With cost of solar power fast decreasing in the US, millions of residential and commercial units in the US are interested to know the actual cost of rooftop solar power in the US.
There are two costs, when we talk of solar power. One is the unsubsidized cost, and the other is the cost of solar power after subsidies.
Usually, the cost of solar power is denoted as LCOE, which stands for levelized cost of electricity. This metric, while it sounds complex, is a fairly simple one:
LCOE = total costs during the entire project cycle/total units of electricity generated during the entire project lifecycle.
Solar power systems have a lifespan of 25 years. Thus, while calculating LCOE, we need to estimate all the costs (capital costs, financing costs, O&M costs, costs for parts replacement etc.) and estimate the total number of units of electricity that will be produced during the 25 years of the project, and divide the former by the latter.
The LCOE gives the true cost for a solar power system which has high upfront costs but provides benefits over 25 years.
The table below gives approximate estimates of the cost of rooftop solar power for the US, for 2015, for both commercial and residential sectors.
All costs in US cents/kWh, for 2015
|Residential||Commercial & Industrial|
How has the rooftop solar based electricity fared over the past years?
LCOE of electricity for residential systems declined by around 42% between 2008 and 2014 for small systems (0-4 kW) in California and by 44% for the larger 4-10 kW systems; in other parts of the United States the decline was 52% and 54%, respectively, for the residential rooftop systems.
The below chart shows the variation of LCOE without considering the battery storage costs, over the years for different countries:
How does the cost of rooftop PV systems in the U.S compare against the utility electricity rates?
The levelized cost of electricity can be compared against per kWh cost of grid electricity to determine whether residential rooftop PV systems have reached grid parity in a particular location.
The below table gives an idea of the 14 cities where grid parity was achieved by the end of 2014 along with a table depicting the cities expected to reach grid parity by mid-2016 , according to the Deutsche Bank Report,2015.
Note: The prices denoted are without storage costs and are not inclusive of incentives
According to the report:
- Solar is currently competitive in more than14 states without any additional state subsidies. Solar LCOE in these states ranges between 10-15c/kWh and compares to retail electricity price of 12-38c/kWh.
- By 2016, nearly 47 states would be at grid parity in the US.
The Deutsche Bank Report assumes a battery storage cost (considering Lead-Acid Batteries) of 14 cents per kWh and expects it to reach around 2 cents per kWh in five years’ time. They have published the below chart to illustrate the comparison of solar+battery costs against grid prices for 2014-2021. Here they’ve compared LCOE compared against electricity prices escalated by different percentages over the years.
How do residential rooftop solar systems compare against other renewable energy sources in the U.S?
The below graph published by Lazard’s Levelized Cost of Electricity, 2014 ,compares how Rooftop Residential Solar fares against other conventional and non-conventional sources.
Note: Storage costs and incentives are not included in the analysis
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