(1) Michael Liebreich, chairman of the research group, noted in a talk that he expects the cost of developing a solar power project to drop by half in the next decade, worldwide. New Energy Finance numbers suggest the cost of large solar photovoltaic (PV) projects to decline to from  around $3.00 per watt today to $1.45 per watt in 2020.

A reduction of that magnitude would make solar energy more competitive with fossil fuels. Note, however, that the cost of large-scale solar has always been — and will likely remain — lower than the costs associated with residential solar energy installations.

(2) Meanwhile, New Energy Finance analyst Chris Gadomski expects that plans to build more nuclear reactors in the U.S. will go forward, despite calls to scale back nuclear’s role in our energy mix.

“We’ll see a reassessment and reevaluation and then stay the course,” Gadomski said today at a conference in New York today. Plans to build the five reactors are already underway, he said, and “We don’t see that changing.”

You can follow the conference chatter on Twitter: #BNEF2011

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First off, it won’t affect the price of installing a solar energy system. Whether you own a home or business, a utility company buying solar power is completely independent from you installing a system yourself. But utility-scale solar projects can create the opportunity to purchase clean energy from your utility.

If you’ve opened and examined a utility bill in the last, say, ten years, you may have noticed an option to pay a little more money on top of your utility bill each month for green power.Depending on where you live, the purchase option may be called “green tags.” This is where these new solar energy plants — and other renewable energy projects — come in to play. If you opt for the green power purchase option, your utility company will charge you a bit more for your electricity. Clean sources of electricity, like wind and solar, are a bit pricier than conventional sources, like coal, after all.

Tucson Electric Power (TEP) in Arizona is taking its green purchase option a step further. The utility recently built a new solar array and is selling its power to customers in blocks of 150 kilowatt-hours (kWh). The utility adds $3 to the home or business’ monthly utility bill for each block purchased. What makes TEP’s program unique? It’s allowing homeowners to lock in a fixed price for their solar energy blocks, which could save them money if the price of conventional electricity goes up in the future.

Keep in mind there’s really no way to make sure that your home is using clean energy when you pay this extra fee. There’s only a single power line, so how do you get the green energy and others don’t? Here’s the deal. The power you’re getting isn’t any different from that of your neighbor’s. The “green tags” are like certificates that subsidize the cost of adding clean power generation. So the more “green tags” purchased, the more clean energy the utility can add to its grid.

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While NREL readily admits its numbers aren’t perfect, the results do provide a glimpse at solar energy system pricing trends across the nation. And, now that 2010 is behind us, we can draw some preliminary conclusions about how solar buyers fared last year. Namely, we can see that the average going price for a solar panel installation in 2010 was $7.17 per watt.

It bears noting that this figure:

• Reflects total average costs across residential solar and commercial solar installations.
• Is a pre-incentive price, which means it doesn’t factor in any federal tax credits or grants and local solar rebates.
• Is a national average and as a result doesn’t reflect regional solar price variations.

NREL’s 2010 numbers confirm that the cost of solar energy systems continues to come down. It’s important to note, however, that solar rebates and other incentives are at the same time being reduced across the country, in places like California, Arizona, Massachusetts and New Jersey. Given that many state and municipal governments will continue to tighten their belts in 2001, this downward trend in solar rebates may well continue. So, while solar panels will likely be cheaper in 2011 than they were in 2010, the solar rebate available in your area may be smaller. This means waiting around to see if solar power costs drop further may not end up saving you any money.

If you’re even a little bit curious about solar power in America, the Open PV Project is worth a peek. Don’t miss their visualization of solar photovoltaic (PV) installations over time.

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The 37-page report includes cost analysis of 70 percent of the residential solar energy systems in the United States. It finds that, between 1998 and 2009, the cost of  home solar installation has fallen by 30 percent. Moreover, in 2010 alone, installations have dropped by 14 percent in California and 16 percent in New Jersey, the two states leading the nation in residential solar installations.

So the same-sized system that went for nearly $11 per watt in 1998 can now be bought today for around $6 per watt in those states. To get a clearer picture of the currently solar market in the entire country, check out the National Renewable Energy Laboratory’s (NREL) Open PV Project, which keeps a running, real-time tally of  the number of photovoltaic (PV) installations in the country (77,366), today’s average cost per watt ($7.15) and the nation’s current solar capacity in megawatts. The data are reported on a voluntary basis, so the numbers aren’t comprehensive. Nevertheless, the site provide a helpful glimpse into solar power costs around the country.

