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Solar Installation Costs Fall Because of Incentives and Rebates

The U.S. ranks third behind German and Spain for additions of solar installations in 2008. The up-front cash rebates, the production-based incentives and the tax benefits presented by the national, state and the local governments can be accounted as the reason behind the steady growth witnessed by the installations of solar photovoltaic (PV) systems.

The impact on the environment, the reduction of the fuel price risk, the increased demand for electricity and the locations of the PV at the point of use has been identified to be the causes for the popularity of the solar energy generation during the past few years. As the growth is directly linked to the incentive policies of the government, it has become essential to keep track of the installed cost of PV systems by characteristics, location and by component.

To tackle this need, Lawrence Berkeley National Laboratory issued a report to identify the path taken by the installed cost of grid-connected PV systems in the country. The study, titled, “Tracking the Sun II: The Installed Cost of Photovoltaics in the U.S. from 1998-2008,” was based on the project-level cost data collected from more than 52,000 residential and non-residential PV systems from 1998 to 2008.

It was found that the successful market-building policies at the state and the local levels have resulted in a decline in the average cost of going solar by more than 30% during the stipulated time. A three-year plateau was followed by the dropping costs by 3.6% from 2007 to 2008.

The report also identified that the average installed costs paid by the system owner prior to receipt of any incentives fell from $10.80/W in 1998 to $7.50/W in 2008, which is equivalent to an average annual reduction of $0.30/W, or 3.6% per year. The reduction in the non-module costs like the cost of inverters, other balance of systems hardware, labor and overheads were attributed as the cause of the same.

The reduction in the costs, suggests Navigant Consulting’s Global Module Price Index, from $7.80/W in 2007 to $7.50/W in 2008 is primarily attributable to wholesale module costs, which fell approximately by $0.50/W.

The study reported that the significant rise in the PV installations benefit from the economies of scale as the support for larger system and increased demand pulls down the cost. More mature markets like Arizona, California and New Jersey enjoyed lower costs of installation in the country.

However, the decline in the total after-tax incentives from the state, local and the federal governments during 2007- 2008 surpassed the drop in the installed costs, resulting in a slight rise to the net cost of installation.

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