ABSTRACTIt is essential to have a complete system overview to optimize photovoltaic (PV) power plants and minimize balance of system (BoS) costs. The described approach leads to a competitive system solution with lower levelized cost of energy (LCoE). Recently, BoS costs have become more important due to rapidly decreasing PV module prices. Improvements for mechanical and electrical BoS costs are validated and benchmarked for PV technologies on a (sub) system level. An example of 30% BoS cost reduction for TF‐Si based on a low voltage design, TL inverter, and a new module mounting interface is investigated among others. The BoS cost fractions are expected to fall to 55% (TF‐Si) and 60% (c‐Si) for ground mounted systems between 2010 and 2016 (including efficiency increase). The annual reduction of BoS costs is expected to be in the range of 8–9.5%. System costs for ground mounted system and commercial roof top plants in Europe and Asia are discussed. In Europe, the system costs dropped from 2.35€/Wp in 2010 to 1.00€/Wp in 2016. LCoE reductions based on sub‐BoS optimizations are investigated. Industrial grid parity is expected in 2012 in Italy (with system costs of 1.34€/Wp) and 2016 for Germany (system cost 1.07€/Wp). BoS costs reductions needed for an LCoE of 0.084€/kWh (25% below industrial electricity cost, 2016) and the gas parity level (0.064 €/kWh in 2016) are explored. Evolutionary and revolutionary BoS approaches and cost reductions are discussed to meet these targets. Copyright © 2013 John Wiley & Sons, Ltd.