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Solar really is getting cheaper, report says

U.S. government data on grid-connected photovoltaic systems shows a 30 percent drop in initial costs between 1998 and 2008.

Solar incentives seem to be working to both increase the number of solar installations in the U.S. and bring down the initial cost, according to a report released Wednesday by the Lawrence Berkeley National Laboratory.

" that, after a three-year plateau, costs decreased by 3.6 percent from 2007 to 2008, marking a pivotal year for the American solar industry," said the report (PDF).

Broken down into real 2008 dollars, the report estimated that the actual cost of installing photovoltaic solar systems--excluding tax credits or financial incentives--was $10.80 per watt in 1998 versus $7.50 per watt in 2008.

That initial cost to the installer dropped significantly once incentives and tax credits were factored in.

Last year, the average cost of installation was $2.80 per watt for residential photovoltaic, when incentives and tax credits are counted, and $4.00 per watt for commercial.

The report attributed rising fuel prices since 1998 and government incentives for alternative energy to the solar market boom. There has been a significant increase in photovoltaic installations in the U.S. since 2007. Of the 566 megawatts of solar added to the U.S. grid since 1998, an estimated 293 megawatts of photovoltaic were added in 2008 alone. That recent uptick was attributed in part to "more lucrative" federal investment tax credits adopted for commercial photovoltaic systems in 2006.

If that figure of 566 megawatts seems low given the plethora of solar installation announcements from private and public organizations over the past few years, keep in mind these figures are for grid-connected systems only.

The report data evaluated the cost outlay for 52,000 residential and commercial installations, about 71 percent of all the grid-connected photovoltaic systems that were installed in the U.S. between 1998 and 2009. The report data did not include cost outlay for those residential or commercial systems operating off the grid.

But the report did include outside data for comparison of markets.

It showed that the recent growing popularity of solar is not just a U.S. phenomenon. About 5,948 megawatts of photovoltaic were installed globally in 2008 compared to 2,826 megawatts in 2007. Spain was the largest photovoltaic market in terms of installation in 2008, followed by Germany and then the U.S., according to the report.

Undoubtedly, the global installation figure will increase even more dramatically in the coming years. China alone has announced plans for large-scale photovoltaic installations ranging from 500 megawatts in Baotou, Inner Mongolia to 2,000 megawatts in Ordos City, Inner Mongolia. In the U.S., First Solar has been given rights to develop a 550-megawatt plant in California.