1

US Solar Photovoltaic System Cost Benchmark Q1 2018

October 2018

NRELPR-6A20-72133

Ran Fu David Feldman and Robert Margolis

2

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

3

NREL has been modeling US photovoltaic (PV) system costs since 2009 This year our report benchmarks costs of US solar PV for residential commercial and utility-scale systems built in the first quarter of 2018 (Q1 2018)

We use a bottom-up methodology accounting for all system and project-development costs incurred during the installation to model the costs for residential commercial and utility-scale systems In general we attempt to model the typical installation techniques and business operations from an installed-cost perspective Costs are represented from the perspective of the developerinstaller thus all hardware costs represent the price at which components are purchased by the developerinstaller not accounting for preexisting supply agreements or other contracts Importantly the benchmark also represents the sales price paid to the installer therefore it includes profit in the cost of the hardware along with the profit the installerdeveloper receives as a separate cost category However it does not include any additional net profit such as a developer fee or price gross-up which are common in the marketplace We adopt this approach owing to the wide variation in developer profits in all three sectors where project pricing is highly dependent on region and project specifics such as local retail electricity rate structures local rebate and incentive structures competitive environment and overall project or deal structures Finally our benchmarks are national averages weighted by state installed capacities

Introduction

4

This report builds on a number of previous publications from NREL and Lawrence Berkeley National Laboratory (LBNL)

bull Fu Ran David Feldman Robert Margolis Mike Woodhouse and Kristen Ardani 2017 US Solar Photovoltaic System Cost Benchmark Q1 2017 Golden CO National Renewable Energy Laboratory NRELTP-6A20- 68925

bull Fu Ran Donald Chung Travis Lowder David Feldman Kristen Ardani and Robert Margolis 2016 US Solar Photovoltaic System Cost Benchmark Q1 2016 Golden CO National Renewable Energy Laboratory NRELTP-6A20-66532

bull Barbose Galen and Naiumlm Darghouth 2016 Tracking the Sun IX The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States Berkeley CA Lawrence Berkeley National Laboratory

bull Bolinger Mark and Joachim Seel 2016 Utility-Scale Solar 2015 An Empirical Analysis of Project Cost Performance and Pricing Trends in the United States Berkeley CA Lawrence Berkeley National Laboratory

bull Chung Donald Carolyn Davidson Ran Fu Kristen Ardani and Robert Margolis 2015 US Photovoltaic Prices and Cost Breakdowns Q1 2015 Benchmarks for Residential Commercial and Utility-Scale Systems Golden CO National Renewable Energy Laboratory NRELTP-6A20-64746

bull Fu Ran Ted James Donald Chung Douglas Gagne Anthony Lopez and Aron Dobos 2015 EconomicCompetitiveness of US Utility-scale Photovoltaics Systems in 2015 Regional Cost Modeling of Installed Cost ($W) and LCOE ($kWh) IEEE 42nd Photovoltaic Specialist Conference New Orleans LA

bull Feldman David Galen Barbose Robert Margolis Mark Bolinger Donald Chung Ran Fu Joachim Seel Carolyn Davidson Naiumlm Darghouth and Ryan Wiser 2015 Photovoltaic System Pricing Trends Historical Recent and Near-Term Projections Golden CO National Renewable Energy Laboratory NRELPR-6A20-64898

Introduction

2

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

3

NREL has been modeling US photovoltaic (PV) system costs since 2009 This year our report benchmarks costs of US solar PV for residential commercial and utility-scale systems built in the first quarter of 2018 (Q1 2018)

We use a bottom-up methodology accounting for all system and project-development costs incurred during the installation to model the costs for residential commercial and utility-scale systems In general we attempt to model the typical installation techniques and business operations from an installed-cost perspective Costs are represented from the perspective of the developerinstaller thus all hardware costs represent the price at which components are purchased by the developerinstaller not accounting for preexisting supply agreements or other contracts Importantly the benchmark also represents the sales price paid to the installer therefore it includes profit in the cost of the hardware along with the profit the installerdeveloper receives as a separate cost category However it does not include any additional net profit such as a developer fee or price gross-up which are common in the marketplace We adopt this approach owing to the wide variation in developer profits in all three sectors where project pricing is highly dependent on region and project specifics such as local retail electricity rate structures local rebate and incentive structures competitive environment and overall project or deal structures Finally our benchmarks are national averages weighted by state installed capacities

Introduction

4

This report builds on a number of previous publications from NREL and Lawrence Berkeley National Laboratory (LBNL)

bull Fu Ran David Feldman Robert Margolis Mike Woodhouse and Kristen Ardani 2017 US Solar Photovoltaic System Cost Benchmark Q1 2017 Golden CO National Renewable Energy Laboratory NRELTP-6A20- 68925

bull Fu Ran Donald Chung Travis Lowder David Feldman Kristen Ardani and Robert Margolis 2016 US Solar Photovoltaic System Cost Benchmark Q1 2016 Golden CO National Renewable Energy Laboratory NRELTP-6A20-66532

bull Barbose Galen and Naiumlm Darghouth 2016 Tracking the Sun IX The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States Berkeley CA Lawrence Berkeley National Laboratory

bull Bolinger Mark and Joachim Seel 2016 Utility-Scale Solar 2015 An Empirical Analysis of Project Cost Performance and Pricing Trends in the United States Berkeley CA Lawrence Berkeley National Laboratory

bull Chung Donald Carolyn Davidson Ran Fu Kristen Ardani and Robert Margolis 2015 US Photovoltaic Prices and Cost Breakdowns Q1 2015 Benchmarks for Residential Commercial and Utility-Scale Systems Golden CO National Renewable Energy Laboratory NRELTP-6A20-64746

bull Fu Ran Ted James Donald Chung Douglas Gagne Anthony Lopez and Aron Dobos 2015 EconomicCompetitiveness of US Utility-scale Photovoltaics Systems in 2015 Regional Cost Modeling of Installed Cost ($W) and LCOE ($kWh) IEEE 42nd Photovoltaic Specialist Conference New Orleans LA

bull Feldman David Galen Barbose Robert Margolis Mark Bolinger Donald Chung Ran Fu Joachim Seel Carolyn Davidson Naiumlm Darghouth and Ryan Wiser 2015 Photovoltaic System Pricing Trends Historical Recent and Near-Term Projections Golden CO National Renewable Energy Laboratory NRELPR-6A20-64898

Introduction

3

NREL has been modeling US photovoltaic (PV) system costs since 2009 This year our report benchmarks costs of US solar PV for residential commercial and utility-scale systems built in the first quarter of 2018 (Q1 2018)

We use a bottom-up methodology accounting for all system and project-development costs incurred during the installation to model the costs for residential commercial and utility-scale systems In general we attempt to model the typical installation techniques and business operations from an installed-cost perspective Costs are represented from the perspective of the developerinstaller thus all hardware costs represent the price at which components are purchased by the developerinstaller not accounting for preexisting supply agreements or other contracts Importantly the benchmark also represents the sales price paid to the installer therefore it includes profit in the cost of the hardware along with the profit the installerdeveloper receives as a separate cost category However it does not include any additional net profit such as a developer fee or price gross-up which are common in the marketplace We adopt this approach owing to the wide variation in developer profits in all three sectors where project pricing is highly dependent on region and project specifics such as local retail electricity rate structures local rebate and incentive structures competitive environment and overall project or deal structures Finally our benchmarks are national averages weighted by state installed capacities

Introduction

4

This report builds on a number of previous publications from NREL and Lawrence Berkeley National Laboratory (LBNL)

bull Fu Ran David Feldman Robert Margolis Mike Woodhouse and Kristen Ardani 2017 US Solar Photovoltaic System Cost Benchmark Q1 2017 Golden CO National Renewable Energy Laboratory NRELTP-6A20- 68925

bull Fu Ran Donald Chung Travis Lowder David Feldman Kristen Ardani and Robert Margolis 2016 US Solar Photovoltaic System Cost Benchmark Q1 2016 Golden CO National Renewable Energy Laboratory NRELTP-6A20-66532

bull Barbose Galen and Naiumlm Darghouth 2016 Tracking the Sun IX The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States Berkeley CA Lawrence Berkeley National Laboratory

bull Bolinger Mark and Joachim Seel 2016 Utility-Scale Solar 2015 An Empirical Analysis of Project Cost Performance and Pricing Trends in the United States Berkeley CA Lawrence Berkeley National Laboratory

bull Chung Donald Carolyn Davidson Ran Fu Kristen Ardani and Robert Margolis 2015 US Photovoltaic Prices and Cost Breakdowns Q1 2015 Benchmarks for Residential Commercial and Utility-Scale Systems Golden CO National Renewable Energy Laboratory NRELTP-6A20-64746

bull Fu Ran Ted James Donald Chung Douglas Gagne Anthony Lopez and Aron Dobos 2015 EconomicCompetitiveness of US Utility-scale Photovoltaics Systems in 2015 Regional Cost Modeling of Installed Cost ($W) and LCOE ($kWh) IEEE 42nd Photovoltaic Specialist Conference New Orleans LA

bull Feldman David Galen Barbose Robert Margolis Mark Bolinger Donald Chung Ran Fu Joachim Seel Carolyn Davidson Naiumlm Darghouth and Ryan Wiser 2015 Photovoltaic System Pricing Trends Historical Recent and Near-Term Projections Golden CO National Renewable Energy Laboratory NRELPR-6A20-64898

