Solar Costs Reach Just 6¢ Per Kilowatt-Hour Beating Government Goal by 3 Years
Morgan Titcher Posted On September 14, 2017 
On Tuesday, the Department of Energy (DOE) announced that utility-grade solar panels have hit cost targets set for 2020, three years ahead of schedule. The target schedule reflect costs of around $1 per watt and 6¢ per kilowatt-hour in Kansas City, which the department uses as a mid-range yardstick for solar panel cost per unit of energy produced (New York is the high-cost benchmark and Phoenix, Arizona with ample sunlight, the low-cost benchmark).
The 6¢ per kilowatt-hour cost figure reflects the raw total cost and does not include subsidies like the Investment Tax Credit (ITC), which the solar industry has been allotted to encourage renewable power generation. The tax credits can reduce the overall cost of solar panel projects substantially and including subsidies in the estimate would likely push the 6¢ per kilowatt-hour figure even lower.
The Department of Energy’s cost estimate is based on utility power generation systems and is based on the final sale price paid to the installer, which means the total estimated cost already includes profit in the cost of the hardware.
The National Renewable Energy Laboratory (NREL), a DOE-funded lab that assesses solar panel cost, issued a report that, compared to the first quarter of 2016, the first quarter of 2017 saw a 29% decline in installed cost for utility-scale solar, attributed to lower photovoltaic module and inverter prices, better panel efficiency, and reduced labor costs. The cost for commercial and residential solar panels has also fallen but to a much lesser degree than utility-scale, at 15% and 6%, respectively.
Utility-scale solar makes up the bulk of the solar power generation output, producing 10.2 gigawatts (GW) of the 13.7 GW that were installed last year according to an NREL report.
Just six years ago, in 2011, the Department of Energy started the SunShot Initiative, aimed at reducing solar panel prices to certain levels by 2020. For utility-grade solar panels, that level was the six cents per kilowatt-hour figure achieved this year. According to the National Renewable Energy Laboratory, the DOE is 85 percent of the way to meeting its SunShot goals for 2020 for residential and commercial solar panels.
While costs have plummeted in recent years, there may not be much further that they can shrink to. NREL’s report reflects that the hardware cost of solar projects has declined dramatically, while “soft” costs like labor and overhead now make up the bulk of the price tag for new solar projects. Soft costs, the more difficult to reduce of the two, now account for 68 percent of residential system costs, 59 percent for a commercial system, and 41 percent of a utility-scale system according to the NREL report.
With 2020 targets met or well within sight, the DOE has set a new goal line for 2030, goals which focus more on reliability and consistency than affordability. The DOE’s Solar Energy Technologies Office said that it will start funding early stage projects focusing on “grid reliability, resilience, and storage,” which are considered among the largest barriers to broader solar power expansion.
Key Takeaways:
• The Department of Energy recently announced that utility-grade solar panels have hit cost targets set for 2020, three years ahead of schedule. The target schedule reflect costs of around $1 per watt and 6¢ per kilowatt-hour in Kansas City, which the department uses as a mid-range yardstick for solar panel cost per unit of energy produced. The 6¢ per kilowatt-hour cost figure reflects the raw total cost and does not include subsidies which would likely push the 6¢ per kilowatt-hour figure even lower.
• Utility-scale solar power costs have plummeted recently, declining 29% in the last year alone. Commercial and residential project costs have also declined, albeit to a lesser extent, at 15% and 6% respectively.
• The DOE will now turn it’s attention to “grid reliability, resilience, and storage,” which are considered among the largest barriers to broader solar power expansion.
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Summary
The Department of Energy recently announced that utility-grade solar panels have hit cost targets set for 2020, three years ahead of schedule. The target schedule reflect costs of around $1 per watt and 6¢ per kilowatt-hour in Kansas City, which the department uses as a mid-range yardstick for solar panel cost per unit of energy produced. The 6¢ per kilowatt-hour cost figure reflects the raw total cost and does not include subsidies which would likely push the 6¢ per kilowatt-hour figure even lower. Utility-scale solar power costs have plummeted recently, declining 29% in the last year alone. The DOE will now turn it's attention to "grid reliability, resilience, and storage," which are considered among the largest barriers to broader solar power expansion.
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