The US solar market report, published on Wednesday, predicts solar module prices will drop to US$0.35c/W in Q4 2016, having already fallen already by one-third in Q3, down from US$0.60c/W to US$0.40c.
The Q3 price drop already charted, combined with Deustche Banks projections for Q4, would mean a total fall in U.S. module prices of 40 percent in just two quarters.
The U.S. PV market has been notable for its heavy balance of system costs, mostly related to the planning and approvals process. By contrast, Australian solar system prices average around A$1.63/W, less than half the average price for residential installation in the U.S.
But, as the Deutsche report illustrates, this appears to be changing and rather rapidly.
Average residential solar system prices in the US market have only modestly decreased from $US3.86W in 2H14 to $3.57/W in 1H16. Most of the price reduction during this period was driven by BoS cost reduction, the report says.
However, considering the recent precipitous drop in module prices (from ~60/W to less than 40c/W), we expect system prices to decline at a much more rapid pace in the base case scenario assuming a 6-month lag for BoS cost reductions and taking into consideration some of the recent module pricing data points, we estimate system prices of $3.26/W in 2H16, $2.75/W in 1H17, $2.5/W in 2H17 and $2/W in 2H18.
In a more optimistic scenario, Deutsche Bank says, it estimates system prices of $3.17/W in 2H16, $2.62/W in 1H17, $2.22/W in 2H17 and ~$1.7/W in 2H18.
This precipitous decline in module prices is also accompanied by a sharp decline in inverter prices, the report says, especially in the utility-scale and C&I (commercial and industrial) markets.
As a result, we expect solar economics in several U.S. markets to improve significantly over the next 12-18 months, Deutsche Bank says.
We expect the final gold rush in the U.S. market to begin in 2017. Our view is also supported by the strong pipeline of utility scale-solar projects we estimate roughly 8GW of solar projects under development in Texas and 31GW in the entire US.
For 2018-20, Deutsche Bank forecasts strong growth in all segments, and raises its demand estimates from 13.2GW, 15.2GW and 17.4GW to 16.5GW, 18GW and 19.7GW respectively.
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