Introduction

4

This report builds on a number of previous publications from NREL and Lawrence Berkeley National Laboratory (LBNL)

bull Fu Ran David Feldman Robert Margolis Mike Woodhouse and Kristen Ardani 2017 US Solar Photovoltaic System Cost Benchmark Q1 2017 Golden CO National Renewable Energy Laboratory NRELTP-6A20- 68925

bull Fu Ran Donald Chung Travis Lowder David Feldman Kristen Ardani and Robert Margolis 2016 US Solar Photovoltaic System Cost Benchmark Q1 2016 Golden CO National Renewable Energy Laboratory NRELTP-6A20-66532

bull Barbose Galen and Naiumlm Darghouth 2016 Tracking the Sun IX The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States Berkeley CA Lawrence Berkeley National Laboratory

bull Bolinger Mark and Joachim Seel 2016 Utility-Scale Solar 2015 An Empirical Analysis of Project Cost Performance and Pricing Trends in the United States Berkeley CA Lawrence Berkeley National Laboratory

bull Chung Donald Carolyn Davidson Ran Fu Kristen Ardani and Robert Margolis 2015 US Photovoltaic Prices and Cost Breakdowns Q1 2015 Benchmarks for Residential Commercial and Utility-Scale Systems Golden CO National Renewable Energy Laboratory NRELTP-6A20-64746

bull Fu Ran Ted James Donald Chung Douglas Gagne Anthony Lopez and Aron Dobos 2015 EconomicCompetitiveness of US Utility-scale Photovoltaics Systems in 2015 Regional Cost Modeling of Installed Cost ($W) and LCOE ($kWh) IEEE 42nd Photovoltaic Specialist Conference New Orleans LA

bull Feldman David Galen Barbose Robert Margolis Mark Bolinger Donald Chung Ran Fu Joachim Seel Carolyn Davidson Naiumlm Darghouth and Ryan Wiser 2015 Photovoltaic System Pricing Trends Historical Recent and Near-Term Projections Golden CO National Renewable Energy Laboratory NRELPR-6A20-64898

Introduction

5

Key Definitions

Sector Category Description Size RangeResidential PV Residential rooftop systems 3 kW ndash 10 kWCommercial PV Commercial rooftop systems ballasted racking 10 kW ndash 2 MWUtility-Scale PV Ground-mounted systems fixed-tilt and one-axis tracker gt 2 MW

Unit DescriptionValue 2018 US dollar (USD) System Size In direct current (DC) terms inverter prices are converted by DC-to-alternating

current (AC) ratios

6

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

7

Overall Model Results (Total Installed Cost)

1 Values are inflation adjusted using the Consumer Price Index (2018) Thus historical values from our models are adjusted andpresented as real USD instead of nominal USD

2 Cost categories are aggregated for comparison purposes ldquoSoft Costs ndash Othersrdquo represents permitting inspection and interconnection (PII) land acquisition sales tax and engineering procurement and construction (EPC)developer overhead and net profit

8

Overall Model Results (Q1 2017 vs Q1 2018)

Sector Residential PV Commercial PV Utility-Scale PV Fixed-Tilt

Q1 2017 Benchmarksin 2017 USDW DC $280 $185 $111

Q1 2017 Benchmarksin 2018 USDW DC $284 $188 $112

Q1 2018 Benchmarksin 2018 USDW DC $270 $183 $113

Drivers of Cost Decrease

bull Higher module efficiencybull Lower structural BOS commodity pricebull Lower electrical BOS commodity pricebull Higher labor productivitybull Lower supply chain costsbull Decrease in higher-cost module inventory bull Higher small installer market sharebull Lower permitting cost

bull Lower inverter price bull Higher module efficiencybull Smaller developer teambull Lower permitting and

interconnection costs

bull Lower inverter price bull Higher module efficiencybull Optimized design

coefficients for wind loadsbull 1500 Vdc to replace

1000 Vdcbull Lower developer

overhead

Drivers of Cost Increase

bull Higher mixed inverter price due to higher advanced inverter adoption

bull Higher module pricebull Higher labor wages

bull Higher module pricebull Higher labor wages

bull Higher module pricebull Higher labor wagesbull Higher steel prices

9

Overall Model Results (Soft Cost)

1 ldquoSoft Costrdquo in this report is defined as non-hardware costmdashie ldquoSoft Costrdquo = Total Cost - Hardware Cost (module inverter and structural and electrical BOS)

2 In 2018 the decreased soft costs () of all three sectors are caused by the increased module prices 3 Residential and commercial sectors have larger soft cost percentage than the utility-scale sector4 Soft costs and hardware costs also interact with each other For instance module efficiency improvements have reduced

the number of modules required to construct a system of a given size thus reducing hardware costs and this trend has also reduced soft costs from direct labor and related installation overhead

5 An increasing soft cost proportion in this figure indicates that soft costs declined more slowly than hardware costs it doesnot indicate that soft costs increased on an absolute basis

10

Overall Model Results (LCOE)

The reductions in total capital cost along with improvements in operation system design and technology have resulted in significant reductions in the cost of electricity US residential and commercial PV systems are 89 and 91 towards achieving SETOrsquos 2020 electricity price targets and US utility-scale PV systems have achieved their 2020 SETO target three years early Note that we use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

11

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

12

Solar photovoltaic (PV) deployment has grown rapidly in the United States over the past several years As the figure shows in 2017 new US PV installations included 21 gigawatts (GW) in the residential sector 15 GW in the commercial sector and 71 GW in the utility-scale sectormdashtotaling 107 GW across all sectors (Bloomberg 2018) Meanwhile although commercial sector showed increased annual installation in 2017 compared to 2016 both residential and utility-scale sectors experienced the decreased installations in 2017 for the first time since 2004 The decreased installation in residential sector might be caused by the Net Metering reforms in some states The decreased installation in utility-scale sector might be caused by the large volume of installations in 2016 when developers expected to fully leverage the 30 federal Investment Tax Credit (ITC)

US Solar PV Market Growth

US PV market growth 2004ndash2017 in gigawatts of direct-current (DC) capacity (Bloomberg 2018)

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

6

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

7

Overall Model Results (Total Installed Cost)

1 Values are inflation adjusted using the Consumer Price Index (2018) Thus historical values from our models are adjusted andpresented as real USD instead of nominal USD

2 Cost categories are aggregated for comparison purposes ldquoSoft Costs ndash Othersrdquo represents permitting inspection and interconnection (PII) land acquisition sales tax and engineering procurement and construction (EPC)developer overhead and net profit

8

Overall Model Results (Q1 2017 vs Q1 2018)

Sector Residential PV Commercial PV Utility-Scale PV Fixed-Tilt

Q1 2017 Benchmarksin 2017 USDW DC $280 $185 $111

Q1 2017 Benchmarksin 2018 USDW DC $284 $188 $112

Q1 2018 Benchmarksin 2018 USDW DC $270 $183 $113

Drivers of Cost Decrease

bull Higher module efficiencybull Lower structural BOS commodity pricebull Lower electrical BOS commodity pricebull Higher labor productivitybull Lower supply chain costsbull Decrease in higher-cost module inventory bull Higher small installer market sharebull Lower permitting cost

bull Lower inverter price bull Higher module efficiencybull Smaller developer teambull Lower permitting and

interconnection costs

bull Lower inverter price bull Higher module efficiencybull Optimized design

coefficients for wind loadsbull 1500 Vdc to replace

1000 Vdcbull Lower developer

overhead

Drivers of Cost Increase

bull Higher mixed inverter price due to higher advanced inverter adoption

bull Higher module pricebull Higher labor wages

bull Higher module pricebull Higher labor wages

bull Higher module pricebull Higher labor wagesbull Higher steel prices

9

Overall Model Results (Soft Cost)

1 ldquoSoft Costrdquo in this report is defined as non-hardware costmdashie ldquoSoft Costrdquo = Total Cost - Hardware Cost (module inverter and structural and electrical BOS)

2 In 2018 the decreased soft costs () of all three sectors are caused by the increased module prices 3 Residential and commercial sectors have larger soft cost percentage than the utility-scale sector4 Soft costs and hardware costs also interact with each other For instance module efficiency improvements have reduced

the number of modules required to construct a system of a given size thus reducing hardware costs and this trend has also reduced soft costs from direct labor and related installation overhead

5 An increasing soft cost proportion in this figure indicates that soft costs declined more slowly than hardware costs it doesnot indicate that soft costs increased on an absolute basis

10

Overall Model Results (LCOE)

The reductions in total capital cost along with improvements in operation system design and technology have resulted in significant reductions in the cost of electricity US residential and commercial PV systems are 89 and 91 towards achieving SETOrsquos 2020 electricity price targets and US utility-scale PV systems have achieved their 2020 SETO target three years early Note that we use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

11

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

12

Solar photovoltaic (PV) deployment has grown rapidly in the United States over the past several years As the figure shows in 2017 new US PV installations included 21 gigawatts (GW) in the residential sector 15 GW in the commercial sector and 71 GW in the utility-scale sectormdashtotaling 107 GW across all sectors (Bloomberg 2018) Meanwhile although commercial sector showed increased annual installation in 2017 compared to 2016 both residential and utility-scale sectors experienced the decreased installations in 2017 for the first time since 2004 The decreased installation in residential sector might be caused by the Net Metering reforms in some states The decreased installation in utility-scale sector might be caused by the large volume of installations in 2016 when developers expected to fully leverage the 30 federal Investment Tax Credit (ITC)

US Solar PV Market Growth

US PV market growth 2004ndash2017 in gigawatts of direct-current (DC) capacity (Bloomberg 2018)

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

7

Overall Model Results (Total Installed Cost)

1 Values are inflation adjusted using the Consumer Price Index (2018) Thus historical values from our models are adjusted andpresented as real USD instead of nominal USD

