Friday, October 23, 2009 at 11:09:32 AM - by Jeanne Roberts

A new report by the Lawrence Berkeley National Laboratory, a research arm of the Department of Energy, or DoE, shows that solar power costs dropped, during the decade 1998 to 2008, from a peak of $10.80 per watt to less than $7.50 per watt, installed.

Solar energy’s ultimate aim – to reach grid parity with fossil-fuel generation (coal, oil and gas) – is getting closer, the report notes. What the report doesn’t note, and writers neglect to mention, is the cost of the installation factor as it affects solar parity.

For residential customers, installation costs can represent up to half of the cost of installed solar photovoltaic (PV) and solar thermal systems (used to heat water and provide home heating).

If we subtract installation costs (which we pay to utilities that develop generation via rate increases), we can say that solar costs $3.75 per watt. A watt is a unit of energy fixed in time, so when we say $3.75 per watt, we really mean the cost of the kilowatt-hours the system is capable of producing.

Translating watts into watt-hours (or the cost over time), we find that utilities charge about 0.10 cents per kilowatt hour. Adding associated fees (basic service charges, environmental improvement fees, resource adjustments), adds another .04 cents at a minimum. So the cost of utility generation is at least 14 cents per kilowatt hour.

A 1-kilowatt solar system costing $9 per watt can produce electricity for .30 cents per kilowatt-hour, in sunny climates. That is, with solar insolation values nearer 6.0 than 4.0. So the current cost per watt calculated by Berkeley Labs leads to a kilowatt-hour cost of .25 cents per hour.

If we factor in the ongoing costs of fossil-fuel generation, in terms of environmental degradation and the eventual costs of carbon emissions reductions – which are likely to descend on us all as soon as next year, if some version of Waxman-Markey passes – it’s a safe bet to say solar has already reached some kind of parity.

Comparison costs, state by state, show that solar energy system costs are lowest in New Jersey ($2,625 after incentives for a 5-kilowatt system), $13,228 in New York, $21,350 in Massachusetts, $22,610 in California (which recently approved a feed-in tariff), and highest (at $35,000) in Arkansas. Which presents a curious anomaly; states with higher insolation values also have higher solar system costs.

Most homes use about 1,000 kilowatt-hours of electricity a month, so most systems designed to largely replace utility power are at least 8 kilowatts. Even then, without extensive and costly battery backup (via deep-charge batteries), most homeowners can’t really get off the grid. In New Jersey, for example, a 15-kilowatt system (enough to cover energy needs at 3.0 to 3.5 solar insolation value) would cost about $7,875, after rebates.