In the U.S., the installed cost of solar dropped, on average, by 17 percent in 2010, the most dramatic drop that authors of a recent report, entitled Tracking the Sun IV, have seen since they started tracking the costs. And, for the first time in years, a significant portion of that cost reduction was in the soft costs of solar like permitting and construction.

The report also found preliminary data for the first half of 2011 that showed a further 11 percent reduction in the cost of solar.

“In the analysis period, this was the largest drop,” said report co-author Galen Barbose.

The report, produced annually by the Lawrence Berkeley National Laboratory, looked at installed solar cost-trends from 1998 to 2010.

“We’re getting data, mostly from state and utility incentive programs, like the California Solar Initiative,” he said.

While the overall cost for installed systems, prior to any incentives, fell $1.3 per installed watt to a total of $6.2 per watt, different sectors of the solar market experienced different degrees of cost reductions.

“This last year, from 2009 to 2010, costs came down a lot, more for larger systems than smaller systems,” Barbose said. “And incentives did not come down that much. They did drop but not as fast as costs.”

The majority of price drops occurred on the hard costs of systems, things like the costs of PV modules, inverters and other material aspects of a solar array.

But for the first time since about 2005, there was a drop in soft costs, which are harder to clarify.

“A lot is installation labor, back-office labor, design costs, regulatory costs, all of that stuff,” Barbose said. “What we saw from 2010 is it did drop. It dropped by about 50 cents per watt and about 40 percent of overall cost drops.”

But the bigger drop, Barbose said, is in module prices.

“Module prices have been dropping pretty severely since at least 2008, at least the wholesale price. The movement in wholesale module prices don’t manifest immediately to the customer,” Barbose said.

So that decline in module prices took a while to get to the end customer, he said.

A group of solar advocacy organizations, including Vote Solar, the Solar Energy Industries Association and the Solar Alliance, praised the report’s findings.

“The whole gain here is to bring down the cost of solar. Costs are the number obstacle to growing the industry,” Vote Solar Executive Director Adam Browning said. “When you build scale it drives demand, and when you build business it drives down costs. [The report] is showing that it’s not just a theory but an actual fact. It’s demonstrable proof that we’re not full of crap.”

Image courtesy of Lawrence Berkeley National Laboratory.