Developing Cost Functions for Estimating Solar Photovoltaic System Installed and Life Cycle Costs Using Historical Quote Data

Published

September 22, 2020

Author(s)

David H. Webb, Joshua D. Kneifel, Cheyney M. O'Fallon

Abstract

Residential solar photovoltaic (PV) system installations have become more prevalent as the installed cost has decreased over the last 10 years while system performance has improved. As these installations have increased, so too has interest in determining their economic value to a homeowner. PV installation cost estimates have typically assumed the entire cost as marginal (average cost per watt) using reported data aggregated to a state or country. This study implements a cost function that includes a fixed cost and marginal cost element to account for differences in cost structures while controlling for panel quality and specific location. The analysis uses county level installed quote data applied to estimate cost functions and apply these functions to life cycle cost analyses of the Washington DC- Maryland-Virginia (DMV) metropolitan area while incorporating state and county level differences in pricing and incentives. The estimated cost function is found to provide an installed cost estimate that is statistically different than using the traditional total average cost per watt approach for both standard and premium systems up to 9 kW and 11 kWh, respectively. The analysis finds no statistical difference in the installed cost function across counties, but clear differences in the life-cycle cost-effectiveness to a homeowner due to state policies and retail electricity prices. Absent financing, only PV systems in DC are life-cycle cost effective compared to retail electricity due to DC’s strong solar renewable energy credit (SREC) market. PV can be cost effective in Maryland if financing and incentives are applied while no combination of financing or incentives makes PV cost effective in Virginia due to its lower relative electricity prices. Sensitivity analysis finds that the homeowner’s assumed discount rate and the upcoming phase out of the federal investment tax credit (ITC) has a significant impact on residential PV economics.

Citation

Technical Note (NIST TN) - 2113

Report Number

2113

NIST Pub Series

Technical Note (NIST TN)

Pub Type

NIST Pubs

Download Paper

DOI Link

Keywords

Solar Photovoltaics, Life Cycle Cost Analysis, Net Present Value, Statistical Analysis, Solar Markets

Citation

Webb, D. , Kneifel, J. and O'Fallon, C. (2020), Developing Cost Functions for Estimating Solar Photovoltaic System Installed and Life Cycle Costs Using Historical Quote Data, Technical Note (NIST TN), National Institute of Standards and Technology, Gaithersburg, MD, [online], https://doi.org/10.6028/NIST.TN.2113 (Accessed October 9, 2025)