In a report released today by the Lawrence Berkeley National Lab (affiliated with the U.S. Department of Energy), researchers say that the cost of solar has dropped by more than 30 percent. “Tracking the Sun II: The Installed Cost of Photovoltaics in the U.S. from 1998-2008″ is the second release from the Berkeley Lab analyzing the installed cost of grid-tied solar electric systems over time.

Reuters’ Business Wire reported the following as among the key findings:

* Average installed costs as paid by the system owner prior to receipt of any
incentives, declined from $10.80 per watt (W) in 1998 to $7.5/W in 2008,
equivalent to an average annual reduction of $0.3/W, or 3.6 percent per year in
real 2008 dollars.
* The primary driver over that 10-year period was a reduction in non-module
costs such as the cost of labor, marketing, overhead, inverters, and the balance
of systems.
* In contrast, the decline in costs from $7.8/W in 2007 to $7.5/W in 2008 is
primarily attributable to wholesale module costs, which decreased by
approximately $0.5/W over this period.
* PV installations benefit from significant economies of scale, suggesting
support for larger systems and larger markets drives down costs.
* The installed cost of solar varies widely by state with low costs found in
Arizona, California, and New Jersey, an indicator that more mature markets
driven by strong incentives help reduce the cost of solar.
* Total after-tax incentives from federal, state and local governments also
declined from 2007 to 2008; the decreased incentives outpaced the drop in
installed costs leading to a slight rise in the net installed costof both
residential and commercial systems

* Average installed costs as paid by the system owner prior to receipt of any incentives, declined from $10.80 per watt (W) in 1998 to $7.5/W in 2008, equivalent to an average annual reduction of $0.3/W, or 3.6 percent per year in real 2008 dollars.

* The installed cost of solar varies widely by state with low costs found in Arizona, California, and New Jersey, an indicator that more mature markets driven by strong incentives help reduce the cost of solar.

* Total after-tax incentives from federal, state and local governments also declined from 2007 to 2008; the decreased incentives outpaced the drop in installed costs leading to a slight rise in the net installed cost of both residential and commercial systems.

The report confirms what we talk about often on this site: the cost of solar technology is at its lowest historical point, while federal and state incentives seem to have peaked. Now is a great time to get solar if you live in a state with good solar incentives, such as New Jersey, California, New York, Pennsylvania, Arizona, Florida, or Colorado.

The full report is available for download here (PDF). “Tracking the Sun: II” is a great affirmation for the solar industry. It shows that a renewable energy technology with great cost-saving potential is becoming more affordable over time, not less, and that when strides are made in solar technology, savings are passed down to the end consumer.