Average installed costs—measured in real 2007 dollars per installed watt—declined from $10.50 per watt in 1998 to $7.60 per watt in 2007, equivalent to an average annual reduction of 30 cents per watt, or 3.5 percent per year in real dollars, according to the Lawrence Berkeley study. The study examined 37,000 grid-connected PV systems installed between 1998 and 2007 in 12 states.

The researchers who conducted the study attribute the decline in the installed cost of solar PV systems mostly to decreases in non-module costs, such as the cost of labor, marketing, overhead, inverters and balance of systems.

"This suggests that state and local PV deployment programs—which likely have a greater impact on non-module costs than on module prices—have been at least somewhat successful in spurring cost reductions," according to a paper by the study's authors, Ryan Wiser, Galen Barbose and Carla Peterman of Lawrence Berkeley's Energy Technologies division.

State and local PV deployment policies have achieved some success in fostering competition within the industry and in spurring improvements in the cost structure and efficiency of the delivery infrastructure for solar power, according to an analysis of cost trends revealed in the study.

Cost reduction over time was largest for smaller PV systems, such as those used to power individual households, according to the results of the study. Installed costs also show significant economies of scale, the study found.

Installed costs were also found to vary widely across states. Among systems completed in 2006 or 2007 and less than 10 kilowatts, average costs range from a low of $7.60 per watt in Arizona to a high of $10.60 per watt in Maryland, the study found. Based on the data and installed cost data from the sizable Japanese and German PV markets, the authors of the study believe that PV costs can be driven lower through sizable deployment programs.