PV is too expensive
Late last year, Reuters reported that solar PV, "is up to eight times more expensive than conventional forms of power like coal and gas." However, the reality just doesn’t stack up to the rhetoric. The cost of PV has fallen fast and is becoming cheaper by the day.
PV module prices themselves are a good example. Since 2007, it can confidently be said that module prices have more than halved, for every type of semiconductor technology and for manufacturers from all over the world. While that’s less than ideal for the manufacturers themselves, and recent financial losses and bankruptcies have become all too common within the industry, it’s great news for consumers interested in investing in solar. But where do the false figures come from?
A study from late last year, by Queen’s University and Michigan Technological University, showed that the cost of solar power – the levelized cost of electricity or LCOE is often vastly inflated in public reports and academic papers. Of the 120 papers reviewed in the research, many didn’t state the assumptions underpinning their LCOE calculations, while others averaged the cost of modules over time to get the LCOE for PV. As Michigan Tech’s Joshua Pearce told pv magazine, "The problem is that the cost of panels has been dropping so rapidly, that the cost over the last five years is completely immaterial to anything that you would be doing today."
Other factors influencing the over-reported cost of PV were underestimated lifetime assumptions for PV and temperature degradation rates, which were overstated. Pearce concluded, "There are some funny papers in there, where people are predicting we wouldn’t be able to get to sales of photovoltaic panels of under a dollar-per-watt until 2035!"
Driving down the cost of PV has been achieved through a variety of combined factors, including: economies of scale for modules, inverters and mounting systems; robust international competition; and the use of lower-cost manufacturing locations for modules. Polysilicon prices have also been falling fast. IHS iSuppli predicts that polysilicon prices will fall to US$22 per kilogram by the end of the year, which is allowing c-Si manufacturers to dramatically drive down costs.
Former material shortages also appear to be a thing of the past. Solar silicon supply, once a bottleneck and impediment to price declines, is at record highs. Production increased 30 percent in 2011, according to data from the Macquarie Group and producers keep expanding production further. Matthias Fawer from Bank Sarasin describes it as both "contradictory and incomprehensible", but it’s a great thing for the price of PV.
Another major cost reduction has come from decreased financing costs – as lenders become more familiar with solar technology and develop specialized financing instruments. Confidence in PV technology has also increased, thereby decreasing perceived risk, as the reliability of solar installations has been proven over the years. This is one of the reasons why the installed cost of PV in Germany is so much lower than in countries where solar is in its infancy.
To illustrate how costs can be driven down as economies of scale form, in November 2011 the cost of PV per installed watt in Germany was US$2.80. While in the U.S., a relative newcomer, it was US$5.20.
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