This report examines the sensitivity of projected 1990 photovoltaic (PV) system costs to major system cost drivers, including: (1) module costs and module efficiencies; (2) area-related balance-of-system (BOS) costs; (3) inverter costs and efficiencies; and (4) module marketing and distribution markups and system integration fees. The report reviews recent PV system cost experiences, illustrating he high costs of electricity from the systems. Based on a review of selected PV engineering literature, 1990 system costs are then projected for five classes of PV systems, including four ground-mounted 5-MW/sub p/ systems and one residential 5-kW/sub p/ system. System cost projections are derived by first projecting costs and efficiencies for all subsystems and components. Sensitivity analyses reveal that reductions in module cost (including marketing markups) and engineering and system integration fees seem to have the greatest potential for contributing to system cost reduction. Although module cost is clearly the prime candidate for fruitful PV research and development activities, engineering and system integration fees seem to be more amenable to reduction through appropriate choice of system size and market strategy. Inverter costs are not as significant to total system costs as are other cost categories. But increases in inverter as well as module efficiencymore » yield significant benefits, especially for systems with high area-related costs. « less