PV cheaper than reported

At a time when share prices have been taking a dive and many photovoltaic companies are winding back capacity and shedding staff, good news on the state of the industry feels outweighed by bad. However, a new study shows that there is reason to hope in that falling module, and balance of system, prices mean that grid parity can be said to have occurred in many parts of the world.

The paper was called: "A review of solar photovoltaic levelized cost of electricity", and was published in the journal Renewable and Sustainable Energy Review, earlier this month.

One of the researchers behind the study, Joshua Pearce from Michigan Tech, told pv magazine that most of the previous analysis as to the cost of photovoltaic electricity (LCOE), was incorrect and the resulting photovoltaic LCOE too high. Pearce said that one of the key findings was that there was not a clear, standard and transparent set of assumptions, which give the LCOE, across much of the research.

"Some of the other papers, and we studied more than 120 papers, didn’t even state what there assumptions are. As our paper shows, those assumptions can greatly vary the LCOE amount you end up with."

Why PV is so much cheaper than first thought

Pearce said that there are three major and decisive discrepancies between past photovoltaic LCOE calculations and he and his co-author’s calculations. The first was the cost of modules. Some papers using module costs averaged them over time, so were way too high. "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."

The second factor is the lifetime of modules assumed in many LCOE models. Pearce says that with recent improvements in technology, an assumption of a 20-year lifetime is way too short. "There is no way we should be assuming anything short of 30 years. These are solid state devices, there are no moving parts." Pearce says that backsheet technology improvements in particular have extended module lifetimes.

The degradation rates assumed in many studies, is the third factor that this recent paper departs from previous LCOE assumptions. "Studies in the past have used degradation rates of five percent a year, two percent or one percent, but the latest studies on standard modules, which are crystalline and polysilicon silicon, those numbers should be closer to 0.1 or 0.2 percent."

The result of these assumptions to calculate today’s costs, argued Pearce, is that you get a much lower LCOE than all of the previous papers in the field. "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!"

Financing the key

Pearce continued that financing costs are also a major factor for LCOE and, he believes, calculations like his could help lead to cheaper loans. "One of the most important things I hopes come out of this study is that it makes bankers more comfortable with investing in long-term capital assets like solar modules."

Germany’s lower photovoltaic LCOE is evidence the effect more affordable financing can have. The country’s long history in photovoltaics no doubt assist with banks confidence with investing in projects. "The Germans get it," Pearce concluded.

The January edition of pv magazine has a feature article on grid parity and its consequences for the photovoltaic industry.