What drives the cost of a commercial solar system?

The cost of U.S. solar installations across all market segments is historically low, even with tariffs on modules, inverters, aluminum and steel. Between 2018 and 2019, commercial solar  system pricing fell  by 9.8%—from $1.62/Wdc to $1.47/Wdc likely driven by more standardization, improved efficiencies within the larger market leaders like Borrego, and reduction in polysilicon prices. In many markets, solar is now competitive with conventional energy prices without subsidies. That’s great for our industry and our customers!

System characteristics that drastically affect pricing, among others, include:

  • Geographical differences, such as weather, related building codes (e.g., snow and wind loading), labor pricing regulations (e.g., requirements for prevailing wage)
  • Site specific topographical challenges (e.g., soil conditions)
  • System type (e.g., rooftop, carport, ground mount)
  • Customer type and electricity tariff structure

The Borrego Solar team is committed to making its processes leaner to help further decrease the cost of solar. In fact, one of our core principles within the Borrego System of Excellence — a system of tools, principles and strategies that guides us toward achieving our mission of accelerating the adoption of renewable energy — is to continuously improve our cost, lead time, and quality. To understand how the costs of an installed commercial solar system add up, we’ve broken it down into three main buckets. Looking at things this way may also help you understand what drives the cost of your system.

Cost breakdown of commercial solar installations

Materials
Materials include the balance of system (BOS) costs, which encompass the components and equipment that move the DC energy produced by the solar modules through conversion to AC power that energy users pull from the grid. These costs, along with the cost of the PV modules and inverter(s), make up most of the cost of the system. 

While component prices may be fixed, BOS does provide opportunities to lower cost. For example, using compatible components can simplify interconnectivity. Also, inverters and modules have come down in price while gaining efficiency. Solar module ratings drive much of the system’s price so as they become more efficient, the cost per watt of other items drop, helping contribute to the 9.8% cost reduction in commercial solar installations.

Labor

Labor costs are another significant portion of the cost of a solar project. While it’s important that solar professionals receive fair wages and appropriate personnel are involved with each project to ensure proper installation, permitting and — most importantly—safety, commercial solar developers are finding ways to streamline installations in order to bring down labor costs. It’s worth noting that the solar labor force has expanded substantially in the last few years and is a growing economic force. In 2018, more than 242,000 Americans worked in solar — more than double the number in 2012 — at more than 10,000 companies in every U.S. state. In 2018, the solar industry generated a $17 billion investment in the American economy.

Other
Other system costs include soft costs, such as permitting, administrative, legal, development and others. These types of costs typically vary by market due to weather patterns and policy/regulations, affecting system prices by as much as 20%.

Overall, as solar development has grown more widespread, permitting and interconnection has become more standardized, decreasing costs.

COST BREAKDOWN OF COMMERCIAL SOLAR INSTALLATIONS

Energy Storage costs

The energy storage market has really taken off in the last few years as customers realize opportunities to pair their solar with storage to take advantage of lower demand charge spikes, time-of-use rates and reduced capacity charges.

Solar modules and batteries make up most of the cost of solar-plus-storage projects. However, technology improvements and increasing scale of manufacturing have contributed to the levelized cost of electricity (LCOE) for lithium-ion batteries falling 35% since the first half of 2018 to $187 per megawatt-hour. Co-locating solar and energy storage also helps reduce costs by as much as 8%, rather than locating them separately, by combining site preparation, land acquisition, installation labor, permitting, interconnection, and EPC/developer overhead.

As the market changes, Borrego continues to find ways to drive down the installed cost of solar in an effort to fulfill our mission of solving the world’s energy problems by accelerating the adoption of renewable energy.


Sources:
https://emp.lbl.gov/tracking-the-sun
https://www.seia.org/research-resources/solar-market-insight-report-2019-q2
https://www.nrel.gov/docs/fy19osti/72399.pdf
https://www.nrel.gov/docs/fy19osti/71714.pdf

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