A Lawrence Berkeley National Lab study (PDF) finds that the price of installing residential solar systems has fallen due to cheaper solar panels and improved efficiency. The study, “Tracking the Sun III: The Installed Cost of Photovoltaics in the United States from 1998-2009” determines that system installation costs fell 30% from 1998 to 2009.

In 1998, the cost to have solar panels installed was $10.80 per watt. The price in the first 10 months of 2010 in California and New Jersey was about $6 per watt, although prices vary significantly in other states, the study found.

German and Japanese consumers paid the least for solar energy, with Germany averaging just under $5 per watt installed, and Japan averaging just below $6 per watt. Large scale manufacturing and government incentives play a large role in these prices.

The study concludes:

  • Average capacity-weighted, pre-incentive installed costs (real 2009 dollars per installed watt) remained flat from 2008 to 2009 at $7.5/WDC.
  • Lifting of the dollar cap on the federal investment tax credit for residential PV in 2009 led to a 24% year-on-year decline in the average net installed cost for residential PV.
  • Preliminary 2010 data shows significant cost reductions relative to 2009, as a result of the decline in global module prices.
  • From 1998-2009, PV costs declined substantially as a result of reductions in both module and non-module costs.
  • This trend, along with the narrowing of cost distributions, suggests that PV deployment policies in the U.S. have achieved some success in fostering competition and spurring efficiencies in the delivery infrastructure.
  • Lower average costs in Japan and Germany (and among some of the larger PV markets in the US) are far less, and this suggest that deeper near-term installed cost reductions are possible and may accompany deployment scale.
  • Low average costs among some small state markets show that local factors can also be important determinants to cost reductions.

It’s also worth noting the the LBL study suggests that when 2010 is over, the data will show that there was a significant drop in costs over the last 12 months. For example, in two states that provide substantial incentives, California and New Jersey costs took a 16% (in the first ten months) and 14% (in just the first six months), respectively.