The cost of solar power is falling rapidly, often surpassing expectations and making solar increasingly affordable in many big cities in the U.S and around the world. In fact, the price of U.S. solar power has fallen 70% since 2009. This drop is even more impressive considering solar panels continue to get smarter.
According to a report by GTM Research, as of February 2016, 20 U.S. states are currently at grid parity, and 42 states are expected to reach grid parity by 2020 if conditions remain the same.
However, determining grid parity is not so simple as it’s dependent on both the location of the solar power system (i.e. amount of sun) and the type of system. For example, typically, large scale solar systems cost less than residential solar panels. Moreover, residential electric rates are much higher than wholesale electric rates, with residential rates averaging about $.12/kWh and wholesale rates being around $.04/kWh.
The levelized cost of solar PV, referred to as the Levelized Cost of Electricity, or LCOE, is determined by the total cost of buying, installing, financing, and maintaining the system, divided by the amount of electricity the system is expected to produce over its lifetime. The number is expressed as dollars per kilowatt-hour.
According to Bloomberg New Energy Finance, as of October 2015, the average cost of energy from solar PV in the U.S. was around 12.2 cents per kWh. This competitive rate is at least in part a result of cheaper technology and lower finance costs.