US solar system prices fell 17% in 2015, finds GTM

A newly published report by GTM Research and the Solar Energy Industries Association (SEIA) titled U.S. Solar Market Insight 2015 Year in Review has revealed that solar system costs fell by 17% across the U.S. last year.

With residential solar prices hitting a new record low of $3.50 per watt, solar’s increasing affordability is helping to drive installation rates, compelling GTM Research to forecast 2016 to be the strongest year yet for the solar industry, topping 16 GW of new capacity.

This latest report shows that – of the various solar sectors in the U.S. – the utility fixed-tilt segment recorded the sharpest price reduction. All sectors, however, posted encouraging cost falls, averaging 10% in the non-residential rooftop sector and 17% in the utility sectors (which includes utility tracking installations).

For residential rooftop solar there was a slight leveling-off in cost reductions towards the end of the year, the study found, citing the "stubbornness" of residential soft costs and strong investment in customer acquisition, which served to prop-up prices somewhat.

Across the board, aggressive cost reductions in hardware continue to yank down system prices, and in the utility sectors soft costs have been falling at a faster rate. Further, as more EPCs and installers move into markets and regions with lower labor and regulatory compliance costs, the report adds, all solar sectors will experience even greater downward pressure on costs.

What solar costs, where

By the fourth quarter of last year, the average cost per watt for residential solar was $3.50. Of that figure, GTM Research and SEIA calculate that 65% is comprised of onsite labor, engineering, permitting and other soft costs. The analysis shows that soft costs in the residential solar sector have actually risen 7% over the course of the past 12 months (largely due to the labor- and time-intensive sales practices of the leading solar leasing providers, many of which go door-to-door to sign up new customers), while at the same time residential hardware costs have dropped 16%.

The commercial rooftop sector has enjoyed similar price falls for hardware (15%), and a modest 6% decrease in soft costs. by Q4, a typical commercial installation cost $2 per watt, of which 50% was comprised of soft costs. "In order to continue reducing costs, developers and EPCs are looking to squeeze additional power density for commercial sites and amortize fixed costs over more power output – and therefore reduce dollar-per-watt and dollar-per-kilowatt-hour costs," said the report.

In the ground-mount, utility-scale solar sectors, prices for PV at the end of Q4 2015 stood at $1.33 per watt and $1.54 per watt in the fixed-tilt and tracking segments respectively. Price variations nationally are more tightly clustered in the utility markets, but there are some regional variations – the cheapest large-scale solar in terms of system costs is found in the Southeast U.S., for example.

Growth into new markets is having the effect of broadening EPCs’ and developers’ economies of scale, forcing greater optimization in logistics and supply chains and, thus, delivering even lower costs. Equally, as installers become more adept at reaching and serving new markets, more mature installation practices are becoming the norm, which in turn is bringing down soft costs – they fell a massive 37% in the fixed-tilt segment last year, and 23% for tracking projects.

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