2 Cost categories are aggregated for comparison purposes ldquoSoft Costs ndash Othersrdquo represents permitting inspection and interconnection (PII) land acquisition sales tax and engineering procurement and construction (EPC)developer overhead and net profit

8

Overall Model Results (Q1 2017 vs Q1 2018)

Sector Residential PV Commercial PV Utility-Scale PV Fixed-Tilt

Q1 2017 Benchmarksin 2017 USDW DC $280 $185 $111

Q1 2017 Benchmarksin 2018 USDW DC $284 $188 $112

Q1 2018 Benchmarksin 2018 USDW DC $270 $183 $113

Drivers of Cost Decrease

bull Higher module efficiencybull Lower structural BOS commodity pricebull Lower electrical BOS commodity pricebull Higher labor productivitybull Lower supply chain costsbull Decrease in higher-cost module inventory bull Higher small installer market sharebull Lower permitting cost

bull Lower inverter price bull Higher module efficiencybull Smaller developer teambull Lower permitting and

interconnection costs

bull Lower inverter price bull Higher module efficiencybull Optimized design

coefficients for wind loadsbull 1500 Vdc to replace

1000 Vdcbull Lower developer

overhead

Drivers of Cost Increase

bull Higher mixed inverter price due to higher advanced inverter adoption

bull Higher module pricebull Higher labor wages

bull Higher module pricebull Higher labor wages

bull Higher module pricebull Higher labor wagesbull Higher steel prices

9

Overall Model Results (Soft Cost)

1 ldquoSoft Costrdquo in this report is defined as non-hardware costmdashie ldquoSoft Costrdquo = Total Cost - Hardware Cost (module inverter and structural and electrical BOS)

2 In 2018 the decreased soft costs () of all three sectors are caused by the increased module prices 3 Residential and commercial sectors have larger soft cost percentage than the utility-scale sector4 Soft costs and hardware costs also interact with each other For instance module efficiency improvements have reduced

the number of modules required to construct a system of a given size thus reducing hardware costs and this trend has also reduced soft costs from direct labor and related installation overhead

5 An increasing soft cost proportion in this figure indicates that soft costs declined more slowly than hardware costs it doesnot indicate that soft costs increased on an absolute basis

10

Overall Model Results (LCOE)

The reductions in total capital cost along with improvements in operation system design and technology have resulted in significant reductions in the cost of electricity US residential and commercial PV systems are 89 and 91 towards achieving SETOrsquos 2020 electricity price targets and US utility-scale PV systems have achieved their 2020 SETO target three years early Note that we use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

11

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

12

Solar photovoltaic (PV) deployment has grown rapidly in the United States over the past several years As the figure shows in 2017 new US PV installations included 21 gigawatts (GW) in the residential sector 15 GW in the commercial sector and 71 GW in the utility-scale sectormdashtotaling 107 GW across all sectors (Bloomberg 2018) Meanwhile although commercial sector showed increased annual installation in 2017 compared to 2016 both residential and utility-scale sectors experienced the decreased installations in 2017 for the first time since 2004 The decreased installation in residential sector might be caused by the Net Metering reforms in some states The decreased installation in utility-scale sector might be caused by the large volume of installations in 2016 when developers expected to fully leverage the 30 federal Investment Tax Credit (ITC)

US Solar PV Market Growth

US PV market growth 2004ndash2017 in gigawatts of direct-current (DC) capacity (Bloomberg 2018)

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

8

Overall Model Results (Q1 2017 vs Q1 2018)

Sector Residential PV Commercial PV Utility-Scale PV Fixed-Tilt

Q1 2017 Benchmarksin 2017 USDW DC $280 $185 $111

Q1 2017 Benchmarksin 2018 USDW DC $284 $188 $112

Q1 2018 Benchmarksin 2018 USDW DC $270 $183 $113

Drivers of Cost Decrease

bull Higher module efficiencybull Lower structural BOS commodity pricebull Lower electrical BOS commodity pricebull Higher labor productivitybull Lower supply chain costsbull Decrease in higher-cost module inventory bull Higher small installer market sharebull Lower permitting cost

bull Lower inverter price bull Higher module efficiencybull Smaller developer teambull Lower permitting and

interconnection costs

bull Lower inverter price bull Higher module efficiencybull Optimized design

coefficients for wind loadsbull 1500 Vdc to replace

1000 Vdcbull Lower developer

overhead

Drivers of Cost Increase

bull Higher mixed inverter price due to higher advanced inverter adoption

bull Higher module pricebull Higher labor wages

bull Higher module pricebull Higher labor wages

bull Higher module pricebull Higher labor wagesbull Higher steel prices

9

Overall Model Results (Soft Cost)

1 ldquoSoft Costrdquo in this report is defined as non-hardware costmdashie ldquoSoft Costrdquo = Total Cost - Hardware Cost (module inverter and structural and electrical BOS)

2 In 2018 the decreased soft costs () of all three sectors are caused by the increased module prices 3 Residential and commercial sectors have larger soft cost percentage than the utility-scale sector4 Soft costs and hardware costs also interact with each other For instance module efficiency improvements have reduced

the number of modules required to construct a system of a given size thus reducing hardware costs and this trend has also reduced soft costs from direct labor and related installation overhead

5 An increasing soft cost proportion in this figure indicates that soft costs declined more slowly than hardware costs it doesnot indicate that soft costs increased on an absolute basis

10

Overall Model Results (LCOE)

The reductions in total capital cost along with improvements in operation system design and technology have resulted in significant reductions in the cost of electricity US residential and commercial PV systems are 89 and 91 towards achieving SETOrsquos 2020 electricity price targets and US utility-scale PV systems have achieved their 2020 SETO target three years early Note that we use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

11

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

12

Solar photovoltaic (PV) deployment has grown rapidly in the United States over the past several years As the figure shows in 2017 new US PV installations included 21 gigawatts (GW) in the residential sector 15 GW in the commercial sector and 71 GW in the utility-scale sectormdashtotaling 107 GW across all sectors (Bloomberg 2018) Meanwhile although commercial sector showed increased annual installation in 2017 compared to 2016 both residential and utility-scale sectors experienced the decreased installations in 2017 for the first time since 2004 The decreased installation in residential sector might be caused by the Net Metering reforms in some states The decreased installation in utility-scale sector might be caused by the large volume of installations in 2016 when developers expected to fully leverage the 30 federal Investment Tax Credit (ITC)

US Solar PV Market Growth

US PV market growth 2004ndash2017 in gigawatts of direct-current (DC) capacity (Bloomberg 2018)

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

9

Overall Model Results (Soft Cost)

1 ldquoSoft Costrdquo in this report is defined as non-hardware costmdashie ldquoSoft Costrdquo = Total Cost - Hardware Cost (module inverter and structural and electrical BOS)

2 In 2018 the decreased soft costs () of all three sectors are caused by the increased module prices 3 Residential and commercial sectors have larger soft cost percentage than the utility-scale sector4 Soft costs and hardware costs also interact with each other For instance module efficiency improvements have reduced

the number of modules required to construct a system of a given size thus reducing hardware costs and this trend has also reduced soft costs from direct labor and related installation overhead

5 An increasing soft cost proportion in this figure indicates that soft costs declined more slowly than hardware costs it doesnot indicate that soft costs increased on an absolute basis

10

Overall Model Results (LCOE)

The reductions in total capital cost along with improvements in operation system design and technology have resulted in significant reductions in the cost of electricity US residential and commercial PV systems are 89 and 91 towards achieving SETOrsquos 2020 electricity price targets and US utility-scale PV systems have achieved their 2020 SETO target three years early Note that we use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

11

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

12

Solar photovoltaic (PV) deployment has grown rapidly in the United States over the past several years As the figure shows in 2017 new US PV installations included 21 gigawatts (GW) in the residential sector 15 GW in the commercial sector and 71 GW in the utility-scale sectormdashtotaling 107 GW across all sectors (Bloomberg 2018) Meanwhile although commercial sector showed increased annual installation in 2017 compared to 2016 both residential and utility-scale sectors experienced the decreased installations in 2017 for the first time since 2004 The decreased installation in residential sector might be caused by the Net Metering reforms in some states The decreased installation in utility-scale sector might be caused by the large volume of installations in 2016 when developers expected to fully leverage the 30 federal Investment Tax Credit (ITC)

US Solar PV Market Growth

US PV market growth 2004ndash2017 in gigawatts of direct-current (DC) capacity (Bloomberg 2018)

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

10

Overall Model Results (LCOE)

The reductions in total capital cost along with improvements in operation system design and technology have resulted in significant reductions in the cost of electricity US residential and commercial PV systems are 89 and 91 towards achieving SETOrsquos 2020 electricity price targets and US utility-scale PV systems have achieved their 2020 SETO target three years early Note that we use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

11

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

12

Solar photovoltaic (PV) deployment has grown rapidly in the United States over the past several years As the figure shows in 2017 new US PV installations included 21 gigawatts (GW) in the residential sector 15 GW in the commercial sector and 71 GW in the utility-scale sectormdashtotaling 107 GW across all sectors (Bloomberg 2018) Meanwhile although commercial sector showed increased annual installation in 2017 compared to 2016 both residential and utility-scale sectors experienced the decreased installations in 2017 for the first time since 2004 The decreased installation in residential sector might be caused by the Net Metering reforms in some states The decreased installation in utility-scale sector might be caused by the large volume of installations in 2016 when developers expected to fully leverage the 30 federal Investment Tax Credit (ITC)

