By Lux Research

While cells and modules have been the primary focal point of the solar industry, relatively little attention is given to the balance of systems (BOS) components and installation that are needed to allow the modules to effectively produce power and transmit it to the grid. Generally, they fall into three categories: mounting, which includes racking and tracking systems; power electronics, which includes inverters and maximum power point tracking (MPPT) devices; and installation, which includes the engineering and design work as well as the actual labor of installing a system. BOS and installation account for slightly more than 50% of the cost of a total system. Lux Research finds that:

• Foundations and racking are highly customized by climate, ground type, and application and are comprised mainly of commodity materials – making cost cutting difficult. Trackers, however, have the potential to improve the economics of solar energy, despite leading higher upfront costs per watt ($/W), since they can improve the output in kilowatt-hours, leading to a lower levelized cost of electricity (LCOE).
• Power electronics are being improved by cost cutting at manufacturing and by general efficiency improvements, but new system architectures are leading to a rise in microinverter and MPPT solutions at the residential level, and higher voltage solutions at the utility scale.
• Standardization of system components and system design is enabling modular systems which can significantly reduce labor cost.

To determine the future impact of BOS innovations on system cost and LCOE, Lux Research built a proprietary BOS model that incorporates the line-item cost data and projections from 15 interviews with installers and BOS component manufacturers. Lux combined this BOS model with module price projections and integrated total system cost projections with a proprietary levelized cost of electricity model (LCOE). Lux Research found:

• Single-axis trackers’ edge erodes and dual-axis trackers disappear as module prices fall. Foundation and racking cost cutting have very limited results for cost savings through 2015, accounting for only $0.03/W or 1.1% of total cost reductions. Trackers can boost output, lowering LCOE, but similar commodity constraints are hampering cost cutting for solar trackers. As module prices plummet, the benefits narrow, making dual-axis trackers obsolete in the short term, and making the cost advantage of single-axis trackers, such as SunPower’s T20, tenuous on an LCOE basis in 2015.
• Power electronics offer improvements in LCOE, but only marginal savings on capex. Standard string and centralized inverter costs will come down more slowly than module costs in coming years, with savings from power electronics from 2009 to 2015, accounting for only $0.11/W or 6.1% of total cost reduction. However, power electronics that increase electricity production in kWh – even at the expense of higher capital costs – will prove valuable for decreasing LCOE through 2015, particularly in residential applications. Of these, MPPT devices look poised to win out over microinverters due to their lower incremental costs and integration with higher efficiency inverters.
• Installation labor cost reductions present the biggest opportunity for cost savings. Labor cost reduction is the biggest lever to pull on the BOS front to reduce system costs, and will account for $0.51/W of cost reduction, or 25% of the total, by 2015. These reductions are made possible by better integration throughout the value chain, with a view towards system cost reduction rather than simply component cost reduction.

“Balance of Systems: The Next Step to Grid Parity” is part of the Lux Solar Intelligence service. Clients subscribing to this service receive ongoing research on market and technology trends, continuous technology scouting reports and proprietary data points in the weekly Lux Research Solar Journal, and on-demand inquiry with Lux Research analysts.

About Lux Research

Lux Research provides strategic advice and on-going intelligence for emerging technologies. Leaders in business, finance and government rely on them to help them make informed strategic decisions. Through their unique research approach focused on primary research and their extensive global network, they deliver insight, connections and competitive advantage to their clients. Visit www.luxresearchinc.com for more information.