A very large percentage of the lifetime costs of rooftop solar goes into its installation, as rooftop solar power systems have low operations and maintenance costs and zero fuel costs.

Solar has come a long way since early 1980s, when the installed costs averaged to more 30 dollars per Watt .This, we know, mainly was due to advancements in PV technology. Since 2007, the cost of an average sized residential rooftop system of 5 kW has halved. The reason for the plunging costs of rooftops systems has garnered significant interest in the US and elsewhere.

What are the cost components of rooftop solar installations?

Rooftop solar power plant installations comprise the following components:

  • Solar panels
  • Inverters
  • Mounting structures
  • Balance of systems (cables, junction boxes etc.)
  • Installation costs

Note: We have considered rooftop solar power plants without batteries and costs are not inclusive of incentives.

An illustration of cost percentages of each component in the PV system is given below:
image1

Now, coming down to installation costs of rooftop solar PV System

Research industries have come out with reports to analyse the installation costs. Let’s look at the numbers quoted by a few:

1) The installed cost of a residential rooftop solar PV system is $3.46 per Watt according to the US Solar Market Insight Report released by GTM Research and SEIA (Solar Energy Industries Association) in the first quarter of 2015 as shown below. The study reflects a cost reduction of around 10% from $3.83 per Watt in Q1 2014 and a cost reduction of 2.4% from $3.5 per Watt in Q4 2014.

image2

Figure 1.Installed Costs of Residential Rooftop PV Systems

On the other hand, the cost of a medium scale commercial rooftop system in Q1 2015 is $2.19 per Watt. This reflects a 14% decline from $2.53 per Watt in Q1 2014. The same is shown below:

image3

Figure 2.Installed costs of Non-Residential Rooftop PV Systems

2)In another study based on LAZARD’s Levelized cost of Energy Analysis – Sept 2014, the total capital cost for rooftop residential solar PV is $3.5-$4.5 per Watt. This capital cost analysis includes EPC cost, capital cost during construction and other owner’s cost. According to LAZARD’s September 2014 study, the capital costs of commercial rooftop PV system ranges from $2.5 – $3.2 per Watt.

3) According to EnergySage Solar Market Place Intel Report, covering data from July 2014 to June 2015, the average cost per Watt for residential rooftop PV systems dropped from $3.86 in 2014 to $3.79 in 2015.

image4

Figure 3.Source:EnergySage

How much longer is the US rooftop sector expected to be incentivized?

On January 1, 2017 the 30 % federal investment tax credit is scheduled to drop to 10 % for commercial and industrial rooftop sector and also for third-party owned residential rooftop systems. The tax credits for purchases of residential PV systems is set to expire completely by then. However, in the current scenario, it looks like the Obama-led government is still in favour of the extension of the solar subsidies made available for the rooftop segment.

How much more are the costs likely to fall?

The average cost of installing a residential solar system saw a massive drop from about $8.50 per Watt in 2007 to just over $4.00 per Watt in 2013, according to GTM Research. The huge reduction was due to the fall in prices of PV panels. The same cannot be expected going forward and any cost reductions are expected to come from Balance of System (BOS) costs like non-module hardware costs and soft costs like installation, permission and acquisition costs. Researchers at GreenTech Media opine that improved balance-of-system technologies will play the primary role in making installed PV system costs decrease 40% of that seen in 2014 by 2020.

The following forecast by Bloomberg New Energy Finance also seem to second the above claim by GTM. They’ve gone on to give the PV installation costs up to 2030.
image5

Figure 4.Source:Bloomberg New Energy Finance

Here, Soft Costs comprise:

  • Financing
  • Customer Acquisition
  • Installation
  • Labour
  • Permitting, Inspection and Inter-connection to the Grid
  • Taxes

Engineering, Equipment and Other Costs comprise of:

  • Inverters
  • Mounting Structures
  • Cables
  • Junction Boxes
  • Other Hardware and Logistics

From the above depicted graph, one can roughly estimate that:

  • The price per Watt for rooftop systems is around $3.5 per Watt in 2015 and is expected to decrease to around 10 % of this by 2017 and 20 % by 2020.It is interesting to note that since 2010,the solar sector has caught on fast. Thanks to the federal incentives and financing options introduced around that time, costs per Watt have reduced by more than 50 % since 2010.
  • Currently the soft costs related to PV installation comes to around $1 per Watt. The same is poised to drop by 10 % by 2017 and 20 % by 2020. The most significant drop in costs has come from panels over the past years. Experts agree the soft costs have the majority of room for price reduction of PV installation. This price reduction can be owed to anticipated novel installation techniques and easier permission approvals and acquisition by 2030.
  • The much awaited break-through in module costs, making it reach the $1 per watt barrier, came in 2009. PV modules have seen massive reduction in costs since 2010, by more than 70%.The key drivers for this kind of a price reduction are efficiency improvements of modules, economies of scale and production process optimisation. Extreme polysilicon price reduction is possibly behind us and future decline is expected to be modest. The module costs, however, are not expected to see price reductions of such a drastic scale by 2030.

Modules currently come at around 65 cents per Watt and is expected to drop by around 15% by 2017 and by 20 % by 2020.By 2030, the module costs are expected to drop by 40%.

  • Non-module and engineering costs haven’t really seen significant reduction in prices since 2010.The price reduction of around 10% can be mainly attributed to technological advancements in inverter and mounting systems. Going forward as well, the scope for price reduction is expected from the same areas and the trends in price reduction is expected to continue.

How much does the rooftop solar installation costs vary with the scale of the system?

The installation costs of a rooftop solar system is dependent on the scale of the system. Based on the above research reports and our understanding, we can say that the installation costs of a 5-10 kW residential rooftop PV system has averaged to $3.5-$4 per Watt and medium scale non-residential systems of 100-250 kW have averaged to $2-$2.5 per Watt. A 50 kW rooftop plant for a commercial enterprise could amount to almost $3 per Watt and a 1 MW non-residential rooftop system could come at lesser than $2 per Watt owing to economies of scale.M

Conclusion

In conclusion, as of mid 2015, rooftop solar installation cost in the US is in the range $3.5-4/W for residential and $2-2.5/W for commercial/industrial installations.

The rooftop solar sector has found its footing basically because of the 30% income tax credits it comes with. Without subsidies, residential-scale solar PV (rooftop solar panels) remains considerably more expensive than utility-scale solar PV. Rooftop PV costs might keep dropping (purely subject to innovations in installation techniques and other non-module expenditure), but solar experts say consumers thinking about going solar should do it sooner rather than later. They’ve cited the soon-to expire federal tax credits as one of the reasons, along with newly-announced tariff rates by Chinese module manufacturers.

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