The cost of solar and wind power installations should be dropping sharply in 2010. Solar prices are supposed to fall by half.

That’s the encouraging prediction in a report from renewable energy consultants, New Energy Finance.

The firm predicts that the cost of solar power will be 50% cheaper in 2010 than it was in 2008, while wind power projects will fall by up to 20%  — based on the lifetime cost of a kilowatt produced by these clean, renewable energy sources.

Solar projects will be much more affordable, the research firm predicts, because of the steady decline in the cost of equipment. Also driving capital investment costs down is the falling price for financing, according to a statement by New Energy chairman Michael Liebreich.

The cheapest solar technology is a thin-film system, which is expected to produce electricity as cheap as $3 per watt of installed capacity.

While the New Energy report focuses on major capital investments, other technological breakthroughs are expected next year to bring cheap solar within the reach of the average Joe business owner and homeowners.

Dow Chemical says it will introduce a new solar panel next year that will be as easy to install as everyday asphalt roofing shingles. Dow says it has developed a low-cost production technique to make solar power available by mid-2010. The company hasn’t announced pricing just yet of its Powerhouse™ Solar Shingles, but some expect the panels to be up to 40% cheaper than some rigid solar panel arrays.

While prices for wind energy technology are also falling, the report notes that the overall cost of these projects will be offset by huge construction costs as energy developers try to build offshore wind power installations.

The cost-advantages of opting for a geothermal energy project won’t match the sustained declines in costs for solar and wind technology. The problem is that geothermal drilling costs, which have fallen by up to 50% due to the recession, will rebound when worldwide demand for oil and natural gas production picks up.

Tags: Dow Chemical, Dow Chemical Co., geothermal, New Energy Finance, Powerhouse Solar Shingles, renewable energy, solar power, wind power