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Solar Panel Costs – Understanding Percentage Breakdown of Component,Part Costs for a Solar System

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Solar Panels are becoming an important consumer product around the world as Solar Panel Costs keep  falling around 10% annually and the electricity prices increases by 5-10% annually.Also the importance of Solar Energy keeps growing with the Fukushima Nuclear Disaster,Coal Mine Deaths,BP Oil Spill constantly reminding us the dangers of Coal,Oil and Nuclear Energy.On the other hand Solar Panels lead to no deaths directly or indirectly and are incapable of causing large scale disasters.Economically also Solar Panels are starting to approach retail electricity prices in number of places in the world.Large scale solar power plants are already selling power at 10-15c/KwH which is lower than the retail electricity prices in most places.Still competition between solar panel manufacturers,improving technology and scale are making solar panel costs come down at a rapid pace.In fact Solar Panel prices have declined by more than 50% from 2008 end to 2010 and are expected to fall by an average rate of 10% in the coming years as well.However Solar Panels are seldom bought by the customers directly but are rather bought by the solar system installers/contractors.However its a good idea to know about the costs of solar panels and systems that you are paying for and not get fleeced by unscrupulous solar installers.Overall Solar System Costs range between $3500/Kilowatt to around $6000/Kilowatt depending on  the size of the installation,technology being used etc.The Breakdown of the Solar System Costs is given below

Solar Panels Costs

Solar Panels cost for the cheapest solar panel manufacturers in around $1.10/watt and they retail for around $2-2.5/watt of residential customers.Note for utility large scale buyers of solar panel buyers,the cost is much lower.Solar Panels Costs have trended down quite in the last 3-4 years except in 2010 when they went up as solar panel demand increased by more than 150% .Solar Panel Costs are the biggest component of a Solar System Cost.The costs for Solar Panels  are lower for Thin Film Solar Panel for example First Solar Panels are much lower in cost but have lower Solar Panel Efficiency .Solar Panels in general cost between40-60% of the total system costs

Solar Inverter Costs

Solar Inverters cost around 50c/watt for small buyers of solar systems but can cost lower for large kilowatt inverter sizes and for scale buyers.Solar Inverters are a crucial component of a solar system and make up around 10% of the solar system costs.Here is a list of major solar inverter brands

Solar Installation Costs

These are the costs paid to the installers/electricians to connect solar panel systems and the balance of systems (BOS) to the grid or the customer installation.Solar Installations costs can vary between 10-20% of the total costs

Balance of Systems (BOS)

Balance of System components are the solar mounting systems,wires,cabling etc which are needed to mount the solar panels at the right inclination to generate the maximum energy while wire and cabling is needed to connect the solar panels to the inverter and each other.Note BOS can form between 15-20% of the Solar System.Again note the percentage of costs are an indicator and can vary substantially depending on the technology used,region etc.

Permitting,Inspection,Regulation,Other  Costs

Most Solar Panel Installations get a government subsidy in most parts of the world and involve a lot of paperwork,regulation,inspection etc.These can vary substantially depending on where the solar panel installation takes place.In USA the red tape involved is quite cumbersome and can form upto 30-40% of the total costs in the worst cases.In Germany which is the world leader in solar energy,the process is very smooth and can be done at 5% of the total system costs.


Understanding the Breakdown of Solar Panel System Costs is very important during taking a decision which involves thousands of dollar in investment in a solar panel installation.Lack of knowledge results in excess payments as the solar industry is still in a nascent phase and is highly fragmented with the usual share of fly by night operators and unscrupulous installers.Understanding the Costs is the first step in installing a solar energy system which not only bring down the electricity costs but also does the bit in fighting climate change

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Solar Panel Costs – Understanding Percentage Breakdown of Component,Part Costs

Abhishek Shah

3 Responses so far | Have Your Say!

  1. Hitesh

    cost of battery is not included in the breakup above. pls comment.