Utility-Scale, Distributed Solar Prices Tumbled 5% to 12% in 2015

Prices for solar energy systems fell to record lows across all sectors in 2015, according to two new reports from the Lawrence Berkeley National Laboratory (LBNL).

The LBNL reports, released on August 24, are Tracking the Sun IX, which focuses on installed pricing trends in the distributed solar photovoltaic (PV) market, and Utility-Scale Solar 2015, which focuses on the utility-scale market. LBNL is one of several laboratories overseen by the Department of Energy.

Installed prices for distributed solar PV systems dropped 5% ($0.20/W) for residential systems, 7% ($0.30/W) for smaller non-residential systems, and 9% ($0.30/W) for non-residential systems. The declines are pegged to reductions in solar system hardware costs and “soft costs” such as marketing and customer acquisition, system design, installation labor, and permitting and inspections, LBNL said in a press release accompanying the reports.

“This marked the sixth consecutive year of significant price reductions for distributed PV systems in the U.S.,” said Galen Barbose of LBNL’s Electricity Markets and Policy Group, the lead author of Tracking the Sun.

Prices for utility-scale PV systems that came online in 2015 also fell by $0.30/W—or 12%—compared to the previous year.


A Market Characterized by Pricing Variability

The reports emphasize a vast variability in PV system pricing that reflects a host of factors, including differences in system design and component selection, market and regulatory conditions, and installer characteristics. “For example, among residential systems installed in 2015, 20 percent sold for less than $3.30/W, while another 20 percent sold for more than $5.00/W,” the lab said.

Prices for utility-scale projects also varied widely in 2015. The cheapest 20% was priced below $1.60/W, while the most expensive 20% was priced above $2.60/W. “Some of the observed price differences between projects can be explained by varying lag times between contract negotiation and project completion, as some of these projects have been under development, or even construction, for several years,” explained LBNL’s Joachim Seel.

Notably, within the utility-scale sector, PV project performance—measured in terms of “capacity factor”—has improved among newer projects, owing to advances in technology and project design.

“In particular, an increasing number of projects are deploying solar tracking technology to boost performance. In addition, developers have been augmenting the size of projects’ solar arrays relative to their inverters (resulting in higher inverter loading ratios, or ILRs), as another way to boost output. Finally, over the past few years, projects have, on average, been built at sites with stronger solar resources, as measured by global horizontal irradiance (GHI),” the lab said.

The Dramatic Fall of Power Purchase Agreement Prices

Meanwhile, lower installed project costs and higher capacity factors have allowed levelized power purchase agreement (PPA) prices from utility-scale PV projects to fall dramatically over time. According to the lab, PPA prices have dropped by $20/MWh to $30/MWh per year on average from 2006 through 2013, with a smaller price decline of about $10/MWh per year evident among PPAs signed in 2014 and 2015.

At the end of 2015, there were at least 56.8 GW of utility-scale solar power capacity in interconnection queues across the nation, the lab noted. Growth within these queues has come primarily from Texas and the Southeast, Central, and Northeast regions. That’s a “clear sign that the utility-scale market is maturing and expanding outside of its traditional high-insolation comfort zones of California and the Southwest,” it said.

“Looking ahead, the improving economics of solar power demonstrated in these two reports, coupled with the extension of the 30% federal investment tax credit (ITC) through 2019, should drive a continued expansion in all sectors of the U.S. solar market over the next few years,” LBNL added.


Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)


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