US Solar PV Market Growth

US PV market growth 2004ndash2017 in gigawatts of direct-current (DC) capacity (Bloomberg 2018)

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

11

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

12

Solar photovoltaic (PV) deployment has grown rapidly in the United States over the past several years As the figure shows in 2017 new US PV installations included 21 gigawatts (GW) in the residential sector 15 GW in the commercial sector and 71 GW in the utility-scale sectormdashtotaling 107 GW across all sectors (Bloomberg 2018) Meanwhile although commercial sector showed increased annual installation in 2017 compared to 2016 both residential and utility-scale sectors experienced the decreased installations in 2017 for the first time since 2004 The decreased installation in residential sector might be caused by the Net Metering reforms in some states The decreased installation in utility-scale sector might be caused by the large volume of installations in 2016 when developers expected to fully leverage the 30 federal Investment Tax Credit (ITC)

US Solar PV Market Growth

US PV market growth 2004ndash2017 in gigawatts of direct-current (DC) capacity (Bloomberg 2018)

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

12

Solar photovoltaic (PV) deployment has grown rapidly in the United States over the past several years As the figure shows in 2017 new US PV installations included 21 gigawatts (GW) in the residential sector 15 GW in the commercial sector and 71 GW in the utility-scale sectormdashtotaling 107 GW across all sectors (Bloomberg 2018) Meanwhile although commercial sector showed increased annual installation in 2017 compared to 2016 both residential and utility-scale sectors experienced the decreased installations in 2017 for the first time since 2004 The decreased installation in residential sector might be caused by the Net Metering reforms in some states The decreased installation in utility-scale sector might be caused by the large volume of installations in 2016 when developers expected to fully leverage the 30 federal Investment Tax Credit (ITC)

US Solar PV Market Growth

US PV market growth 2004ndash2017 in gigawatts of direct-current (DC) capacity (Bloomberg 2018)

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

13

We use the California NEM Interconnection Applications Data Set (CSI 2018) to benchmark generic system characteristics such as system size module power and efficiency and choice of power electronics This database is updated monthly and contains all interconnection applications in the service territories of the statersquos three investor-owned utilities (Pacific Gas amp Electric Southern California Edison and San Diego Gas amp Electric) Although there are other databases for other markets such as Massachusetts and New York we use only the California NEM database because of its higher granularity and greater consistency However we do not use the California NEM database for regional cost analyses inputs and sources for regional analyses are described in subsequent sections of this report

Database for Residential and Commercial Sectors

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

14

This figure displays module power and efficiency data from the California NEM database Since 2010 module power and efficiency in both sectors have been steadily improving We use the values of 172 (residential) and 191 (commercial and utility-scale) module efficiency in our models Also note that since module selection may vary in different regions the actual module efficiencies in other regions than CA may be different

Module Power and Efficiency Trend (California)

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

15

This figure displays average system sizes from the California NEM database We use the 2017 value of 62 kW as the baseline case in our residential cost model to reflect the adoption of higher module efficiency

Commercial system sizes have changed more frequently likely reflecting the wide scope for ldquocommercial customersrdquo which include schools office buildings malls retail stores and government projects Thus we use 200 kW as the baseline case inour commercial model

PV System Size Trend (California)

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

16

According to the California NEM database market uptake of MLPE has been growing rapidly since 2010 in Californiarsquos residential sector This increasing market growth may be driven by decreasing MLPE costs and by the ldquorapid shutdownrdquo of PV output from buildings required by Article 69012 of the National Electric Code (NEC) since 2014mdashMLPE inherently meet rapid-shutdown requirements without the need to install additional electrical equipment

In 2017 MLPEmdashrepresented by the combined share of Enphase and SolarEdge inverter solutionsmdashreached 65 of the total California residential market share Therefore in our residential system cost model string inverter power optimizer and microinverter options are modeled separately and their market shares (35 37 and 28) are used for the weighted average case

Inverter Market mdash Residential PV Sector (California)

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

17

Conversely MLPE growth (represented by Enphase and SolarEdge) has been slow in Californiarsquos commercial sector reaching a share of only 8 in 2017 Thus we do not build MLPE inverter solutions into our commercial model

Inverter Market mdash Commercial PV Sector (California)

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

18

We source non-MLPE inverter prices from the PVinsights (2018) database which contains typical prices between Tier 1 suppliers and developers in the market

Inverter Price for non-MLPEs

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

19

For MLPE inverter prices we use data from public corporate filings shown in this figure (Enphase 2018 SolarEdge 2018) Enphasersquos Q1 2018 revenue was $039Wac which represents the typical microinverter price SolarEdgersquos Q1 2018 revenue was $026Wac including sales from DC power optimizers string inverters and monitoring equipment which are typically included inone product offering GTM Research estimates a DC power optimizer cost of $006Wac (GTM Research 2018) implying a string inverter and monitoring equipment price of $020Wac

Inverter Price for MLPEs

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

20

We convert the USDWac inverter prices from previous inverter price figures to USD per watt DC (Wdc) using different DC-to-AC ratios (table below) In our benchmark we use USDWdc for all costs including inverter prices Note that we updated the central inverter DC-to-AC ratios using Lawrence Berkeley National Laboratory data (Bolinger and Seel 2018) for the ratios in residential and commercial sectors we use the estimates based on interview feedback (NREL 2018)

Inverter Price and DC-to-AC ratios

Inverter Type Sector $ per Watt AC DC-to-AC Ratio $ per Watt DC

Single Phase String Inverter

Residential PV(non-MLPE) 014 115 012

Microinverter Residential PV(MLPE) 039 115 034

DC Power OptimizerString Inverter

Residential PV(MLPE) 020 115 018

Three Phase String Inverter

Commercial PV(non-MLPE) 009 115 008

Central Inverter Utility-scale PV(fixed-tilt) 006 136

(Oversized) 004

Central Inverter Utility-scale PV(1-axis tracker) 006 130

(Oversized) 005

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

21

Module Price (US vs Global)

We assume an ex-factory gate (spot or first-buyer) price of $047Wdc for Tier 1 crystalline-silicon PV modules in Q1 2018 As this figure shows US spot prices declined substantially between 2014 and 2016 approaching global spot prices In 2017 however US spot prices rose as many commercial and utility-scale PV developers and residential installers purchased large quantities of modules owing to uncertainty about US policy on imported modules (GTMSEIA 2018) By the time US tariffs onimported modules came into effect in 2018 US spot prices had reached $047Wdcmdash$017Wdc above the global spot pricemdashand appeared to be leveling off

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

22

Module Price Inputs Q1 2018Although commercial and utility-scale PV developers typically can procure modules at or near the spot price residential integrators and installers incur additional supply chain costs (figure below) Historical inventory price can create a price lag(approximately six months) for the market module price in the residential sector when the modules from previous procurement are installed in todayrsquos systems In the Q1 2017 residential PV benchmark this supply chain cost represented $021W ndash a 60 premium Because US module ASP was lower than Q1 2018 pricing for much of 2017 we do not included this supply chain cost in the current benchmark We assume that small installers and national integrators are both subject to a 15 ($007W) premium on the spot price for module shipping and handling (NREL 2018) consistent with Q1 2017 residential PV benchmark Small installers are subject to an additional 35 ($16W) premium owing to small-scale procurement (Bloomberg 2018) increasing from an assumed 20 premium in the Q1 2017 residential PV benchmark Both types of companies are also subject to 69 sales tax (weighted national average) bringing the small installer module cost to $076W and the national integrator cost to $058W (Bloomberg 2018)

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

23

Our residential PV benchmark is based on two different business structures ldquosmall installerrdquo and ldquonational integratorrdquo We define small installers as businesses that lead generation sales and installation but do not provide financing solutions The national integrator performs all of the small installerrsquos functions and provides financing and system monitoring for third-party-owned systems In our models the difference between small installers and national integrators manifests in the overhead and sales and marketing cost categories where the national integrator is modeled with higher expenses for customer acquisition financial structuring and asset management To estimate the split in market share between small installers and national integrators we use data compiled from corporate filings (Sunrun 2018 Vivint Solar 2018) and GTM Research and SEIA (2018) As shown in this figure small installers have gained more market share than national integrators since 2016 because the direct ownership business model led by installers became more popular than third-party ownership

Residential PV Integrator vs Installer

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

24

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

25

Residential PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

Direct Laborbull Electricalbull Mechanicalbull General construction

Indirect Laborbull Engineering designbull Construction permit

administration

Overhead(General and administrative)Sales and Marketing (Customer acquisition)

Permit Inspection and Interconnection (PII) Costs

System Hardwarebull Equipment costsbull and quantitiesbull Supply chain costsbull Sales tax

DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

PII Costs

Total Overhead Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total PII Costs

Total Overhead Costs

Total Capital

Cost

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

26

Residential PV Modeling Inputs and AssumptionsCategory Modeled Value Description SourcesSystem size 62 kW Average installed size per system Go Solar CA (2018) Module efficiency 172 Average module efficiency Go Solar CA (2018)Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price

Single-phase string inverter $012Wdc

DC power optimizer string inverter $018Wdc Microinverter $039Wdc

Ex-factory gate (first buyer) prices Tier 1 inverters PVinsights (2018) NREL (2018) corporate filings (Enphase 2018 SolarEdge 2018)

Structural BOS (racking) $010Wdc Includes flashing for roof penetrations and all the rails and clamps NREL (2018)

Electrical BOS$019ndash$027Wdc

Varies by inverter option

Conductors switches combiners and transition boxes as well as conduit grounding equipment monitoring system or production meters fuses and breakers

Model assumptions NREL (2018) RSMeans (2017)

