 2010 were, on average, installed for $1 per watt less than in 2009. During the first six months of 2010 the average price of installed solar in New Jersey dropped by $1.20 per watt compared to 2009.

The report didn’t focus primarily on 2010 because the year isn’t over yet.

“Given that we’re nearly at the end of 2010, we didn’t want to give partial data for 2010,” said Galen Barbose, lead author of the report. “The next report we’re shooting to release is kind of mid-2010. That will have a full analysis.”

The price of installed costs has lagged behind the drops in module prices, the report found. That may change in 2010 because of the successive years’ price drops in modules prices.

The report also found that installed solar in the U.S. still costs more than it does in Japan or Germany, suggesting that more near-term cost reductions may be possible in U.S.

“It depends upon how aggressively the U.S. can build the market size,” Barbose said.

The cost reduction would have to come in terms of installation cost reductions and incentives.

“Part of what’s driving the recent cost trends are declines in module prices,” he said. There aren’t large price differences in module costs from country to country, so the price drop in installed solar must come from elsewhere.

Renewable portfolio standards are one factor that could drive down prices in the U.S.
By forcing utilities to bring more solar into their energy mix, it increases the demand for solar and companies will produce more solar as result, which should help lower costs.

“One of the emerging [cost] drivers for the U.S. are in the renewable portfolio standards,” Barbose said. “There are a number of regions and states in the U.S. that have solar carve-outs.”

As those start to ramp up, you’ll start to see more states become significant players in the solar market, he said.

Image courtesy of Lawrence Berkeley National Laboratory.