Installation Price, Degradation, and Value in Residential Photovoltaic Systems

Solar photovoltaic (PV) systems are becoming price competitive with conventional electricity sources. Their adoption is predicated on both private (electricity cost savings) and public (climate and air quality) benefits, which are obscured by wide variation in PV system price. System quality may be an important source of that variation, but it remains poorly understood. Here, I used degradation as a proxy for system quality, and studied degradation of small (15<kW) California Solar Initiative (CSI) systems to explore the hypothesis that high price reflects high quality. I analyzed data for 386 mature systems generated by the Expected Performance Based Buydown (EPBB) portion of the May 2016 CSI Working Dataset, the National Solar Radiation Database (NSRDB), and the Tracking the Sun (TTS) dataset. These systems showed a median annual degradation rate of 1.0% based on year-on-year (YOY) differencing. Using multiple linear regression, I found no support for the hypothesis that high-cost residential solar PV systems avoid annual degradation differently than low-cost systems. In general, the model explains little variation in the data, likely due to either data quality issues in the components of the degradation rate calculation and/or to significant but unexplored variables. Additionally, by estimating the value of a PV system with median annual degradation relative to one with no degradation, I demonstrated that the value of degradation represents a non-trivial cost to system owners. Despite a large range (+32% to 0%), median degradation adds 11% to the $/kWh cost of residential solar. These results demonstrate that policy interventions targeting degradation are an important area for transparency and financial risk reduction in residential PV markets.


  • Series: La Follette School Working Paper No. 2017-003
  • Authors: Andrew Lick

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