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Report shows solar costs drop as DECC starts internal review

DECC has released a report that estimates solar installation costs are due to drop by up to 30 per cent in 2012, but admits that huge uncertainty faces the industry.

The move comes after climate change secretary Greg Barker confirmed to shadow secretary Caroline Flint that DECC has commissioned a review of lessons to be learned on the Feed-in Tariff controversy that has plagued the industry.

The report by Parsons Brinckerhoff is an update to the costs associated with solar PV as set out by the government in October 2011, with the majority of the report based on views gained over January 2012.

The report estimates a capex reduction in cost of 10- 30 per cent by the end of 2012, with further falls of 5-25 per cent in 2013/14 and further reductions beyond 2015.

Retrofit Domestic 2kW installation

January 2012

Low-cost est: £2,450 (£734 + £1,716 marginal costs)

Medium-cost est: £3,701 (£1,249 + £2,452 m/c)

High-cost est: £5,894 (£2,288+£3,606 m/c)

2015:

Low-cost est: £1,278 (£548+£730 m/c)

Medium-cost est:£2,404 (£1,039+£1,365 m/c)

High-cost est: £4,725 (£2,089+£2,636 m/c)

However the report highlights the uncertainty currently faced within industry, ahead of the announcement by energy secretary Ed Davey on the results of the consultation on Feed-in Tariff reviews tomorrow.

It states: “Both supply and demand factors are currently uncertain – falling prices have stimulated demand, but changes in tariffs may reduce demand, while increased supply capacity has increased competition and driven down prices but may result in capacity being reduced which could in turn affect prices.

“The uncertainty in supply and demand and how they will influence each other means that future costs are very difficult to predict.”

The report shows a reduction in costs of 10-20 per cent for domestic systems, rising to 40-50 per cent for larger installations of 50kW and above compared to 2011 data.

However the report notes that there is a “high level of uncertainty” associated with the data.

The capex data is based on a sample of around 80 installations covering the system size, quotes from 11 UK installers, talks with two large-scale developers, evidence from DECC, informal discussions with supply chain parties and PB experience.

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