GTM Research: BoS cost reductions drive falling PV system prices

In the wake of European feed-in tariffs, price declines for solar PV are rapidly becoming the biggest driver for deployment, both globally and especially in the United States.

Module costs have fallen precipitously over the past few decades, and have reached levels that seemed unfathomable in the past. However, as costs and prices reach new lows, the sticking point for bringing down the cost of installing solar moves elsewhere – to the balance of systems (BoS) segment.

GTM Research’s latest report on BoS notes that while these costs continue to decline, they are not keeping pace with module cost declines. BoS represented 58% of total costs for the average U.S. residential PV system in 2007, but now accounts for over ¾ of total costs.

This is despite BoS costs falling 39-64%, depending upon the market segment and geography.

GTM expects this to gain speed to 2020, with BoS cost reductions driving a fall in average PV system installed costs from $2.16 per watt in 2014 to $1.24 per watt in 2020.

This will come from progress in multiple areas. GTM Research Director of Solar Research MJ Shiao, who authored the report, says that there is still room for hardware cost reductions. However, he notes that this is not what he expects to be the most important area for improvement.

Instead, Shiao cites innovations like 1500 volt systems and use of higher-power string inverters on larger systems as ways that changes in BoS components are enabling use of less electrical hardware in other areas.

“As the technology improves, it affects the electrical BoS, and the ability to design a system,” explains Shiao. “That is something we feel very bullish about.”

Shiao notes that it took changes in multiple components including modules to allow for 1500 volt system architecture, but says that the pieces are finally starting to come together. Shaio says that there is “momentum” behind 1500 volt systems, and predicts that the industry will rapidly move towards this as the new normal.

Innovations in BoS also have the potential to reduce non-hardware costs. “I think the most interesting part is how those pieces of hardware affect construction costs as a whole,” says Shiao.

Shiao notes that this will be true not only for large utility-scale plants, but also rooftop PV. He says that rail-free racking, as pioneered by Zep Solar, is helping to reduce costs mostly by reducing the amount of aluminum that has to be purchased, transported, and installed on a roof.

“You now have many residential racking companies chasing this market, starting to release their own rail-free products,” comments Shiao.

The report does not look at reductions in the cost of capital, which has been an area of key progress for the solar industry. However, it does look at optimization of residential labor, including compensation strategies.

“Does it make sense to pay installers by the hour, by the module or by the system?” asks Shiao. He says these and other process innovations will drive lower system costs, particularly for the labor-intensive residential sector.

Ultimately, Shiao believes that it will be a combination of technologies and processes that will continue to push system costs down. “For better or worse, we are past the time in the industry where we can watch module costs fall 70-80% and reduce costs that way,” muses Shiao.