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Solar photovoltaic (PV) systems are a fast-growing source of new electric power in the U.S. Systems are being installed rapidly, at every scale, from the smallest residential rooftop systems of just a few kilowatts to commercial and community scale systems ranging up to as much as several megawatts, and all the way up to utility systems ranging to more than 100 MW. Researchers investigating the levelized cost of energy (LCOE) from solar PV generally find that larger systems cost less per unit of capacity and energy delivered. The best available data generally show that the smallest systems tend to cost roughly twice as much per kilowatt, or even more, compared to the largest systems, and that cost differences by system size have been persistent over time.
Reported cost differences are primarily the result of economies of scale in engineering design and construction, and discounts through the bulk purchasing of components. Existing studies vary in several important ways, most notably:
(1) Varying assumptions for important inputs;
(2) Representing different time periods, which is important because PV costs have fallen rapidly, across the board, in recent years; and,
(3) Reflecting costs and solar production in different locations and utility territories, where PV markets are more or less active and mature and the available solar resource varies by as much as 50%.
Regardless of these kinds of differences, though, PV cost studies generally find that utility-scale systems might cost roughly half as much, or even less, compared to much smaller rooftop systems.
This report reviews and compares solar PV LCOE studies and forecasts of how current cost trends might affect PV economies of scale in the coming years. It also briefly explores how ratepayer- and taxpayer-funded incentive policies sometimes distort PV system economics by favoring only certain system types and sizes.