As for the report, the price reduction is clearly good news for homeowners worried about the cost of installation. But the steep decline in price also indicates that competition within the industry is heating up, and therefore driving prices down. Most important, with innovation being the key factor among companies battling for their spot under the sun, we can expect development of more efficient solar panels to rise quicker than previously predicted.

If this price trend continues, the solar industry may soon be able to stand on its own without government incentives. There’s been much debate recently about how long federal, state and utility incentive programs will have to keep the industry moving forward. But while we’re heading closer to a day when those programs won’t be needed, we’re not there yet. Even with the price drop, the upfront cost of residential solar energy systems still falls between $25,000 and $40,000 before any incentives are taken into consideration.

That’s where financing options come in to play. Qualified homeowners throughout the country can choose the financing route and pay a monthly payment toward owning the system that is usually less than their utility bill. So now, there’s really no excuse. Use GetSolar’s Solar Calculator today and find out how much money you can save each month with a solar energy system.

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See, in order to ensure that you receive state- or utility-sponsored solar rebate funds, your solar installer will need to file an application stating (among other things) the size and per-watt cost of your solar energy system. These numbers from across the state can then be aggregated to provide a snapshot of the solar energy market: who’s installing solar panels, where they’re being installed and at what cost.

In California, this data aggregation is carried out by Go Solar California, a joint endeavor of the California Public Utilities Commission and the California Energy Commission. The group maintains a useful database of statewide solar power statistics. We ran a quick query to see which California counties lead the state in terms of the number of residential solar energy systems.

As you can see, San Diego county is numero uno, with nearly 25 megawatts (MW) in installed residential solar power. Los Angeles county — at least the portion served by Southern California Edison (SCE) comes in second with about 15 MWs worth of solar home energy systems. Then we’ve got Santa Clara, Riverside, Orange and on down the line. Taken together, these counties represent 48,883 residential solar rebate applications that have either been accepted or are currently awaiting approval.

If you’re interested in learning more about things like solar energy system size and solar cost in California, be sure to check out Go Solar California’s database!

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The Wall Street Journal last Friday ran an article on the California Solar Initiative (CSI), a multi-year roadmap that aims to boost in a major way the amount of electricity the state gets from solar energy systems. Among the article’s main takeaways was the fact that some home solar installations cost far more than the statewide average:

Two installers in particular, Sungate Energy Solutions Inc. of San Diego and Stout & Burg Electric Inc. of Tustin, Calif., had costs for solar projects that were much higher than average, according to data collected by California Solar Initiative. Those companies are among hundreds of contractors that installed solar systems for residential and small commercial customers in California in the past year and a half. Stout & Burg began doing significant amounts of solar installation work in mid-2008, and Sungate got into the business in 2009.

Between early 2009 and through the first half of this year, the average cost per watt, measured in direct current for small projects of 10 kilowatts or less that registered with the California program was about $7.15. There were about 19,000 such projects.

But Sungate Energy Solutions listed an average cost of $13.33 per watt for its 557 projects, according to an analysis of the data by Dow Jones Newswires. Stout & Burg had average installation costs of $12.43 per watt for the 583 projects it submitted to the program.

What’s going on here? Highway robbery? Or is there a logical explanation? A few things to consider:

For one, the two installers in question did do an unusually large number of small projects; according to the article, their solar electric installations averaged fewer than 2.5 kilowatts (kW) in size. The cost of solar panel systems is measured in dollars per watt. Since general administrative and related costs don’t vary all that much from residential project to residential project, smaller projects often do, in fact, tend to have a higher per-watt cost. Fair enough.

Second, as noted in the article, some of the higher-cost systems were installed with battery backups. This, too, can increase per-watt costs. While no one system is the same, a rough estimate of this additional outlay might be to the tune of $4/watt. Read here for more on solar photovoltaics (PV) and batteries.

Third, the high-cost numbers are taken from a pool of, as noted above, some 19,000 projects. It’s natural to expect some cost variation. Just as some projects came in at above the $7.15/watt average, some undoubtedly came in under. Given the WSJ’s usual focus on the numbers, I’m surprised the article didn’t analyze whether the data showed major distribution irregularities. Perhaps that’s coming.

Despite these explanations, CSI staff are still scratching their heads over the numbers. Merideth Tirpak Sterkel, manager of the CSI, told the WSJ she was “mystified as to why some of the projects would have much higher costs than others.”

While it seems too soon to say whether some California homeowners got ripped off, the story demonstrates why it’s always a good idea to get more than one quote for your solar home project.