Supply chain costs ( of equipment costs)

Varies by installer type

15 costs and fees associated with shipping and handling of equipment multiplied by the cost of doing business index (101)Additional 35 small-scale procurement for module-related supply chain costs for small installers Additional 20 for inverter-related supply chain costs for small installers and 10 for national integrators

NREL (2018) model assumptions

Sales tax Varies by location weighted national average 69

Sales tax on the equipment national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location and inverter option

Modeled labor rate depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318

Workers compensation (state-weighted average) federal and state unemployment insurance Federal Insurance Contributions Act (FICA) builders risk public liability

RSMeans (2018)

Permitting inspection and interconnection (PII)

$006WdcIncludes assumed building permitting fee of $200 and six office staff hours for building permit preparation and submission and interconnection application preparation and submission

NREL (2018)

Sales amp marketing (customer acquisition)

$030Wdc (installer)

$044Wdc (integrator)

Total cost of sales and marketing activities over the last yearmdashincluding marketing and advertising sales calls site visits bid preparation and contract negotiation adjusted based on state ldquocost of doing businessrdquo index

NREL (2017) Sunrun (2017) Vivint Solar (2017) Feldman et al (2013)

Overhead (general amp administrative)

$029Wdc (installer)

$037Wdc (integrator)

General and administrative expensesmdashincluding fixed overhead expenses covering payroll (excluding permitting payroll) facilities administrative finance legal information technology and other corporate functions as well as office expenses adjusted based on state ldquocost of doing businessrdquo index

NREL (2018) Feldman et al (2013)

Profit () 17Fixed percentage margin applied to all direct costs including hardware installation labor direct sales and marketing design installation and permitting fees

Fu et al (2017)

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

27

This figure presents the US national benchmark from our residential model The national benchmark represents an average weighted by Q1 2018 installed capacities Market shares of 67 for installers and 33 for integrators are used to compute thenational weighted average String inverter power optimizer and microinverter options are each modeled individually and theldquomixedrdquo case applies their market shares (35 37 and 28) as weightings

Residential PV Model Outputs

Q1 2018 US benchmark 62-kW residential system cost (2018 USDWdc)

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

28

Residential PV Model Outputs

This figure presents the benchmark in the top US solar markets (by 2017 installations) reflecting differences in supply chain and labor costs sales tax and SGampA expensesmdashthat is the cost of doing business (Case 2012)

Q1 2018 benchmark by location 62-kW residential system cost (2018 USDWdc)

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

29

Residential PV Model Outputs

Our bottom-up modeling approach yields a different cost structure than those reported by public solar integrators in their corporate filings (Sunrun 2018 Vivint Solar 2018) Because integrators sell and lease PV systems they practice a different method ofreporting costs than do businesses that only sell goods Many of the costs for leased systems are reported over the life of the lease rather than the period in which the system is sold therefore it is difficult to determine the actual costs at the time of the sale Although the corporate filings from Sunrun and Vivint Solar report system costs on a quarterly basis the lack of transparency in the public filings makes it difficult to determine the underlying costs as well as the timing of those costs

Q1 2018 NREL modeled cost benchmark (2018 USDWdc) vs Q1 2018 company-reported costs

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

30

Residential PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 63 reduction in the residential PV system cost benchmark Approximately 57 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over that time period An additional 19 can be attributed to labor which dropped 77 over that time period with the final 24 attributed to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 5 reduction in the residential PV system cost benchmark

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

31

Residential PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions residential PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 3-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a module tilt angle of 25 degrees and an azimuth of 180 degrees 9) debt with a term of 18 years and 10) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of residential projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

734 644 455 397 349 323 302 284 270

System size (kw-DC)

50 50 51 51 52 52 56 57 62

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

54 48 41 36 30 25 25 24 22

Pre-inverter derate ()

900 901 902 903 904 905 905 905 905

Inverter efficiency ()

940 948 956 964 972 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate

55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

32

Residential PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 71 reduction in the residential PV system electricity cost benchmark (a 6 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $012kWh to $016kWh ($008kWh to $010kWh when including the federal ITC) This reduction is 89 towards achieving SETOrsquos 2020 residential LCOE goal which is 10 centskWh in 2018 USDNote For LCOE Kansas City MO without ITC cases are $051kWh in 2010 and $015kWh in 2018 (2018 USD) see also the Appendix Thus calculation is (0507 ndash 0147)(0507 ndash 0102) = 89

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

33

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

34

Commercial PV Model Structure

System Designbull Available roof areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection feesbull Interconnection

EPC-Indirect Costsbull Engineering designbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Laborbull Wage rates by labor

classbull Wage burden rates

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer Costsbull Project origination

acquisitionbull Project engineering

and managementbull Project contingenciesbull Developer SGampA

Developer Overhead and Other Costs by Category

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

35

Commercial PV Modeling Inputs and Assumptions

Category Modeled Value Description Sources

System size 100 kWndash1 MW Average installed size per system Go Solar CA (2018)

Module efficiency 191 Average module efficiency Go Solar CA (2018)

Module price $047Wdc Ex-factory gate (first buyer) ASP Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price Three-phase string inverter $008Wdc Ex-factory gate prices (first buyer) ASP Tier 1 inverters PVinsights (2018) NREL (2018)

Structural components (racking)

$010ndash$022Wdc varies by location due to wind and snow loading Ex-factory gate prices flat-roof ballasted racking system ASCE (2006) model assumptions NREL (2018)

Electrical components

$013ndash$017Wdc varies by location due to cost of doing business

Conductors conduit and fittings transition boxes switchgear panel boards etc Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs) 13 Costs and fees associated with EPC overhead inventory shipping

and handling NREL (2018)

Sales tax Varies by location Sales tax on equipment costs national benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes non-union labor and depends on state national benchmark uses weighted average of state rates BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII $010Wdc For construction permits fee interconnection study fees for existing substation testing and commissioning NREL (2018)

Developer overheadAssume 10-MW system development and installation per year for a typical developer

Includes fixed overhead expenses such as payroll facilities travel insurance administrative business development finance and other corporate functions assumes 10 MWyear of system sales

Model assumptions NREL (2018)

Contingency 4 Estimated as markup on EPC cost value represents actual cost overruns above estimated cost NREL (2018)

Profit 7 Applies a fixed percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

36

As in the commercial model the national benchmark represents an average weighted by 2017 state installed capacities We model different system sizes because of the wide scope of the ldquocommercialrdquo sector which comprises a diverse customer base occupying avariety of building sizes Also economies of scalemdashdriven by hardware labor and related markupsmdashare evident here That is assystem sizes increase the per-watt cost to build them decreases Meanwhile because we assume that a typical developer has 10 MW of system development and installation per year the developer overhead on this 10 MW total capacity does not vary for different system sizes When a developer installs more capacity annually that developerrsquos overhead per watt in each system declines (shown in Figure 18 in our Q1 2015 benchmark report Chung et al 2015)

Commercial PV Model Outputs

Q1 2018 US benchmark commercial system cost (2018 USDWdc)

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

37

Commercial PV Model Outputs

This figure presents the benchmark from our commercial model by location in the top US solar markets (by 2017 installations) The main cost drivers for different regions in the commercial PV market are the same as in the residential model (labor rates sales tax and cost of doing business index) but also include costs associated with wind or snow loading

Q1 2018 benchmark by location 200-kW commercial system cost (2018 USDWdc)

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

38

Commercial PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 66 reduction in the commercial PV system cost benchmark Approximately 79 of that reduction can be attributed to total hardware costs (module inverter and hardware BOS) as module prices dropped 82 over thattime period An additional 5 can be attributed to labor which dropped 50 over that time period with the final 16 attributable to other soft costs including PII sales tax overhead and net profit

Looking at this past year from 2017 to 2018 there was a 3 reduction in the commercial PV system cost benchmark Cost reductions in most categories were moderated by a 32 increase in module spot price

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

39

Commercial PV LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions commercial PV system LCOE assumes a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning an interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 200 kW 9) an inverter lifetime of 15 years 10) a module tilt angle of 10 degrees and an azimuth of 180 degrees 11) debt with a term of 18 years and 12) $11 million of upfront financial transaction costs for a $100 million TPO transaction of a pool of commercial projects

2018 USDper Watt DC

2010 2011 2012 2013 2014 2015 2016 2017 2018

Benchmark reportInstalled cost ($W)

543 504 347 282 280 230 220 188 183

System size (kw-DC)

200 200 200 200 200 200 200 200 200

Inverter loading ratio

110 111 112 113 113 114 115 115 115

Ongoing NREL benchmarkingAnnual degradation ()

100 095 090 085 080 075 075 075 070

OampM expenses ($kw-yr)

33 30 28 25 22 19 19 18 18

Pre-inverter derate ()

905 905 905 905 905 905 905 905 905

Inverter efficiency ()

950 956 962 968 974 980 980 980 980

Equity discount rate (real)

90 86 83 79 76 73 69 69 69

Inflation rate 25 25 25 25 25 25 25 25 25

Debt interest rate 55 54 53 52 50 49 48 48 48

Debt fraction 342 352 361 371 381 390 400 400 40

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

40

Commercial PV LCOE Benchmark Historical Trends

From 2010 to 2018 there was a 72 reduction in the commercial PV system electricity cost benchmark (a 3 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $009kWh to $012kWh ($006kWh to $008kWh when including the federal ITC) This reduction is 91 towards achieving SETOrsquos 2020 commercial PV LCOE goal which is 8 centskWhin 2017 USD Note For LCOE Kansas City MO without ITC cases are $039kWh in 2010 and $011kWh in 2018 in 2018 USD from Appendix Thus calculation is (0393 ndash 0107)(0393 ndash 0079) = 91

