NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

Breakeven Cost for Residential Photovoltaics in 

the United States: Key Drivers and Sensitivities

(Report Summary)

Paul Denholm

Robert M. Margolis

Sean Ong

Billy Roberts

December 2009

NREL/PR-6A2-47248

Presentation for NREL/TP-6A2-45991
National Renewable Energy Laboratory Innovation for Our Energy Future

Outline

• Introduction

• Methodology

• Results: Near-term residential breakeven costs

• Results: Future Market Sensitivities of Breakeven 

Costs (2015)

• Conclusions
National Renewable Energy Laboratory Innovation for Our Energy Future

Introduction

• Objective: To provide an analysis of PV breakeven 

costs for residential customers in the United States for 

2009 and 2015, including evaluation of some of the key 

drivers of PV breakeven both regionally and over time.

• Defining “breakeven cost”: The point where the cost of 

PV-generated electricity equals the cost of electricity 

purchased from the grid. 

• Caveats: 

– Focus of analysis is on overall trends and sensitivities, in order 

to evaluate the economic performance of an individual PV 

system a different/more detailed analysis would need to be 

carried out.

– Breakeven does not equal market potential or guarantee market 

adoption for rooftop PV, in other words, we do not present a 

depth of market analysis.
National Renewable Energy Laboratory Innovation for Our Energy Future

Outline

• Introduction

• Methodology

• Results: Near-term residential breakeven costs

• Results: Future Market Sensitivities of Breakeven 

Costs (2015)

• Conclusions
National Renewable Energy Laboratory Innovation for Our Energy Future

Breakeven Cost - Definitions

• We define the breakeven cost of PV as the point at 

which the net present cost (NPC) of the PV system 

equals the net present benefit (NPB) realized to its 

owner.

• The NPC is the cumulative discounted cost of the 

system, including initial cost, financing, tax impacts, 

incentives, and operation and maintenance (O&M), 

equal to the sum of the cost in each year multiplied by 

the discount factor in that year.

• The NPB is the discounted cumulative benefits of 

reduced electricity bills over the evaluated period or the 

sum of the benefits in each year multiplied by the 

discount factor.
National Renewable Energy Laboratory Innovation for Our Energy Future

Breakeven Cost - Calculation

• The breakeven cost for PV was calculated for the top 

1,000 utilities in the United States, which represent 

about 95% of the total residential load.

• We evaluated both the breakeven cost ($/W) and the 

breakeven electricity price (cents/kWh).

• The breakeven system cost was calculated by 

iteratively varying the price of PV until the NPC equaled 

the NPB. Alternately, the breakeven electricity price was 

calculated by iteratively varying the cost of electricity 

until the NPB equaled the NPC.
National Renewable Energy Laboratory Innovation for Our Energy Future

Rates – EIA and Utility Specific Data

• Form EIA-861 data was used to determine the average 

cost of electricity to residential customers for each utility 

in 2007. We scaled each utility to 2008 values using the 

state average value for 2008 derived from the EIA.

• To establish the relative difference in value between the 

annual average cost of electricity for each utility and the 

actual value of PV, we used information from current 

(late 2008 to early 2009) tariff sheets for the largest 

utility in each state.

• The relative difference established a scale factor, 

accounting for the relative change in value associated 

with the actual tariff structure as well as removing fixed 

billing components. This scale factor was then applied 

to the remaining utilities in each state. 
National Renewable Energy Laboratory Innovation for Our Energy Future

Incentives

• 30% Federal Investment Tax Credit (ITC)

• State, local, and utility incentives were derived from the 

DSIRE database representing incentives that were 

applicable as of May 21, 2009. 

• Tax credits were applied at the end of year 1 in the NPC 

calculation.

• Exemption from sales and property tax. 

• Assumed rebates are paid to the installer, rather than 

the homeowner, which effectively reduces the 

installation price to the homeowner and the basis for the 

federal ITC.
National Renewable Energy Laboratory Innovation for Our Energy Future

Base Case Assumptions

• Home-equity type loan (tax deductible interest)

• 28% marginal federal tax rate

• 20% down payment

• Real interest rate and discount rate of 5%

• 30 year loan term and evaluation period

• 30% federal investment tax credit (ITC)

• Apply existing state, local, and utility incentives

• 0.5% annual electricity price escalation (real)

• Installed cost in 2008 is $8/W

• Inverter replacement at 10 and 20 years

• South facing, 25 tilt PV system with a 77% derate

factor and 0.5% annual degradation in output
National Renewable Energy Laboratory Innovation for Our Energy Future

Outline

• Introduction

• Methodology

• Results: Near-term residential breakeven costs

• Results: Future Market Sensitivities of Breakeven 

Costs (2015)

• Conclusions
National Renewable Energy Laboratory Innovation for Our Energy Future

PV breakeven cost ($/W) in 2008 with base rate structure

• Percentages 

represent portions 

of the load in 

which breakeven 

conditions may 

exist under our 

assumptions.