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“Solar and Nuclear Costs: The Historic Crossover” was published by North Carolina Waste Awareness and Reduction Network (NC WARN) in affiliation with Duke University. This report has generated significant buzz over a particularly exciting moment in energy economics, where the cost of a renewable energy source has reached that of a more conventional one. We gave this study a read to address skepticism and clarify its contents. Here are some of the report’s main takeaways:

The cost of solar has decreased significantly and quickly. Between 1998 and 2008, the cost of photovoltaics (PV) fell by one third. This trend is poised to continue in response to increased research and development as well as global market growth.

The cost of commercial scale solar energy in North Carolina is less, on average, than the cost of nuclear energy. That’s not as simple as the headlines want to make it. Commercial-scale solar refers to electricity generated from a large solar farm, not a small set of PV panels on a rooftop. According to the report, this type of solar electricity is sold by project developers to utilities for 14 cents per kilowatt-hour (kWh) or less. Planned nuclear power plants, meanwhile, would “generate electricity at much higher costs — 14 to 18 cents per kWh.”

The average cost of all solar energy in North Carolina is about equal to the cost of nuclear. The average cost of solar energy — including both commercial scale solar farms and smaller scale residential solar — is 16 cents per kWh, which is in the normal price range for nuclear energy.

Nuclear power requires very high capital expenditures, making it a “risky investment.” Nuclear power is incredibly expensive to build, which is why a surprising number of your tax dollars are spent supporting it. Standard and Poor’s, the rating agency, views nuclear as risky, which is why it threatened to downgrade the credit rating of any utility attempting to build a new nuclear power plant in 2009.

The federal government, however, feels differently. Both the Bush and Obama administrations have funded significant investments in R&D for nuclear power, and both have supported construction of new projects. As a result of these conflicting views, the federal government guarantees loans that finance the construction of new nuclear power facilities.

Incentive structures and lack of data make it impossible to compare the subsidies for solar and nuclear power. We can’t make simple comparisons since solar is subsidized primarily through dollars per watt installed and nuclear is funded through less transparent federal loans and guarantees. The report’s authors could have done a better job discussing how subsi

Finally, the study exaggerates the ability of solar to replace nuclear power on a large scale. Yes, we love solar, but honesty is the best policy. Solar cannot completely replace nuclear power without significant improvements to currently available energy storage technology. Why? Solar is an intermittent source of power, meaning that the amount of electricity it generates in a given period of time varies due to factors outside of our control. Like the weather. Nuclear, on the other hand, can and does generate a predictable amount of power 24 hours a day.

This study addresses the issue of intermittent vs. baseload power by claiming that “the distinction between intermittent sources and baseload sources is rapidly becoming obsolete.” This is simply not the case. Distributed generation is growing fast and has tremendous potential But the evidence the study provides for replacement of nuclear power is insufficient. The article the authors cite from Reuters discusses a FERC official who believes not a single new nuclear or coal-fired power plant must be built to meet future electricity demand. This official may well be correct. However, he did not address eliminating current nuclear power generation and replacing it with solar, which is what this study suggests is possible. We may well be able to eliminate nuclear power with a combination of energy sources that includes solar, but that’s a story for another blog post.

The NC WARN study is a noteworthy one. Judging from its findings, two things are clear: (1) The costs associated with building, insuring and decommissioning nuclear power plants have been rising and will continue to do so. The result will be ever higher per-kWh prices for electricity that comes from a nuclear source. (2) The costs associated with building and installing solar panels have been falling — and will continue to do so. The result will be ever lower per-kWh prices for solar power. While the report’s main thesis — that solar power is already cheaper than nuclear power — may not apply nationwide, the general trend is difficult to argue with.

We invite you to examine it yourself and, as always, we welcome your opinions.

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When you’re sitting across from a solar installer who’s prepared a quote for you, or when you’re looking at the (often inaccurate) results of an online solar calculator and you see more zeros in a row than you had expected, don’t panic. Your solar investment might turn out to be completely manageable, and provide you with an excellent return in a relatively short period of time. Getting a solar quote is the only way to know for sure if solar is going to make sense for you, but answering a few questions before you even approach the numbers game can help immensely:

