The Dramatic Drop in Solar-Energy Prices

| 5/19/2016 9:44:00 AM

The price of solar energy is at an all-time low according to a recent report conducted by the Lawrence Berkeley National Laboratory (Berkeley Lab). Due to lower solar installation costs, improved project efficiency, and a 70 percent decline in purchase agreement prices since 2009, this renewable energy resource has never been more affordable.

Upfront Solar Energy Costs

The average installed price of photovoltaic (PV) devices has fallen by more than 50 percent since 2009, making the initial investment cost of system installations feasible for a much wider range of homeowners and businesses. The Berkeley Lab’s latest “Utility-Scale Solar” report cites that up-front costs have fallen from around $6.3/W in 2009 to $3.1/W for projects completed in 2014.

"By the end of 2020, the amount of installed solar capacity will be 300 percent higher than today," Dan Whitten, vice president of communications at the Solar Energy Industries Association, said. “Nationwide, it grew 10 times between 2008 and 2015.”

Solar Energy Prices Graph

Photovoltaic Efficiency

New solar projects generate electricity more efficiently as well. PV projects performed at an average capacity factor of 29.4% (in AC terms) in 2014, a notable improvement over the 26.3% and 24.5% average 2014 capacity factors realized by projects built in 2012 and 2011, according to the report findings. The improvement is due to better resource areas, and better solar collector fields and tracking technology, which has helped to increase energy capture.

Lower Cost of Solar Power Purchase Agreements

Another piece of this solar energy price puzzle has to do with the drop in solar power purchase agreements (PPA). A PPA is a financial agreement where a solar contractor constructs the design, permitting, financing and installation of a solar energy system on a customer’s property for very little cost. The developer then sells the power generated to the host customer at a fixed rate that is typically lower than the local utility’s retail rate.

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