Evaluating Solar: Lawrence Berkeley Report Investigates California PV Market, Part III

Evaluating Solar: Lawrence Berkeley Report Investigates California PV Market, Part III

Information provided by Ernest Orlando Lawrence Berkeley National Laboratory

"Letting the Sun Shine on Solar Costs," a report from the Ernest Orlando Lawrence Berkeley National Laboratory, presents some conclusions based on the study's findings and also remarks on some trends regarding the evaluation of cost trends in California’s market for residential and commercial grid-connected PV. (The report looks at California’s two largest solar rebate programs, which are operated by the California Energy Commission [CEC] and the California Public Utilities Commission [CPUC].)]

"Perhaps of most importance, we find substantial reductions in PV system costs over time, especially among systems funded by the CEC’s program. Although our analysis cannot, without comparison to a control group, definitively conclude that the CEC and CPUC programs caused these cost reductions, it is clear that--despite the lack of continuity and stability experienced by both programs--pre-rebate installed costs have come down," the report says.

In addition, the report offers some interesting points for both the green building and solar industries. “We find that PV installed in new residential construction--a prime target for low-energy buildings more generally--have come in at significantly lower costs than the retrofit market,” remarked Ryan Wiser, the primary author of the study.

What is the most interesting point the report offers for the solar industry? “It reveals that costs have come down, and have come down significantly, since the inception of the CEC rebate program in 1998,” Wiser explained. “It also finds, however, that the state's incentive programs--due to their design--have at times hampered those system cost reductions, and therefore provides useful insight into how one might alter those structures to more effectively support solar in the future.”

The analysis conducted also resulted in several policy recommendations by the report's writers:

"Reducing non-module costs should be a primary goal of local PV programs." Non-module costs are potentially subject to the influence of local programs, the report points out. This is different from module costs that are "set in a worldwide market" and are highly impacted by factors outside the control of an individual PV program, such as the demand for solar modules in Japan and Germany. "State policymakers may wish to undertake programmatic activities aimed specifically at reducing non-module costs, which could range from targeted approaches to building local supply infrastructure (e.g., providing business development funding to installers, supporting standardized PV products, or offering installer training and certification), to something as simple as making PV system cost and performance data more publicly accessible to further encourage supply competition," the report recommends.

"Sustained, long-term programs may be necessary to drive down costs." According to the report, “Sustained, sizable, and stable markets for PV may be the most direct way of reducing non-module costs because such markets will presumably attract suppliers and encourage those suppliers to create an efficient delivery infrastructure.” PV cost reductions in California are significant, the report adds. However, looking at Japan shows that it is possible to get even great cost reductions. In Japan, the average residential PV system cost $7.4/W_AC compared to the cost of $8.8/W_AC in California (at least among CEC-funded systems).

"The structure and size of the incentive should encourage cost reduction, not cost inflation." There is some “troubling evidence,” the report says, that policy design has adversely impacted the cost of PV systems in California. “For example, the 50 percent cap on the size of the rebate employed by both programs at one time or another appears to have, at best, impeded cost reductions, and at worst, contributed to artificial cost inflation.” Considering that, the decision by both the CEC and CPUC programs to abandon such percentage caps is a positive development, the report adds. In addition, the total pre-rebate cost of PV installations in California has tracked, to some degree, the size of the rebate itself. In fact, the report says, heavy subsidies can lessen the desire for installers to offer and customers to look for lower installed costs. “As rebates are reduced over time, however, we expect that the link between incentive levels and pre-rebate installed costs will be severed, as lower rebates require contractors to price systems at cost in order to ensure a sale,” the report says.

"Targeted incentives that account for the relative economics of different system sizes and application types may be appropriate." The analysis in the report reveals that installed costs are largely dependent upon the type and size of PV installation. There is some spread in the date, however, the report points out there is "clear evidence of sizable economies of scale in PV installations. We also find that systems installed in large new home developments are, on average, far more economical than retrofitted systems, or systems installed in smaller new home clusters. Systems installed on affordable housing, which involve new construction and presumably enable bulk installation, also show significant savings." Also, owner-installed systems had considerably lower costs than those contractor installed. Consequently, the report says, "a further targeting of incentives to account for the relative economics of different system sizes and application types may be appropriate."

Like to find out more details from "Letting the Sun Shine on Solar Costs”? Check out the Orlando Lawrence Berkeley Web site. There you will find the entire report complete with detailed charts and footnotes.

Our thanks to the reports' writers and Ernest Orlando Lawrence Berkeley National Laboratory for so generously sharing this information with the Sun-Enews Community.

"Letting the Sun Shine on Solar Costs: An Empirical Investigation of Photovoltaic Cost Trends in California" was authored by Ryan Wiser and Mark Bolinger of the Ernest Orlando Lawrence Berkeley National Laboratory, Peter Cappers of Neenan Associates, and Robert Margolis of the National Renewable Energy Laboratory. The report was funded by and prepared for the Assistant Secretary of Energy Efficiency and Renewable Energy (Office of Planning, Budget & Analysis), and by the Office of Electricity Delivery and Energy Reliability (Electrical Markets Technical Assistance Program) of the U.S. Department of Energy.

Published 03/31/2006