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Installed PV System Costs Continue to Exhibit Strong Global Variations

Solar photovoltaic (PV) module average selling prices (ASPs) are becoming somewhat normalized (or commoditized), with premium pricing available only in select countries or regions. However, further downstream, installed PV system costs continue to show a much wider range of pricing levels globally. It is widely known that PV installations benefit from economies of scale, with large systems typically achieving bulk discounts ranging from 10-40%. Furthermore, installed system prices show large variations across geographical regions as well as within countries.

On a dollar per watt basis the highest-cost region for solar PV installations continues to be Japan, with both small- and large-scale installations. One of the primary reasons for the price differentials is preference for higher priced domestically produced modules. Installed system pricing in Japan has been decreasing over time, however, in part as cheaper foreign modules gain market share and also assisted by the national residential incentive program’s price ceiling, which establishes a maximum price point in order for systems to qualify for the incentive. Also, this year the residential program introduced tiered rates, whereby cheaper systems can access higher incentive rates, thus encouraging more downward pressure on installed system pricing.

Other major markets within the Asia-Pacific region have lower installed costs, due to larger system sizes and increased downward pressure on component and labor costs. In fact, China has the lowest installed PV costs in the world today, lower even than India comparing like-for-like c-Si system sizes.

Within Europe, there is less variation across different countries when compared to pricing variations across the Asia-Pacific region. One of the highest cost markets in Europe is still the UK, but installed pricing there has been approaching mainland Europe norms over the past few quarters, as competition has intensified between UK installers.

The US is the second-highest priced market in the world, due largely to ‘soft’ costs (permitting, regulations, etc.) rather than more expensive PV components. In the figure, the US cost points are averaged over several major state markets. However, each state (or utility) has different requirements for permitting that can drastically affect overall PV system costs. Installed costs in the US are all trending downwards at approximately the same rate, due mainly to each accessing declining component costs.

The one trend that is common to all countries regardless of location is consistently declining installed system costs. This has occurred in large part due to rapidly declining component – especially PV module – ASPs, but other costs are also declining, especially in developed markets which have had years to decrease soft costs. There is also downward pressure coming from increased competition, especially as vertically-integrated manufacturers are entering the system installation space looking to secure product channels and boost overall margins. As more major players enter this space, however, there is a strong possibility that margins will decline and pricing will become increasingly normalized across regions and countries. The declines in pricing are also creating new opportunities in emerging markets as PV-generated electricity is rapidly approaching the same level as retail electricity tariffs.

Q4’12 installed c-Si system cost by country and system size.

installed systems costs

Source: Adapted from NPD Solarbuzz PV Markets Quarterly Reports