A Lawrence Berkeley National Laboratory study finds that the price of installing residential solar photovoltaic systems has fallen due to cheaper solar panels and improved industry efficiency.

The study (PDF) published today finds that system installation costs fell 30 percent from 1998 to 2009. The data, representing 70 percent of grid-tied solar electric installations across the U.S., also noted that "dramatic" cost reductions have been seen in 2010.

In the first ten months of 2010, the installed cost of solar PV systems fell by $1 per watt (DC), or a 14 percent drop in California, and by $1.20 per watt in New Jersey, which a 16 percent reduction. California is by far the largest market for solar PV in the U.S. with about three-quarters of installations, followed by New Jersey with 12 percent.

A solar photovoltaic array in Massachusetts.

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.

Consumers in Germany and Japan, where there are large-scale solar manufacturing and government incentives, paid a bit less than U.S. consumers. In 2009, homeowners in Germany paid under $5 per watt installed, while their counterparts in Japan paid about $6 per watt.

The costs in Germany and Japan suggest that further near-term cost reductions are possible, according to the Lawrence Berkeley Lab. That is significant because state and utility incentives, notably in California and New Jersey, are being scaled back.

The overall downward trend in prices suggests that the solar industry has been successful in introducing more competition to spur efficiencies in delivering product, the study finds.

An uncapped 30 percent federal tax credit for solar installations (hot water or photovoltaics) remains in effect until 2016. Rebate and tax credits from state programs vary, as does the money available from selling renewable energy certificates, which are credits for generating energy from renewable sources. (See state incentive program information here.)

Another factor making solar PV more accessible is the growing number of financing options. Rather than pay the upfront cost, which can be between $25,000 to $40,000 depending on size, installers now offer an option to lease panels with a monthly fee that is offset by lower electricity bills.