November 05, 2008
Big Solar Energy Price Declines Expected
Tired of waiting for solar photovoltaics costs to finally drop? Looks like the wait is almost up. Average Selling Prices (ASPs) of solar photovoltaic modules are expected to decline 20% in 2009 and 25% in 2010.
After subsidies, Plan B for module makers is to sell products at a discount to keep inventory moving. It helps that manufacturing costs continue to decline about 10% each year, thanks to design improvements and benefits of scale. But it seems a little coincidental that most solar companies happened to predict the ASP for their products will decline at the exact same rate.
Analysts from Deutsche Bank (nyse: DB - news - people ), UBS (nyse: UBS - news - people ), Hapoalim Securities and Goldman Sachs all reached a different consensus, namely that ASPs will need to decline closer to 20% in 2009 to absorb excess inventory, and as much as 25% the following year.
The credit crunch is cutting demand for solar power.
Commerzbank said the impact of tougher financing conditions would affect returns seven times more than would module prices. It puts next year's financing needs for global photovoltaic projects at 33 billion euros, of which 20 billion would need debt financing.
But all indications pointed to a near halt in debt financing for large-scale solar power parks outside Germany, Commerzbank added, which would last until at least the second quarter of 2009.
The credit crunch will also cause delays and cancellations of new solar photovoltaic manufacturing plants. That will tend to boost prices by reducing future supply.
First Solar and some of the PV manufacturers are claiming costs much lower than current prices. As production capacity expands the prices should drop down closer to manufacturing costs.
Doesn't matter a bit. Until large scale power storage comes along solar is more of a liability than an asset. Talk to any power utility engineer. Stop the fantasy thinking. Al Gore can get rich thinking that way, but it's the quickest path to Zimbabwe.
Who could believe such a thing?
Demand curve proves it.
Solar's production follows the daily demand curve pretty well. Besides, there's lots of storage potential right now in the major electricity-hogs, such as air conditioning. You can spend your surplus power making ice, and run off the ice during the dark hours. Using mechanisms such as ice storage also allows the grid to be regulated by controlling the demand, so the cost of power goes down as the most expensive generators get used less.
Changes coming in transportation such as PHEV's and BEV's will change things even more in solar's favor, as they'll be perfectly suited to absorb surpluses.
In Michigan, by the time I had to leave for a new job, off peak electrical resistance heating was cost competitive with propane, and storage was as simple as having a pile of bricks in the basement that you heated when electricity was cheap, and blew air through when the house was cold. So if solar becomes as cheap as off peak electricity at ANY time of the day, it becomes more affordable for home heating than the fuel most of us in rural areas pay through the nose for.
The main thing is, we need to get a lot more people on time of day pricing, so that they'll move their demand to when the excess capacity is available.
The wholesale price of electricity varies by multiples. Solar PV just has to be cheaper on average than the price of electricity when the sun shines in order for PV to compete.
Right you are. More dynamic pricing will make solar competitive sooner. Yes, solar will compete for space heating as you point out. Intermittently available electricity has many more uses than it is used for today. Make it cheap enough and lots of uses for it will be found.