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The Hidden Reasons Solar Prices Are Dropping

There are more contractors competing for solar projects, and the government's making it easier for them to get their jobs done.

Solar panels are getting cheaper, but that’s not the only reason that the total cost of solar power is dropping fast. From 2009 to 2010, the costs for the non-technical parts of the system fell by 18 percent, according to a new report from the Department of Energy’s Lawrence Berkeley National Laboratory. In the past year, that drop was bigger than the drop in the cost per watt of solar panels and made up 40 percent of the total decrease in solar system prices.

Two trends help explain this drop. The first is explained by one of the report's authors as costs “that can be most readily influenced by solar policies aimed at accelerating deployment and removing market barriers.” What that means is that the government can bring down the price by making it easier for contractors to get all of their ducks in a row.

The Department of Energy has been working for a few years now to dig into the boring nitty-gritty details of permitting and other regulations that can slow installations and drive up costs. The agency helped cities create streamlined permitting processes to aid contractors in completing the paperwork they needed with less hassle, and scheduling systems that would send inspectors to check out projects within two-hour windows, keeping contractors from waiting around. At the beginning of the month, the department threw another $13.6 million at these types of efforts.

But even though this work makes it easier for solar projects to go forward, it’s not the only force that’s driving down costs. On the list of “other” costs, the report includes “installer profit.” Labor makes up a huge slice of installation costs. And in the past few years, government incentives for renewable energy projects have driven solar booms in states like New Jersey, where a crop of new solar installation companies have opened and started competing for projects, driving prices down.

For instance, as work has dried up in New Jersey, contractors have been looking to New York as a possible market. Dan Fink, who manages solar projects for Bright Power, a sustainable energy company in the area, found that the market for solar installations in the city was relatively insulated for many years because permitting is complicated and costs are high. But competition is increasing.

“What we've been finding recently is there have been people from New Jersey coming into New York City, and they’ve been driving down the costs,” Fink says. “They see an opportunity for work, and they’ve been biding lower numbers.”

Even as competition increases, though, more people are getting into the field. The number of jobs in the solar industry grew by 6.8 percent this year, significantly better than the national average for job growth, according to the Solar Foundation. In 2010, most of the jobs in the solar industry were in installation, and four of the five fastest growing fields were photovoltaic installers, electricians with specific experience in solar installations, sales reps at installation firms, and roofers with specific experience in solar installations. The field may be more competitive, but right now, that’s good for solar customers. And as long as it’s still growing, it’s good for installers, too.

Photo via (cc) Flickr user OregonDOT

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