Drop in 2010 Solar Costs May Accelerate: Study

The cost to install solar power in the United States fell by 17 percent in 2010 and is on pace to drop even faster this year, according to a new report issued by the Lawrence Berkeley National Laboratory.

The total cost to place solar systems on homes and businesses in 2010 excluding government incentives dropped to $6.20 per watt from $7.50 in 2009, according to the study, the fastest drop in the 13 years of data included in the study by the Berkeley Lab, which is managed by the University of California and partly funded by the U.S. Energy Department.

Government incentives typically cut the costs last year by between 25 to 30 percent, although that support was declining as incentives expire and solar's need for subsidies declined.

The post-incentive price drop is less because the incentives are going down pretty fast, said Galen Barbose, a co-author of the report.

The United States was the fourth-largest market for solar energy last year behind Germany, Italy and Japan.

This year, sharp declines in the prices of solar panels drove costs down by 11 percent to $5.2 per watt in the first six months alone for installations in California.

If that pace continues, costs this year could see declines of 22 percent.

A glut of the solar panels that turn sunlight into electricity has pushed those wholesale prices down by about 20 percent since the end of 2010, mostly because of fast-growing production -- largely from Chinese companies.

Those price declines have squeezed profits and margins across the industry and eroded the share prices of companies such as U.S.-based First Solar, the largest solar maker by market value, and SunPower Corp, as well as China's Suntech Power Holdings, Trina Solar and JA Solar Holdings.

Recent corporate bankruptcies, including that of U.S. government-backed Solyndra, have eliminated many of the players that failed to keep pace with the declining market prices for modules.

Panels typically make up less than half the costs of an installed solar array, with construction, wiring and other components adding the rest.

Prices for solar panels, or modules, dropped by 37 percent from 2008 through 2010, according to Navigant Consulting's Global Module Price Index.

Not surprisingly, the report showed that costs for large-scale solar installation of a megawatt or bigger were typically lower than the costs of small systems on homes.

Costs for large, utility-scale projects varied widely, from $2.90 to $7.40 per watt, depending on the type of project and its location.

Costs for small residential systems in the Unites States were $6.90 per watt, far higher than the $4.20 per watt cost in Germany, a country that has more than 8 times as much solar built as the United States.