1. Am I a good solar candidate? If you live in a state with strong solar incentives, have either a high per-kilowatt-hour electric rate or simply burn through a lot of electricity, and are interested in investing in clean energy, then yes–solar may be a great choice for you. States with good solar incentive programs include California, Arizona, Pennsylvania, New Jersey, New York (if they ever get around to re-issuing solar funds for 2010), Connecticut, and Massachusetts. You can see at a glance how your state measures up on this interactive solar incentive map.
2. Do I have a good site for solar panel installation? Solar panels can be installed on a rooftop or on cleared ground. Either way, their only non-negotiable requirement is direct sunlight, preferably uninterrupted by shadows at least between the hours of 10 and 3. If you’re talking roof space, a southern orientation is best, but other orientations can be worked with too–you’ll just lose a bit of efficiency.
3. Can I finance a large investment in my home or business? Take a step back and assess your current financial situation. How much additional debt could you take on? You can always, always get a solar installation sized to your budget (keeping in mind we’re talking thousands rather than hundreds) rather than to your total energy usage. Don’t be shy about letting your installer know this.
   • If you run a business, take a look at your energy expenditures and see what portion of your budget is just being eaten up with keeping the lights on. You might be surprised. If you’re a business with no budgetary wiggle room, you may still be able to pursue third-party financing options like power purchase agreements (PPAs), so don’t give up before digging a little deeper.

And when you do start looking at numbers, keep the following in mind:

1. Time to payback for solar installations in competitive states is now often under ten years, or even five (New Jersey is kind of a show-off in this regard). However, even if you’re quoted a 15 year payback, remember that solar panels produce electricity for decades. Most solar panels come with a 25 year warranty; some, even longer.
2. You’re essentially pre-paying for a clearly defined percentage of your electric usage for the next 20-30 years. Multiply your current annual electric bill times 25–that’s a lot of zeros too, right? It’s good perspective to have. And by using solar for your own electric generation, you’re protecting yourself from energy price inflation over time, an extremely important value.

Yes, solar is expensive. But it can be an attractive investment–the days of going solar just to go green are long gone in many markets across the country. Don’t let the dollar signs knock you out of the game before you get a professional opinion on whether or not solar can work for you.

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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 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.

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• State: While there is a nation-wide financial incentive for solar in the form of a federal tax credit, each state has the authority to offer additional incentives. In states where the cost of electricity is high, and/or there are few in-state energy resources, state governments may offer cash rebates, low-interest loans, tax credits or production-based incentives in order to make solar more affordable. Take a look at our interactive ap of solar incentives to see how your state measures up, and visit the thorough DSIRE website to see minute details of each state’s solar incentives. Among the best states for solar currently are New Jersey, New York, Pennsylvania, California, Florida, and Arizona. Incentives can help reduce the net cost of solar by anywhere from 30 to over 70 percent.

• Site: Exposure to the sun is the most obvious factor here, but that’s not the only thing that matters when considering your home’s suitability for solar panels. A southern exposure is ideal–this ensures the PV panels will receive the maximum sunlight throughout the day, increasing their energy output for your home. Southeast and southwest exposurs work too, though decrease efficiency slightly. Other exposures (primarily west) are occasionally used but they’re nowhere near as efficient–and thus, not cost-effective. Getting 4 kilowatts of solar energy on your roof will take fewer solar panels if they’re at their maximum efficiency, more if they’re operating at lower efficiency due to shade or exposure.

• Roof: Different roof surfaces require different mounting procedures, and occasionally different specific solar panels. Some are more expensive than others due to materials or to added labor costs.
  • Does your roof have at least 25 years of good house-sealing service left in it? If not, you may want to consider replacing your roof before pursuing a solar installation. Solar panels last a surprisingly long time: manufacturer warranties are often 20-25 years, and they can last even longer than that. If you need to replace your roof before that time is up, you essentially have to pay for a new solar installation. No major materials costs (unless you’re replacing your inverters at the same time, which do need replacing every 15 years or so), but it’s quite a bit of labor and most of it can’t be performed by regular roofing contractors.

• Energy Usage: This is less obvious, but the more you spend on electricity per month, the more a solar installation can save you, and the faster it can pay for itself. (To that, though, see Adam’s post on why payback period is not necessarily the gold standard for solar financing.) The two factors here primarily are rate per kilowatt-hour of electricity, and how many kWh’s you actually use per month. Here’s one hard figure for you: if you’re spending less than $100/month on electricity, chances are–no matter what your state–it will be difficult to make solar work as an investment for you.

And here’s another set of hard figures for you: if you live in a competitive state for solar, you should expect quotes in the $7-8/watt range. If you live in a non-competitive (e.g., low incentive) state, expect more like $8-10/watt. After incentives, of course, that figure can drop drastically.

So, don’t be disappointed when you can’t get someone to give you a firm figure. A site visit from an experienced installer is a necessary component to figuring out how deep into your pocket you need to go for a solar installation: there are just too many factors at play to allow for a simple answer to the question of solar cost.

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