May 22, 2008
Solar Photovoltaics Competitive By 2015?

Neodymics inventor Jeff Radtke brings to my attention a claim that there are Moore's Law-like effects happening with photovoltaics prices that will make PV competitive by 2015.

In recent years, global PV production has been increasing at a rate of 50 percent per year, so that accumulated global capacity doubles about every 18 months. The PV Moore’s law states that with every doubling of capacity, PV costs come down by 20 percent. In 2004, installing PV cost about $7 per watt, compared to $1/W for wind, which at that time was beginning to stand on its own feet commercially, Last, year, as recently noted in this blog, average global solar costs had come down to between $4 and $5 per watt, right in line with the PV Moore’s law. Extrapolate those gains out six or seven years, and PV costs will be below $2/W, making photovolatics competitive with 2004 wind.

You can find more details on this argument here. But note that in 2004, 2005, and 2006 PV prices rose in the graph at that link. This is consistent with what I've seen with other sources of PV prices. Government incentives have driven up PV demand so quickly that prices have not fallen. Therefore the cost trend in recent years is hidden by high demand. We need to wait for supply to catch up to demand in order to find out how much costs have dropped in recent years. For example, the US government's Energy Information Administration shows substantial increases in PV module prices from 2005 to 2006.

Rapidly rising demand is likely hiding the effects of production cost declines. So we should see a big cut in PV prices once production capacity starts to catch up with demand. In places with especially high electric costs such and lots of insolation (e.g. SoCal, Italy, Hawaii, Japan) grid parity will come years sooner.

A recent financial report by PV maker Solarfun provides a small window into PV pricing. Solarfun reports PV prices in the first quarter 2008 were higher than in 2007. This is not a sign of declining costs.

. In the recent quarter, Solarfun’s net PV module shipments were 40.3 megawatts at $4.07 per watt, compared to shipments of 6.5 megawatts at $3.77 per watt last year.

Selling prices were particularly strong in Spain and Germany, and the company benefited from a strong euro in the quarter. Solarfun reported that 46.0% of its revenues were generated from Spain, followed by 36.0% in Germany. France accounted for 8.0%, Italy for 6.0% and Switzerland for 4%.

You can find reports about imminent $1/watt PV manufacturing costs. But with prices still running 4 times as high I feel like I'm still waiting for Godot.

Share |      Randall Parker, 2008 May 22 11:46 PM  Energy Solar

Wolf-Dog said at May 23, 2008 4:40 AM:

OK, once the solar energy is competitive with wind and coal, and once batteries are ready within a few years, electric cars will rule the world. At least that's what I thought... But the problem is that according to some people, although batteries will be ready, things like lithium, zinc, etc will become very expensive and there will be shortage of such metals, meaning that there might be an increase in the price of batteries, even if the technology and manufacturing costs improve for batteries. Any comments? I would like to know what you think about the effect of shortage of lithium and zinc, for the batteries (Assuming that there will be more than a billion cars in the world.)

Allan said at May 23, 2008 5:34 AM:

Randall - I know how you feel. It always seems like cheap solar is "just around the corner". But right now it is following the law of supply and demand. Demand is up and until the supply catches up then prices will remain higher than they would probably be otherwise. Let's see how long this "spike" lasts.

Wolf-dog - I feel the same way about "cheap" batteries for electric cars. Always a little progress and we're allllllmost there. Yea, I know that Tesla Motors has a nice all electric car but the avg joe can't afford it.

But I'm an optimist ... I think Godot will arrive ... sometime ...

jb said at May 23, 2008 7:00 AM:

If demand is high and prices are high, it will attract new entrants. Who, over a fairly short time, will drive the price down as the supply exceeds the demand.

If lithium for batteries becomes prohibitively expensive, other battery technologies will be examined and used.

In any case, even if electric cars are twice the cost of the equivalent gas car, high oil prices make those switches economically cost effective for some people.

Over time, we'll see all sorts of cycles - as people buy more electric cars because of high gas prices, the demand for gas will fall. This will lower the price of gas, and make gas cars more attractive. Which will increase the demand for gas, and cause the price to rise.

The intricate dance of pricing between gas cars, electric cars and substitute goods (trains, bikes, telecommuting, etc) will be fascinating to watch.

Oh, and Godot has already arrived, and is shipping in multiple forms. ( Sorry you missed him. Ugly as hell, I agree, but still,In stock now at dealers across the US.

Perhaps you feel that price/performance is lacking, in which case might I suggest a hybrid? You have all sorts of options.

lorne said at May 23, 2008 8:44 AM:

The relative shortage of rare earth elements needed to make batteries and electric motors is another factor that will have to be dealt with. Right now the only country mining REEs is China. New mines are coming online in Canada, the US and Australia but are still years away from production. This means for at least the near future the rate some of this technology will proliferate will depend on whether China is willing to export commodities and not finished product.

Tom said at May 23, 2008 9:58 AM:

Still waiting for Godot - a 40 MPH electric with a 25 mile range isn't going to do it for me, as I commute 30 miles on a highway.

