Stunning price falls could spark another gold rush for US solar PV market

A Deutsche Bank report has predicted “sharp declines” in US solar module and inverter prices that it says could drive payback periods down to less than five years and spark a “final ‘gold rush’” in the American residential, commercial and industrial markets, starting in 2017.

The US solar market report, published on Wednesday, predicts solar module prices will drop to $US0.35c/W in Q4 2016, having already fallen already by one-third in Q3, down from $US0.60c/W to $US0.40c.

The Q3 price drop already charted, combined with Duestche Bank’s projections for Q4, would mean a total fall in US module prices of 40 per cent in just two quarters.

As we have reported on RenewEconomy before, the US PV market has been notable for its heavy “balance of system” costs, mostly related to the planning and approvals process. By contrast, Australian solar system prices average around $A1.63/W, less than half the average price for residential installation in the US.

But, as the Deutsche report illustrates, this appears to be changing – and rather rapidly.

“Average residential solar system prices in the US market have only modestly decreased from $US3.86W in 2H14 to $3.57/W in 1H16. Most of the price reduction during this period was driven by BoS cost reduction,” the report says.

“However, considering the recent precipitous drop in module prices (from ~60/W to less than 40c/W), we expect system prices to decline at a much more rapid pace – in the base case scenario assuming a 6-month lag for BoS cost reductions and taking into consideration some of the recent module pricing data points, we estimate system prices of $3.26/W in 2H16, $2.75/W in 1H17, $2.5/W in 2H17 and $2/W in 2H18.”

In a more optimistic scenario, Deutsche says, it estimates system prices of $3.17/W in 2H16, $2.62/W in 1H17, $2.22/W in 2H17 and ~$1.7/W in 2H18.

“This precipitous decline in module prices is also accompanied by a sharp decline in inverter prices,” the report says, “especially in the utility-scale and C&I (commercial and industrial) markets.

“As a result, we expect solar economics in several US markets to improve significantly over the next 12-18 months,” Deutsche Bank says.

“We expect the final “gold rush” in the US market to begin in 2017. Our view is also supported by the strong pipeline of utility scale-solar projects – we estimate roughly 8GW of solar projects under development in Tecas and 31GW in the entire US.

For 2018-20, Deutsche forecasts strong growth in all segments, and raises its demand estimates from 13.2GW, 15.2GW and 17.4GW to 16.5GW, 18GW and 19.7GW respectively.