Cost of solar in U.S. dropped 17% in 2010, report says

The average cost of solar energy systems in the United States decreased by 17 percent in 2010 and another 11 percent in the first half of 2011 -- a record drop, according to a new report.

According to a report released Thursday by the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, market-building policies are driving pre-incentive solar system costs down, from reductions in the costs of installation labor to overhead costs.

"Both the long-term and more recent reductions in non-module costs suggests that PV deployment policies have achieved some success in fostering competition within the industry and spurring improvements in the cost structure and efficiency of the PV delivery infrastructure," the authors write.

Even non-module costs took a hit, an indicator that state and federal policies are helping to accelerate deployment and remove market barriers. (Module costs, on the other hand, are dictated by the global market.)

The report examined more than 115,000 photovoltaic systems installed between 1998 and 2010 across 42 states.

The authors write that U.S. solar incentives are successfully delivering an increasing return on investment as costs per watt become ever lower.

But there's still room to grow, and increased market scale would help drive costs down further, helping the U.S. compete with other progressive nations, according to the report.

The authors write:

Lower average installed costs in Germany suggest that deeper near-term 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 the lowest-cost state markets in the United States are relatively small PV markets. Targeted policies aimed at specific cost barriers (for example,permitting and interconnection costs), in concert with basic and applied research and development,may therefore be required in order to sustain the pace of installed cost reductions on a long-term basis.

To wit:

• The average installed cost of small residential PV installations in 2010 in Germany: $4.20 per watt
• The average installed cost of small residential PV installations in 2010 in the U.S.: $6.90 per watt
• Cumulative grid-connected PV capacity through 2010 in Germany: 17,000 megawatts
• Cumulative grid-connected PV capacity through 2010 in the U.S.: 2,100 megawatts

"The American solar industry has achieved these tremendous cost reductions and economic benefits while still supplying less than 1 percent of our national energy mix," Solar Alliance president Carrie Hitt said in a statement. "Just imagine what the coming years could have in store."

This post was originally published on Smartplanet.com