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

41

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

42

Utility-Scale PV Model Structure

System Designbull Available land areabull Module efficiencybull System architecture

CORE COST DRIVERS

MODEL COST CATEGORIES

INPUTS OUTPUTS

System Location

Company Structure

EPC-System Hardwarebull Modulebull Inverterbull Structural BOSbull Electrical BOS

EPC-Other Direct Costsbull Electrical laborbull Mechanical laborbull General construction

laborbull Construction permit

and inspection fees

EPC-Indirect Costsbull Engineering laborbull Construction permit

administrationbull EPC SGampA

System Hardwarebull Equipment costs

and quantitiesbull Sales tax

EPC DirectIndirect Laborbull Wage rates by labor

class and geographybull Person-hours per task

by labor classbull Wage burden rates

EPC Other Costsbull SGampA markupbull Supply chain costsbull Other costs and fees

Developer Direct Costs by Category

Total Equipment Costs

Total Direct and Indirect Labor Costs

Total EPC Other and Overhead Costs

Total Development Costs

Total Capital

Cost

Developer-Direct Costsbull Site controlbull Land acquisitionbull Interconnection

studies fees and upgrades

bull Transmission lineDeveloper-Overheadbull Project origination

and acquisitionbull Developer SGampA

Developer Overhead Markup

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

43

Category Modeled Value Description Sources

System size 5-100 MW A large utility-scale system capacity Model assumptionModule efficiency 191 Average module efficiency NREL (2018) Module price $047Wdc Ex-factory gate (first buyer) price Tier 1 modules GTM and SEIA (2018) NREL (2018)

Inverter price $004Wdc (fixed-tilt)

$005Wdc (one-axis tracker)

Ex-factory gate (first buyer) price Tier 1 inverters

DC-to-AC ratio = 136 for fixed-tilt and 130 for one-axis trackerBloomberg (2018) Bolinger and Seel (2018) NREL (2018)

Structural components (racking)

$010ndash$021Wdc for a 100-MW system varies by location and system size

Fixed-tilt racking or one-axis tracking system ASCE (2006) model assumptions NREL (2018)

Electrical components Varies by location and system sizeOur model has been upgraded to 1500 Vdc system including conductors conduit and fittings transition boxes switchgear panel boards onsite transmission etc

Model assumptions NREL (2018) RSMeans (2018)

EPC overhead ( of equipment costs)

867ndash13 for equipment and material (except for transmission line costs) 23ndash69 for labor costs varies by system size labor activity and location

Costs associated with EPC SGampA warehousing shipping and logistics NREL (2018)

Sales tax Varies by location National benchmark applies an average (by state) weighted by 2017 installed capacities RSMeans (2018) GTM and SEIA (2018)

Direct installation labor

Electrician $1974ndash$3896 per hour

Laborer $1288ndash$2557 per hour

Varies by location

Modeled labor rate assumes both non-union and union labor and depends on state national benchmark uses weighted average of state rates

BLS (2018) NREL (2018)

Burden rates ( of direct labor) Total nationwide average 318 Workers compensation (state-weighted average) federal and state

unemployment insurance FICA buildersrsquo risk public liability RSMeans (2018)

PII$003ndash$009Wdc

Varies by system size and locationFor construction permits fee interconnection testing and commissioning NREL (2018)

Transmission line

(gen-tie line)

$000ndash$002Wdc

Varies by system size

System size lt 10 MW use 0 miles for gen-tie line

System size gt 200 MW use 5 miles for gen-tie line

System size = 10ndash200 MW use linear interpolation

Model assumptions NREL (2018)

Developer overhead2ndash12

Varies by system size (100 MW uses 2 5 MW uses 12)

Includes overhead expenses such as payroll facilities travel legal fees administrative business development finance and other corporate functions

Model assumptions NREL (2018)

Contingency 3 Estimated as markup on EPC cost NREL (2018)

Profit5ndash8

Varies by system size (100 MW uses 5 5 MW uses 8)

Applies a percentage margin to all costs including hardware installation labor EPC overhead developer overhead etc NREL (2018)

Utility-Scale PV Modeling Inputs and Assumptions

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

44

Utility-Scale PV 1000 Vdc and 1500 Vdc

1000 Vdc 1500 VdcInput Max Voltage (Vdc) 1000 1500

Output Nominal AC Power(MVA Mega Volt Amp)

0792 4

Rated AC operating voltage (Vac) 356 550

Max Efficiency 98 984

Reduce trenching 0 33

Reduce wiring and cables 0 33

Reduce the number of combiner boxes 0 33

Reduce the number power conversion station (inverter + transformer)

0 64

Reduce DC wiring loss from higher voltage

No Yes

Reduce AC wiring loss from higher inverter efficiency

No Yes

Power harvesting and system efficiency

Regular Higher

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

45

Utility-Scale PV 1000 Vdc and 1500 Vdc

This figure demonstrates the cost savings from increased voltage from 1000 Vdc to 1500 Vdc This change reduces the total cost by reducing trenching length wiring and cable length number of combiner boxes and power conversion station (inverter and transformer)

US utility-scale one-axis tracking PV system cost reduction by upgrading from 1000 Vdc to 1500 Vdc (2018 USDWdc)

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

46

This figure shows the percentage of US utility-scale PV systems using tracking systems for 2007ndash2017 Although the data include one-axis and dual-axis tracking systems in the same ldquotrackingrdquo category there are many more one-axis trackers than dual-axis trackers (Bolinger and Seel 2018) Cumulative tracking system installation reached 79 by 2017

Utility-Scale PV US Fixed-Tilt vs Tracking Systems

Percentage of US utility-scale PV systems using tracking systems 2007ndash2017 (Bolinger and Seel 2018)

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

47

972MW

216MW

362MW 15

MW

554MW

428MW

34MW

66MW

76MW

89MW

78MW

67MW

2MW

3MW

14MW

12MW

201MW

Utility-Scale PV Union Labor Case

Although EPC contractors and developers tend to employ low-cost non-union labor (based on data from BLS 2018) for PV system construction when possible union labor is sometimes mandated Construction trade unions may negotiate with the local jurisdiction and EPC contractordeveloper during the public review period of the permitting process This figure shows 2017 utility-scale PV capacity installed (GTM Research and SEIA 2018) and the proportion of unionized labor in each state (BLS 2018) The unionized labor number represents the percentage of employed workers in each statersquos entire construction industry who are union members In our utility-scale model both non-union and union labor rates are considered

138MW

658MW

1192MW

172MW

179MW

367MW

318MW

47MW

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

48

Utility-Scale PV Model Outputs EPC Only $070 $080 $090 $100 $110 $120 $130 $140

OklahomaArkansasAlabamaMontana

South DakotaNorth Carolina

GeorgiaOregon

LouisianaTexas

WyomingDelaware

ArizonaUtah

ColoradoNew Mexico

New HampshireVirginia

TennesseeSouth Carolina

NebraskaKansas

IdahoMississippi

VermontKentucky

IowaPuerto Rico

MarylandFlorida

MissouriOhio

West VirginiaMaine

IndianaMichigan

North DakotaPennsylvania

NevadaWashington

DCWisconsinCaliforniaNew York

Rhode IslandIllinoisHawaii

MinnesotaNew JerseyConnecticut

MassachusettsAlaska

(1) Fixed-tilt amp Non-Union Labor(2) One-Axis Tracker amp Non-Union Labor(3) One-Axis Tracker amp Union Labor

Modeled EPC CostsFor 100 MW Systems(2018$ Wdc)

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

49

(1) The national benchmark applies an average weighted by 2017 installed capacities(2) Non-union labor is used(3) Economies of scalemdashdriven by BOS labor related markups and development costmdashare demonstrated

Utility-Scale PV Model Outputs EPC + Developer

Q1 2018 US benchmark utility-scale PV total cost (EPC + developer) 2018 USDWdc

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

50

Utility-Scale PV Capital Cost Benchmark Historical Trends

From 2010 to 2018 there was a 77 reduction in the utility-scale (fixed-tilt) PV system cost benchmark and an 80 reduction inthe utility-scale (one-axis) PV system cost benchmark Approximately 69 and 63 of that reduction can be attributed to total hardware costs (for fixed-tilt and one-axis systems respectively) as module prices dropped 81 over that time period An additional 1112 can be attributed to labor which dropped 8184 over that time period with the final 2025 attributable to other soft costs including PII sales tax overhead and net profit (for fixed-tilt and one-axis systems respectively)

From 2017 to 2018 there was a 1 increase in the utility-scale (fixed-tilt) PV system cost benchmark and a 04 increase in the utility-scale (one-axis) PV system cost benchmark The majority of that increase can be attributed to the 32 increase in modulespot price which offset cost reductions in other areas

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

51

Utility-Scale PV (One-Axis Tracker) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 552 465 320 243 218 200 156 112 113 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 27 25 24 23 22 21 20 14 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 112 113 115 117 118 120 130 130Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

52

Utility-Scale PV (Fixed-Tilt) LCOE assumptions

All 2010ndash2017 data are from Fu et al (2017) adjusted for inflation The inverter replacement line-item in Fu et al (2017) is incorporated into OampM expenses in this edition to be consistent with the 2018 OampM benchmark Other important assumptions utility-scale PV system LCOEs assume a 1) system lifetime of 30 years 2) federal tax rate of 35 from 2010ndash2017 changing to 21 in 2018 3) state tax rate of 7 4) MACRS depreciation schedule 5) no state or local subsidies 6) a working capital and debt service reserve account for 6 months of operating costs and debt payments (earning interest of 175) 7) a 6-month construction loan with an interest rate of 4 and a fee of 1 of the cost of the system 8) a system size of 100 MW 9) an inverter lifetime of 15 years 10) debt with a term of 18 years and 11) $11 million of upfront financial transaction costs