• 11% of residential 

electricity sales for 

$8/W or more.

• 42% of sales $6/W 

or more.

• 57% of sales $5/W 

or more.
National Renewable Energy Laboratory Innovation for Our Energy Future

PV breakeven cost ($/W) in 2008 with time-of-use rate structure

• Percentages 

represent portions 

of the load in 

which breakeven 

conditions may 

exist under our 

assumptions.

• 19% of residential 

electricity sales 

$8/W or more.

• 45% of sales $6/W 

or more.

• 61% of sales $5/W 

or more.
National Renewable Energy Laboratory Innovation for Our Energy Future

Increase in electricity prices (Cents/kWh) required for $8/W 

breakeven using base rate structure in 2008

• Percentages 

represent portions 

of the load in 

which breakeven 

conditions may 

exist under our 

assumptions.

• 36% of residential 

electricity sales 

with 5 cent 

increase.

• 59% of sales with 

10 cent increase.

• 11% of sales with 

no change.
National Renewable Energy Laboratory Innovation for Our Energy Future

Increase in electricity prices (Cents/kWh) required for $8/W 

breakeven using time-of-use rate structure in 2008

• Percentages 

represent portions 

of the load in 

which breakeven 

conditions may 

exist under our 

assumptions.

• 39% of residential 

electricity sales 

with 5 cent 

increase.

• 63% of sales with 

10 cent increase.

• 19% of sales with 

no change.
National Renewable Energy Laboratory Innovation for Our Energy Future

Breakeven Range and Components by state

• The bars illustrate the 

breakeven value for the 

largest utility in each state 

by major cost component.

• The error bars show the 

variability in breakeven 

across utilities within a 

given state.

• The most attractive 

utilities tend to be 

significantly smaller than 

the largest utility.

• Without incentives or the 

ITC, half of the largest 

utilities in each state have 

a breakeven that is less 

than $2/W.

• “NYC” includes both New 

York City and Long Island, 

and California is split into 

northern and southern 

regions. 0 1 2 3 4 5 6 7 8 9 10

WA

MO

KS

WV

IN

IA

NE

TN

OK

MT

VA

MS

WY

SD

MI

AR

AL

CO

IL

ND

UT

KY

AZ

TX

CT

ID

ME

SC

GA

OR

MN

NM

RI

NC

OH

NV

MD

PA

NJ

VT

LA

DC

FL

NH

WI

DE

MA

NY

CA No

CA So

NYC

HI

Breakeven Price ($/W)

Basic Rate

Time of Use

Tax Deuctible Interest

Federal Tax Credit

Local Incentives
National Renewable Energy Laboratory Innovation for Our Energy Future

Outline

• Introduction

• Methodology

• Results: Near-term residential breakeven costs

• Results: Future Market Sensitivities of Breakeven 

Costs (2015)

• Conclusions
National Renewable Energy Laboratory Innovation for Our Energy Future

Future Base Case and Sensitivities

Base Case Finance Technical Electricity Policy

Low High Low High Low High Low High

Down Payment 20% Base 0%

base

base

base

Fed Tax Bracket 28% 20% 35%

discount rate 5% 7% 4%

Int Rate 5% 7% 4%

Loan Type 30yr home equity 15 yr home base

Eval Period 30 yrs 25yr

Solar Resource 

Location Largest Utility

base

lowest highest

Orientation S - 25deg - fixed Flat base

Derate 82% 82% 86%

O&M Solar Program 

Goals EIA Base

Rate Type Basic

base

base TOU

Electricity Price 

Escalation 0.5% per year 0% 1.5%

Electric Cost Location Largest Utility lowest highest

CO2 cost $25/ton base 0 $50/ton

Incentives Federal ITC 0 Base

Net Metering Full Retail Net 

Metering

avoided 

cost base Base

• We evaluated the sensitivity of breakeven cost in 2015 to four major 

drivers: technical performance, financing parameters, electricity prices 

and rates, and policies.
National Renewable Energy Laboratory Innovation for Our Energy Future

PV breakeven cost ($/W) in 2015 with base rate structure

• Percentages 

represent portions 

of the load in 

which breakeven 

conditions may 

exist under our 

assumptions.