Allan said at May 23, 2008 5:20 PM:

Tom --- I'm with you. With a useful load of 303 lbs ... the Zebra doesn't even have the weight capacity for me and my gf! And I'm not sure what "opportunity charging" is. I wonder if it comes with a flexible solar cells to charge it while it's parked. I don't have an extension cord long enough to go from the parking lot the office building!

I'll wait the for plug-in hybrid.

Fat Man said at May 23, 2008 8:27 PM:

I continue to maintain that single watt pricing for PV modules is misleading. Until you account for storage costs, or admit that PV will never be more than a bit player in the energy ecosystem, you will not have a true picture of the cost of energy.

The same goes for electric cars. Until, such time, if ever, as batteries improve in storage capacity by an order of magnitude electric cars cannot be more than urban runabouts. They might find a commercial niche if oil continues to soar in price, but the majority of consumers will continue to own and use hydrocarbon fueled vehicles. I count PHEVs as hydrocarbon fueled vehicles with a plug in range extender. I doubt that in the real world (oh, by the way, honey, can you pick Emily up at the gym on your way home) they will get more than a 10-20% range boost from plug in.

Allan said at May 23, 2008 9:29 PM:

Fat Man - I don't think plugging in a PHEV will give a range boost as far as the range of the battery before a recharge but it could significantly reduce gasoline or diesel used to charge the batteries. Most of my driving is short ranged. I could use that Zebra thingy for my work commute without the "opportunity charge". If I had a PHEV, I could go quite a while before the engine would need to kick in to charge my battery because I would be charging it at home. Anyway, it's a step in the right direction for electric vehicles. Of course, if I had $109,000 in chump change, I could get a sporty electric vehicle that goes 220 miles without a recharge

As for PV in the home, you can either have a grid tied system ... in which you don't need the batteries ... or a totally off-grid system with batteries ... or a combo, tied to the grid but with batteries as a supplement or backup in case of power failure. My friend has a totally modern (just built) off grid house (no electricity available). She has 6 200-watt panels and a 400-watt wind turbine charging 16 6-volt deep cycle batteries (48 volt system) with a propane generator as a backup or supplement when she needs to run the air conditioning. The 16 batteries were just under $2,000. It pays to shop around and buy the stuff for the contractor. If you let the contractor buy it, the price can and often does double.

Lorne said at May 24, 2008 10:35 AM:

While solar photovoltaics are still expensive solar energy can still have a major impact on total home energy bills very cost effectively by using passive solar heating for household hot water, swimming pools and hot tubs every where and also make a big dint in home heating costs in parts of the plains and other areas that get a lot of sunshine. Look at how much energy you use in your hot water heater and you'll be shocked.

There are all kinds of ways homes can save energy very cost effectively. Low temperature geothermal energy, using geothermal heat pumps, is well known technology that could very affordably be used to heat and air condition almost every home in North America. If you are building a new home or replacing your furnace with a new one I think you are crazy not to look at putting in a geothermal system. It would pay for itself in five years and save you money every year afterwards. It's a shame that building codes didn't encourage developers to lay down geothermal lines with new water and sewer lines in every new subdivision built in Canada and the US. This would drop the price of installing a system to the same initial cost as installing any other furnace or air conditioning system.

The province of Manitoba in central Canada has tons of hydro electricity. There are 100,000 homes in that province that heat with electricity. The province's electrical utility though has a program loaning $18,000 dollars to household heating with electricity, to switch to geothermal. Their reasoning is that if they can get these people to switch they will save the equivalent capacity of electricity that their biggest hydro dam generates. This would then be freed up to be sold in the US midwestern electrical grid at a substantial profit with no risk and no need to go through the environmental studies needed to conduct more hydro dams.

My over all point here is that there are already all kinds of ways you can make a huge impact on your home energy bill using cost effective green technology. COst effective PVs, generating power on every roof top is a nice goal but just because it is too expensive to be seriously considered now doesn't mean there aren't other workable solutions.

K said at May 25, 2008 2:33 AM:

I'm glad to see so many writers aware that high price is a good sign for PV and not bad news. That is what demand does at first. The industry is growing rapidly and major new suppliers are coming online. And it looks like the long dominance of the expensive crystal silicon cell will soon end.

I favor tax credits for home installations. But keep them limited and the building inspections strict. If credits are too generous the homeowner has no stake in the process. Shoddy and/or fraudulent work will result. It is far better that people realize there is a real cost for a real benefit.

Excessive linkage and analysis paralyzes. Solar installations are desirable even if we never own an electric car or a plugin hybrid. And the reverse is true; those vehicles are desirable even if solar progress should prove slow for decades. In reality we will see the vehicles and the solar.

Danface said at May 25, 2008 10:04 AM:

OK, now to change the subject. How about something radical like "MASS TRANSIT". The current claim of "no one wants it" is due the fact that's it's been pretty much neglected and didn't meet the general publics need. Why not fix it? Europe has had high petrol prices for a long time and good mass transit.

Why think any of these emerging technologies will address the problems now?

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