Reduced Cost & Module Efficiency Drive Residential Solar Growth in the US

LBL’s Tracking the Sun report highlights trends in solar and PV systems with energy storage in US


New residential solar installations in the U.S. had a median size of 7.2 kW in 2022, a significant jump from the 2.4 kW seen in 2000, thanks to cost reductions and improved module efficiencies,  according to the Lawrence Berkeley National Laboratory (LBL).

This trend is heavily influenced by California, which contributes significantly to the data even if it has smaller residential system sizes. In most states, the median size of residential photovoltaic (PV) systems in 2022 exceeded 8 kW, with many states exceeding 9 kW.

The annual “Tracking the Sun” report from Berkeley Lab outlines patterns in the U.S. grid-tied solar PV systems and PV systems combined with energy storage. The report is based on data from 3.2 million systems installed up to the end of 2022, which accounts for more than 80% of all systems installed up to that point.

Distributed solar refers to residential installations, non-residential systems mounted on rooftops, and ground-mounted systems with a capacity of up to 5 MW.

PV System Characteristics

Over the last two decades, residential solar system sizes have consistently increased in the U.S. due to reduced costs and improved module efficiencies. Non-residential solar system sizes have followed a less predictable path, spanning a wide range of sizes. While most of these systems are relatively small, with a median size of 25 kW in 2022, a long tail of larger installations contributes to the variability in system sizes in this category.

According to the report, median module efficiencies in residential systems showed a consistent upward trend over time from 13.5% in 2002 to 20.8% in 2022.

The use of module-level power electronics, such as microinverters or DC optimizers, has continued to grow. These electronics were present in 93% of residential systems, 83% of small non-residential systems (those with less than 100 kW capacity), and 39% of large non-residential systems (those with 100 kW or more capacity) installed in 2022.

Inverter-loading ratios (ILRs), which measure the ratio of module-to-inverter nameplate ratings, have generally increased as module costs decline. Historically, ILRs were higher for non-residential systems, but rising residential ILRs have narrowed the gap. In 2022, the median ILR was 1.22 for residential systems compared to 1.26 for large non-residential systems.

About one-third (34%) of large non-residential systems installed in 2022 were ground-mounted, and 8% had tracking capabilities. In contrast, only 12% of small non-residential and 1% of residential systems were ground-mounted, and tracking was rarely used.

Panel orientation has remained relatively consistent in recent years, with 54% of systems installed in 2022 facing southward, 24% to the west, and the majority of the remainder facing east.

Third-party ownership (TPO), including leasing and power purchase agreements, has declined in residential systems over time, from a peak of approximately 60% in 2012 to 24% in 2021. In the non-residential sector, TPO shares have remained relatively stable and historically been lower for small systems than large ones (14% vs. 32% in 2022). TPO tends to be more common in states with robust incentives.

For-profit commercial customers constitute the majority (>75%) of non-residential site hosts, while the rest are a mix of tax-exempt customers like schools, government entities, and nonprofits. As expected, TPO is more prevalent among tax-exempt site hosts, with a rate of 38% compared to 16% among commercial hosts in 2022.

Paired PV+Storage Systems

Battery storage is increasingly being combined with distributed PV. In 2022, 10% of new residential PV installations and 7% of non-residential installations included battery storage. Hawaii had the highest residential attachment rate at 96%, while California had an 11% attachment rate, and most other states were in the range of 5-10%.

Storage is also being retrofitted onto existing PV systems. In 2022, 23% of new paired PV+ storage systems were retrofitted onto existing PV systems. California led in residential retrofits at 26%, driven by concerns about resilience and time-of-use pricing. More PV capacity was added to the existing PV system in about half of these cases.

The residential market has been moving towards paired systems with larger batteries, primarily due to the demand for backup power. However, in 2022, there was a slight reversal, with 35% of paired systems having 10+ kW of storage.

Conversely, paired non-residential systems are becoming smaller as smaller customers adopt them for various applications beyond managing demand charges. In 2022, just over half (51%) of all paired non-residential systems had batteries smaller than 10 kW.

Median Installed Price Trends

Over time, standalone PV system prices have decreased by roughly $0.4 per watt annually. However, this decline slowed down after 2013, averaging $0.1-0.2 per watt per year due to stabilized module costs. Current price trends are mainly influenced by balance-of-system and soft costs. These costs have gradually fallen by $0.1-0.2 per watt per year on average, notes the report.

Nominal PV system prices increased recently but remained lower in real terms. Between Q1 2021 and Q4 2022, median prices rose by $0.1-0.3 per watt (4-13%). The price decreased by about $0.2 per watt for residential and large non-residential systems. This aligns with the decade-long trend.

National median installed prices from the Tracking the Sun dataset are higher than other PV pricing benchmarks, mainly due to different methods and data sources.

Median installed prices for paired residential PV+ storage systems have declined, reflecting a maturing market. However, pricing trends for paired non-residential systems are unclear due to limited sample sizes.

Variations in Installed Prices

System size significantly affects installed prices, with a $1/W difference in median prices between the smallest and largest residential systems and a $2.6/W difference between the smallest and largest non-residential systems.

In the non-residential sector, prices are higher for systems installed at tax-exempt customer sites compared to commercial site hosts. However, this trend appears to be unique to California, which is a significant part of the market. The price difference is most pronounced for large non-residential systems in California, where tax-exempt customers paid a median price of $3.6/W in 2022, compared to $2.1/W for commercial customers.

The energy storage market in the U.S., including grid-scale, residential and community, commercial, and industrial segments, experienced an 80% year-over-year growth in the second quarter of 2023, adding a total of 5,597 MWh, a report by Wood Mackenzie and American Clean Power Association said.