2018 USD per Watt DC 2010 2011 2012 2013 2014 2015 2016 2017 2018Installed cost ($W) 463 397 270 207 191 185 147 104 106 Annual degradation () 100 095 090 085 080 075 075 075 070OampM expenses ($kW-yr) 28 26 24 22 20 18 18 17 13 Pre-inverter derate () 905 905 905 905 905 905 905 905 905Inverter efficiency () 960 964 968 972 976 980 980 980 980Inverter loading ratio 110 115 120 125 130 135 140 130 136Equity discount rate (real)

74 72 70 69 67 65 63 63 63

Inflation rate 25 25 25 25 25 25 25 25 25Debt interest rate 55 53 52 50 48 47 45 45 45Debt fraction 342 352 361 371 381 390 400 400 400

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

53

Utility-Scale PV LCOE Benchmark Historical Trends

We use the fixed-tilt systems for LCOE benchmarks from 2010-2015 and then switch to one-axis tracking systems from 2016 to 2018 to reflect the market share change in the utility-scale PV sector All detailed LCOE values can be found in Appendix

From 2010 to 2018 there was a 80ndash82 reduction in the utility-scale PV system electricity cost benchmark (a 6ndash9 reduction was achieved from 2017 to 2018) bringing the unsubsidized LCOE between $004kWh to $006kWh ($003kWh to $004kWh when including the federal ITC) This reduction signifies the achievement of SETOrsquos 2020 utility-scale PV goal which is 6 centskWh without subsidies

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

54

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

55

This figure demonstrates the cost savings from increased system size Scaling up the system size from 50 MW to 100 MW reduces related costs in several ways per-watt BOS costs because of bulk purchasing labor costs because of learning-related improvements and EPC overhead and developer costs because these fixed costs are spread over more installed watts Note that non-union labor is used in this figure

Model Application mdash Economies of Scale

Model application US utility-scale one-axis tracking PV system cost reduction from economies of scale (2018 USDWdc)

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

56

Model Application mdash Module Efficiency Impacts

Our system cost models can also assess the economic benefits of high module efficiency Because higher module efficiency reduces the number of modules required to reach a certain system size the related racking or mounting hardware foundation BOS EPCdeveloper overhead and labor hours are reduced accordingly This figure presents the relation between module efficiency and installed cost (with module prices held equal for any given efficiency) and demonstrates the cost-reduction potential due to high module efficiency Note that fixed-tilt system is used in utility-scale curve and string inverter is used in residential curve

Modeled impacts of module efficiency on total system costs (2018 USDWdc)

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

57

Contents

bull Introduction and Key Definitions

bull Overall Model Outputs

bull Market Study and Model Inputs

bull Model Output Residential PV

bull Model Output Commercial PV

bull Model Output Utility-Scale PV

bull Model Applications

bull Conclusions

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

58

Conclusions

(1) Based on our bottom-up modeling the Q1 2018 PV cost benchmarks are $270Wdc ($311Wac) for residential systems $183Wdc ($210Wac) for commercial systems $106Wdc ($138Wac) for fixed-tilt utility-scale systems and $113Wdc ($154Wac) for one-axis-tracking utility-scale systems Overall both modeled installed costs of residential and commercial PV systems continued to decline in Q1 2018 Meanwhile modeled utility-scale PV system cost increased slightly

(2) Lower inverter prices and higher module efficiencies continued contributing to these cost reductions across all three sectors Increased module efficiency smaller developer teams lower structural and electrical BOS commodity prices higher small installer market share lower permitting cost higher voltage configuration and lower supply chain cost also contributed On the other hand higher module price higher labor wages higher advanced inverter adoption and higher steel prices partially offset the cost reductions across the various sectors

(3) Our bottom-up system cost models enable us to investigate regional variations system configurations (such as 1500 Vdc vs 1000 Vdc MLPE vs non-MLPE fixed-tilt vs one-axis tracker and small vs large system size) and business structures (such as installer vs integrator and EPC vs developer)

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

59

For More Information

Contact the authors bull Ran Fu RanFunrelgovbull David Feldman DavidJFeldmaneedoegovbull Robert Margolis RobertMargolisnrelgov

This work was authored by the National Renewable Energy Laboratory operated by Alliance for Sustainable Energy LLC for the US Department of Energy (DOE) under Contract No DE-AC36-08GO28308 Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office The views expressed in the article do not necessarily represent the views of the DOE or the US Government The US Government retains and the publisher by accepting the article for publication acknowledges that the US Government retains a nonexclusive paid-up irrevocable worldwide license to publish or reproduce the published form of this work or allow others to do so for US Government purposes

60

ReferencesASCE (American Society of Civil Engineers) 2006 Minimum Design Loads for Buildings and Other Structures (7-05) Reston VA American Society of Civil EngineersBarbose G and N Darghouth 2016 Tracking the Sun IX The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States Berkeley CA Lawrence Berkeley National Laboratory httpsemplblgovpublicationstracking-sun-ix-installed-priceBloomberg 2017 Bloomberg Professional service Accessed May 20 2017 BLS (US Bureau of Labor Statistics) 2017 ldquoOccupational Employment Statisticsrdquo Accessed May 8 2017 httpwwwblsgovoestableshtmBolinger M and J Seel 2017 (forthcoming) Utility-Scale Solar 2016 An Empirical Analysis of Project Cost Performance and Pricing Trends in the United States Berkeley CA Lawrence Berkeley National Laboratory mdashmdashmdash 2016 Utility-Scale Solar 2015 An Empirical Analysis of Project Cost Performance and Pricing Trends in the United States Berkeley CA Lawrence Berkeley National Laboratory httpsemplblgovpublicationsutility-scale-solar-2015-empiricalCase T 2012 ldquoUS Cost of Doing Business Costs Fall in 2010rdquo Moodyrsquos Analytics Regional Financial Review September 2012Chung D C Davidson R Fu K Ardani and R Margolis 2015 US Photovoltaic Prices and Cost Breakdowns Q1 2015 Benchmarks for Residential Commercial and Utility-Scale Systems NRELTP-6A20-64746 Golden CO National Renewable Energy Laboratory httpwwwnrelgovdocsfy15osti64746pdfCSI (California Solar Initiative) 2017 ldquoCSI Working Data Setrdquo Accessed May 10 2017 httpwwwcaliforniadgstatscagovdownloadsDSIRE (Database of State Incentives for Renewables amp Efficiency) 2017 Accessed May 10 2017 httpwwwdsireusaorgEnphase 2017 Enphase quarterly presentations Accessed May 20 2017 httpinvestorenphasecomeventscfmYear=2017Feldman D G Barbose R Margolis M Bolinger D Chung R Fu J Seel C Davidson N Darghouth and R Wiser 2015 Photovoltaic System Pricing Trends Historical Recent and Near-Term Projections NRELPR-6A20-64898 Golden CO National Renewable Energy Laboratory httpwwwnrelgovdocsfy15osti64898pdfFeldman D B Friedman and R Margolis 2013 Financing Overhead and Profit An In-Depth Discussion of Costs Associated with Third-Party Financing of Residential and Commercial Photovoltaic Systems NRELTP-6A20-60401 Golden CO National Renewable Energy Laboratory httpwwwnrelgovdocsfy14osti60401pdfFeldman D Lowder T Lowder and P Schwabe 2016 Terms Trends and Insights PV Project Finance in the United States 2016 NRELBR-6A20-66991 Golden CO National Renewable Energy Laboratory httpwwwnrelgovdocsfy16osti66991pdfFu R D Chung T Lowder D Feldman K Ardani and R Margolis 2016 US Solar Photovoltaic System Cost Benchmark Q1 2016 NRELTP-6A20-66532 Golden CO National Renewable Energy Laboratory httpwwwnrelgovdocsfy16osti66532pdfFu R TL James D Chung D Gagne A Lopez and A Dobos 2015 ldquoEconomic Competitiveness of US Utility-Scale Photovoltaic Systems in 2015 Regional Cost Modeling of Installed Cost ($W) and LCOE ($kWh)rdquo Presented at the IEEE 42nd Photovoltaic Specialist Conference New Orleans LA httpwwwnrelgovanalysispdfsEconomic_Competitiveness_of_US_Utility-Scale_Photovoltaics_SystempdfGo Solar CA (Go Solar California) 2017 ldquoCurrently Interconnected Data Setrdquo Accessed May 10 2017 httpwwwcaliforniadgstatscagovdownloadsGTM Research 2017 Q1 2017 Solar Executive Briefing Boston Greentech Media GTM Research and SEIA (Solar Energy Industries Association) 2017 US Solar Market Insight Report Q1 2017 Washington DC Solar Energy Industries Association NREL 2017 NREL dialogues and interviews with solar industry collaborators Golden CO National Renewable Energy LaboratoryPVinsights 2017 PVinsights database Accessed May 20 2017 RSMeans ed 2016 RSMeans Building Construction Cost Data 2015 73rd annual edition Norwell MA RSMeansSolarEdge 2017 SolarEdge quarterly presentations Accessed May 20 2017 httpinvestorssolaredgecomphoenixzhtmlc=253935ampp=irol-newsampnyo=0Sunrun 2017 Sunrun quarterly presentations Accessed May 20 2017 httpinvestorssunruncomphoenixzhtmlc=254007ampp=irol-calendarVivint Solar 2017 Vivint Solar quarterly presentations Accessed May 20 2017 httpinvestorsvivintsolarcomcompanyinvestorsevents-and-presentationspresentationsdefaultaspxVote Solar 2015 ldquoProject Permitrdquo Accessed May 8 2017 httpprojectpermitorg20130206best-practices Vote Solar and IREC (Interstate Renewable Energy Council) 2013 Project Permit Best Practices in Residential Solar Permitting San Francisco Vote Solar InitiativeWoodhouse M R Jones-Albertus D Feldman R Fu K Horowitz D Chung D Jordan and S Kurtz 2016 On the Path to SunShot The Role of Advancements in Solar Photovoltaic Efficiency Reliability and Costs NRELTP-6A20-65872 Golden CO National Renewable Energy Laboratory httpwwwnrelgovdocsfy16osti65872pdfXE Currency Charts 2017 Historical currency conversion Accessed May 2 2017 httpwwwxecomcurrencycharts

