August 15, 2009
Steep Price Drops For Solar Photovoltaics

The price drops in PV were so long in coming a lot of commenters on past posts on solar cells expressed skepticism that solar would ever become cheap. But big production capacity expansions, technological advances (most notably by First Solar) that cut costs, and the recession have finally popped the high prices for PV. Over about the last 15 months photovoltaic panel prices have dropped 40%.

For manufacturers, the problem boils down to a sharp drop in panel prices amid increased supply and tighter demand. Panel prices have fallen by nearly 40 percent from their peak last spring, estimates Chris Whitman, the president of U.S. Solar Finance, which helps arrange bank financing for solar projects.

Overcapacity could lead to a shake-out in the industry. Some companies are shutting down manufacturing lines whose costs are too high.

A decline in silicon crystal prices have made silicon PV a lot cheaper to make.

After scaling up rapidly in response to strong demand during 2007 and early 2008, falling demand has seen the solar market hit by a glut of silicon, the raw material used in most panels, and solar panels themselves. As a result, silicon prices have dropped by as much as 40 per cent in the past year, while panel prices have fallen by about 20 per cent, making many older production lines unviable.

The party for buyers looks set to continue. Barclays Capital analyst Vishal Shah expects more big price drops in 2010.

“Given the overly optimistic demand outlook of most Chinese solar players and expectations of continued production ramps, we see additional downside risk to module pricing exiting 2009,” he adds. “More importantly, we expect 2010 module ASPs to decline by 25%-30%.”

These rapid price declines are a reason to wait before putting PV on your roof. Even if you live in Phoenix or Tucson Arizona you are better off waiting another year. The amount you'll have on electricity in a year if you install PV is less than you'll have by waiting for cheaper prices. Wait for the price drops to slow up before buying. You basically should wait until yearly price drops to become smaller than your yearly expected savings.

One analyst expects solar to become grid competitive by 2010. Perhaps that is true in the summer in SoCal because of the high cost (at least by American standards) of electricity.

In an Aug. 13 research note, UBS (UBS) analyst Robin Cheng said she expects photovoltaic electricity to be competitive with power from the grid by 2010 in those parts of Europe and the U.S. that get more regular sunshine, and by 2014 in regions that experience more cloud cover. "Until then, the industry is heavily dependent on government incentives," she writes.

Differences in local electric rates as well as differences in insolation (the amount of photons hitting the surface) are just two of the factors that determine whether solar power makes sense where you live. Here's a list of things to keep in mind when trying to decide on PV for your home roof:

  • Current electric prices from your local utility.
  • Expected future electric prices including possible future dynamic pricing (which would make solar more attractive).
  • Insolation by time of year at your location.
  • Local utility regs on utility prices paid (if any) on surplus PV when you aren't using it.
  • Your pattern of demand by time of year. If you use a lot of summer A/C you'll save more from solar than if you spend most on electricity in winter.
  • State and federal tax credits.
  • Your cost of capital. What interest rate will you pay on the money you use to install solar?
  • Current cost of the solar install.
  • Future expected prices for solar. Do not buy right before big price drops. The avoided electric bills will amount to less than the money saved by waiting.
Share |      Randall Parker, 2009 August 15 11:45 AM  Energy Solar


Comments
Nick G said at August 15, 2009 12:35 PM:

possible future dynamic pricing

I think that all utilities should have dynamic pricing available for the asking. Typically it's designed so that the average consumer will see the same bill as they did previously on flat pricing, which means that they have opportunities to save by shifting their consumption to the night and reducing daytime consumption.

So, request dynamic pricing, shift the easy things to the night (like dish and clothes washing), and then buy a PV system sized to take care of the remaining daytime consumption (maybe larger, if you can get net-metering).

Randall - have you checked into dynamic pricing for yourself?

David Govett said at August 15, 2009 3:30 PM:

Why have we witnessed precipitous drops in PVs for decades, yet they never become economically viable? It makes one cynical about the whole field.

Randall Parker said at August 15, 2009 3:58 PM:

David Govett,

Cynicism is no substitute for reason.

PV started at a very high price.

PV did not drop much in the last 10 years. Government subsidies pushed up demand so fast that prices stayed high.

Nick G,

Does SoCalEd provide a dynamic pricing option?

I only spend about $25-30 per month on electricity. I do not expect to save much in any case.

odograph said at August 15, 2009 7:26 PM:

Well, I've been commenting that end-user $/watt had not been dropping much in the last years (after steep declines) 20 or 30 years ago.

I understood that part of that was just high demand around the world, allowing vendors to charge $$ even if their processes were improving.

I certainly understand now that those new processes, combined with a once in a century (we hope) building slump, would produce the opposite effect.

Just curious though, what are the $/watt? Solar Buzz is showing about a 10% decline so far:

http://www.solarbuzz.com/Moduleprices.htm

John Moore said at August 15, 2009 11:31 PM:

Per that link, the cost of the solar cells is around 50% of the total cost. That means that additional decreases in module cost will have proportionately less impact on overall system cost.

Looking at a cost of $4.40/watt for the solar cells, this implies an additional system cost of another $4/watt or so.

That means that a current cost is around (roughly) $8/watt, and if the price of silicon goes all the way to zero, the install cost only drops 50%.

Hence we are looking at installed costs of $5/watt in the best case (unless there is something to cause the rest of the install cost to go down dramatically).

So does anyone have an estimate on total system cost per KWH? That's the really significant figure.

Randall Parker said at August 16, 2009 11:52 AM:

John Moore,

2 points about non-module costs:

1) I've read Grid Tie Inverter prices have dropped. I do not know by how much.

2) Installation costs will eventually be much lower when PV becomes the surface roofing material. Why pay for tiles and PV? Also, labor costs for putting in a new roof when an old roof needs replacement could cover some of the PV installation costs.

odograph,

The solarbuzz.com numbers seem too high for recent months. You can tell from what the PV makers are saying that they've suffered big declines in module prices.

Engineer-Poet said at August 17, 2009 8:59 AM:

NB:  there are few differences between small grid-tie inverters and computer power supplies.  In volume, we can expect the per-watt prices of these to converge.  Those prices are what, about 10¢/W for power supplies?  You'd need 3-4 panels to supply the power for one inverter but that's not a big deal.

Nick G said at August 17, 2009 11:21 AM:

Randall,

Tiles are useful for residential applications. OTOH, 85% of California PV installations (by KW) are on industrial/commercial flat roofs.

Once panel/module prices fall, and panel supply is no longer the bottleneck, installation costs become the focus. My impression is that I/C installation costs are falling fairly quickly, and that overall system costs are substantially (at least 1/3)lower than residential.

Nick G said at August 17, 2009 3:57 PM:

Randall,

Does SoCalEd provide a dynamic pricing option?

It looks like it does. I think this introduction is the correct thing: http://www.sce.com/b-db/services/meter/interval-meters/basic-I.htm

SCE is rolling them out to everybody: http://cleantech.com/news/3484/utility-commission-approves-16b-smart-metering-program

Baltimore Gas & Electric (BG&E) have both filed for cost recovery for two-way meters. SCE was approved to spend $1.6 billion to install 5.3 million meters, or $300 per meter. BG&E has requested $500 million to install 2 million new electric and gas meters, about $240 per meter.

Post a comment
Comments:
Name (not anon or anonymous):
Email Address:
URL:
Remember info?

                       
Go Read More Posts On FuturePundit
Site Traffic Info
The contents of this site are copyright ©