• 23% of residential 

electricity sales 

$5/W or more.

• 43% of sales $4/W 

or more.

• 85% of sales $3/W 

or more.
National Renewable Energy Laboratory Innovation for Our Energy Future

PV breakeven cost ($/W) in 2015 with time-of-use rate structure

• Percentages 

represent portions 

of the load in 

which breakeven 

conditions may 

exist under our 

assumptions.

• 47% of residential 

electricity sales 

$5/W or more.

• 75% of sales $4/W 

or more.

• 91% of sales $3/W 

or more.
National Renewable Energy Laboratory Innovation for Our Energy Future

Increase in electricity prices (Cents/kWh) required for $3.5/W 

breakeven using base rate structure in 2015

• Percentages 

represent portions 

of the load in 

which breakeven 

conditions may 

exist under our 

assumptions.

• 97% of residential 

electricity sales 

with 5 cent 

increase.

• 67% of sales with 

no change.
National Renewable Energy Laboratory Innovation for Our Energy Future

Increase in electricity prices (Cents/kWh) required for $3.5/W 

breakeven using time-of-use rate structure in 2015

• Percentages 

represent portions 

of the load in 

which breakeven 

conditions may 

exist under our 

assumptions.

• 98% of residential 

electricity sales 

with 5 cent 

increase.

• 88% of sales with 

no change.
National Renewable Energy Laboratory Innovation for Our Energy Future

Range of PV breakeven costs in 2015 scenarios: Top 26 regions

• The grey bars illustrate the 

breakeven value for the 

largest utility in each state, 

• The error bars show the 

sensitivity of breakeven to the 

four major drivers.

• Electricity price is the biggest 

driver of breakeven cost, 

followed by finance factors, 

policy issues, and technical 

performance.

• Excluding HI, the breakeven 

range is between $1.6/W and 

$6.2/W.

• “NYC” includes both New 

York City and Long Island, 

and California is split into 

northern and southern 

regions.

0 1 2 3 4 5 6 7 8

HI

NYC

TX

CT

DC

CA So

CA No

MA

NV

NJ

AZ

DE

CO

ME

NH

NY

LA

NM

MD

AL

RI

WI

MI

FL

OH

MS

Breakeven Price ($/W)

Finance Technical Electric Policy
National Renewable Energy Laboratory Innovation for Our Energy Future

PV breakeven costs in 2015 scenarios: Bottom 26 regions

• The grey bars illustrate the 

breakeven value for the 

largest utility in each state, 

• The error bars show the 

sensitivity of breakeven to the 

four major drivers.

• Electricity price is the biggest 

driver of breakeven cost, 

followed by finance factors, 

policy issues, and technical 

performance.

• Excluding HI, the breakeven 

range is between $1.6/W and 

$6.2/W.

• “NYC” includes both New 

York City and Long Island, 

and California is split into 

northern and southern 

regions.

0 1 2 3 4 5 6 7 8

NC

IL

VA

MT

AR

OK

SC

TN

VT

GA

IA

UT

WY

IN

PA

NE

MN

ND

SD

KS

MO

KY

WV

OR

WA

ID

Breakeven Price ($/W)

Finance Technical Electric Policy
National Renewable Energy Laboratory Innovation for Our Energy Future

Outline

• Introduction

• Methodology

• Results: Near-term residential breakeven costs

• Results: Future Market Sensitivities of Breakeven 

Costs (2015)

• Conclusions
National Renewable Energy Laboratory Innovation for Our Energy Future

Conclusions

• The most important drivers of the breakeven cost of PV 

are non-technical factors, including the cost of 

electricity, the rate structure, and the availability of 

system financing, as opposed to technical parameters 

such as solar resource or orientation.

• Currently, the break-even cost of PV in the United 

States varies by more than a factor of 10 (from less 

than $1/Watt to over $10/Watt) despite a much smaller 

variation in solar resource. 

• Breakeven conditions are currently observed in the 

Southwest where they are driven by resource 

availability and in the Northeast where they are driven 

by high electricity prices.

• Breakeven conditions will begin to occur in the 

Southeast and Midwest as PV prices decline.