61

Appendix PV System LCOE Benchmarks in 2018 USD$

Reporting Year 2010 2011 2012 2013 2014 2015 2016 2017 20182020 Goal

2030 Goal

Benchmark Date Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q1 2015 Q1 2016 Q1 2017Q1 2018

ResidentialPhoenix AZ no ITC 415 349 241 201 169 148 135 127 120Kansas City MO no ITC 507 426 294 246 206 180 165 155 147 102 51New York NY no ITC 540 454 313 262 219 192 175 165 156Phoenix AZ ITC 276 231 161 134 112 98 89 85 79Kansas City MO ITC 337 283 197 164 137 119 109 103 97New York NY ITC 359 301 209 175 146 127 116 110 103CommercialPhoenix AZ no ITC 393 349 236 186 175 139 129 112 109Kansas City MO no ITC 416 370 250 197 186 147 137 119 115 79 41New York NY no ITC 318 282 191 150 142 112 104 91 88Phoenix AZ ITC 259 230 157 124 116 92 86 75 73Kansas City MO ITC 275 243 166 131 123 98 91 79 77New York NY ITC 210 186 127 100 94 75 69 61 59Utility-scale (one-axis tracking)Phoenix AZ no ITC 267 220 151 115 101 90 71 55 52Kansas City MO no ITC 294 243 167 126 111 99 79 61 57 61 31New York NY no ITC 211 174 120 91 80 71 56 44 41Phoenix AZ ITC 177 146 101 77 68 61 49 39 35Kansas City MO ITC 195 161 112 85 75 67 54 43 39New York NY ITC 140 116 80 61 54 48 39 31 28Utility-scale (fixed-tilt)Phoenix AZ no ITC 273 229 156 119 107 101 81 60 58Kansas City MO no ITC 292 244 167 127 115 107 86 64 62New York NY no ITC 224 187 128 97 88 83 67 49 48Phoenix AZ ITC 182 152 105 81 73 68 55 42 40Kansas City MO ITC 194 163 112 86 78 72 59 45 42New York NY ITC 149 125 86 66 60 56 46 34 32

62

Acronyms and AbbreviationsAC alternating currentBOS balance of systemDC direct currentEPC engineering procurement and constructionFICA Federal Insurance Contributions ActGW gigawattILR inverter loading ratioITC investment tax creditLCOE levelized cost of energyMACRS Modified Accelerated Cost Recovery SystemMLPE module-level power electronicsNEC National Electric CodeNEM net energy metering NREL National Renewable Energy LaboratoryOampM operation and maintenancePERC passivated emitter and rear cellsPII permitting inspection and interconnectionPV photovoltaic(s)Q quarterRampD research and developmentSAM System Advisor ModelSGampA sales general and administrativeTPO third party ownershipUSD US dollarsVdc volts direct currentWac watts alternating currentWdc watts direct current

• US Solar Photovoltaic System Cost Benchmark Q1 2018
• Contents - Introduction and Key Definitions
• Key Definitions
• Contents - Overall Model Outputs
• Overall Model Results (Total Installed Cost)
• Overall Model Results (Q1 2017 vs Q1 2018)
• Overall Model Results (Soft Cost)
• 10Overall Model Results (LCOE)
• Contents - Market Study and Model Inputs
• US Solar PV Market Growth
• Database for Residential and Commercial Sectors
• Module Power and Efficiency Trend (California)
• PV System Size Trend (California)
• Inverter Market -Residential PV Sector (California)
• Inverter Market mdashCommercial PV Sector (California)
• Inverter Price for non-MLPEs
• Inverter Price for MLPEs
• Inverter Price and DC-to-AC ratios
• Module Price (US vs Global)
• Module Price Inputs Q1 2018
• Residential PV Integrator vs Installer
• Contents - Model Output Residential PV
• Residential PV Model Structure
• Residential PV Modeling Inputs and Assumptions
• Residential PV Model Outputs
• Residential PV Capital Cost Benchmark Historical Trends
• Residential PV LCOE assumptions
• Residential PV LCOE Benchmark Historical Trends
• Contents - Model Output Commercial PV
• Commercial PV Model Structure
• Commercial PV Modeling Inputs and Assumptions
• Commercial PV Model Outputs
• Commercial PV Capital Cost Benchmark Historical Trends
• Commercial PV LCOE assumptions
• Commercial PV LCOE Benchmark Historical Trends
• Contents - Model OUtput Utility-Scale PV
• Utility-Scale PV Model Structure
• Utility-Scale PV Modeling Inputs and Assumptions
• Utility-Scale PV 1000 Vdc and 1500 Vdc
• Utility-Scale PV US Fixed-Tilt vs Tracking Systems
• Utility-Scale PV Union Labor Case
• Utility-Scale PV Model Outputs EPC Only
• Utility-Scale PV Model Outputs EPC + Developer
• Utility-Scale PV Capital Cost Benchmark Historical Trends
• Utility-Scale PV (One-Axis Tracker) LCOE assumptions
• Utility-Scale PV (Fixed-Tilt) LCOE assumptions
• Utility-Scale PV LCOE Benchmark Historical Trends
• Contents Model Applications
• Model Application - Economies of Scale
• Model Application - Module Efficiency Impacts
• Contents - Conclusions
• Conclusions
• For More Information
• References
• Appendix PV System LCOE Benchmarks in 2018 USD$
• Acronyms and Abbreviations

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62

Acronyms and AbbreviationsAC alternating currentBOS balance of systemDC direct currentEPC engineering procurement and constructionFICA Federal Insurance Contributions ActGW gigawattILR inverter loading ratioITC investment tax creditLCOE levelized cost of energyMACRS Modified Accelerated Cost Recovery SystemMLPE module-level power electronicsNEC National Electric CodeNEM net energy metering NREL National Renewable Energy LaboratoryOampM operation and maintenancePERC passivated emitter and rear cellsPII permitting inspection and interconnectionPV photovoltaic(s)Q quarterRampD research and developmentSAM System Advisor ModelSGampA sales general and administrativeTPO third party ownershipUSD US dollarsVdc volts direct currentWac watts alternating currentWdc watts direct current

• US Solar Photovoltaic System Cost Benchmark Q1 2018
• Contents - Introduction and Key Definitions
• Key Definitions
• Contents - Overall Model Outputs
• Overall Model Results (Total Installed Cost)
• Overall Model Results (Q1 2017 vs Q1 2018)
• Overall Model Results (Soft Cost)
• 10Overall Model Results (LCOE)
• Contents - Market Study and Model Inputs
• US Solar PV Market Growth
• Database for Residential and Commercial Sectors
• Module Power and Efficiency Trend (California)
• PV System Size Trend (California)
• Inverter Market -Residential PV Sector (California)
• Inverter Market mdashCommercial PV Sector (California)
• Inverter Price for non-MLPEs
• Inverter Price for MLPEs
• Inverter Price and DC-to-AC ratios
• Module Price (US vs Global)
• Module Price Inputs Q1 2018
• Residential PV Integrator vs Installer
• Contents - Model Output Residential PV
• Residential PV Model Structure
• Residential PV Modeling Inputs and Assumptions
• Residential PV Model Outputs
• Residential PV Capital Cost Benchmark Historical Trends
• Residential PV LCOE assumptions
• Residential PV LCOE Benchmark Historical Trends
• Contents - Model Output Commercial PV
• Commercial PV Model Structure
• Commercial PV Modeling Inputs and Assumptions
• Commercial PV Model Outputs
• Commercial PV Capital Cost Benchmark Historical Trends
• Commercial PV LCOE assumptions
• Commercial PV LCOE Benchmark Historical Trends
• Contents - Model OUtput Utility-Scale PV
• Utility-Scale PV Model Structure
• Utility-Scale PV Modeling Inputs and Assumptions
• Utility-Scale PV 1000 Vdc and 1500 Vdc
• Utility-Scale PV US Fixed-Tilt vs Tracking Systems
• Utility-Scale PV Union Labor Case
• Utility-Scale PV Model Outputs EPC Only
• Utility-Scale PV Model Outputs EPC + Developer
• Utility-Scale PV Capital Cost Benchmark Historical Trends
• Utility-Scale PV (One-Axis Tracker) LCOE assumptions
• Utility-Scale PV (Fixed-Tilt) LCOE assumptions
• Utility-Scale PV LCOE Benchmark Historical Trends
• Contents Model Applications
• Model Application - Economies of Scale
• Model Application - Module Efficiency Impacts
• Contents - Conclusions
• Conclusions
• For More Information
• References
• Appendix PV System LCOE Benchmarks in 2018 USD$
• Acronyms and Abbreviations

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