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Published on May 26th, 2013 | by Guest Contributor

16

Solar PV Costs Will Fall By Half By 2020, But Prices Won’t



This post first appeared on RenewEconomy

Australian solar pioneer Stuart Wenham predicts that the cost of making solar PV modules will fall another 50 per cent at least by 2020 – even after the 80 per cent fall in the last few years, although consumer prices may not fall as much.

Wenham, who is the head of the ARC Centre of Excellence in Advanced Silicon Photovoltaics at the University of New South Wales, and is also  the chief technology officer of Suntech, says advances in efficiency, manufacturing and materials will lead the drive to lower costs – but prices would not fall as much because the major players needed to recover their margins.

Even so, a fall in costs of such magnitute highlights the enormous potential of solar PV in the modern electricity grid. Wenham noted that rooftop solar had already reached grid parity in more than 100 countries, and was approaching parity at a wholesale level in competition with fossil fuels such as coal and gas.

The levellised coat of rooftop solar is estimated at around 13c/kWh in Australia – some say it is already less – so a further fall of near 50 per cent will make it a compelling product for households and businesses looking to reduce the exposure to the high cost of grid infrastructure. At those prices, it will also be well below the cost of new coal and gas, and even match prevailing wholesale prices, causing a radical remodeling of the grid.

Wenham used two interesting graphs to illustrate his point. The first is the assumed fall in costs over the next 8 years. “Solar has always been thought of as costly. That is no longer true,” he said during a presentation at the Solar 2013 conference in Melbourne.

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(This and the other graphs are sourced from the International Technology Roadmap for Solar PV).

The second indicates why consumer price falls will not match the scope of those cost reduction because the market needs to be rebalanced. As this graph below illustrates, the relationship between price and market size has gotten out of sync in recent years – mostly because of the increase in capacity encouraged by various subsidies and incentives – and this would need to be redressed for the major solar manufacturers to continue to operate.

Screen-Shot-2013-05-23-at-5.09.16-PM

“Prices have fallen further than is sustainable in the short term,” he said. “Now we are seeing the start of the next cycle as demand picks up. I don’t think prices will go up in any significant way – it’s just that prices will stabilize.  Most big manufacturers are able to bring costs down, increase efficiency etc. These companies will be OK if prices stop falling for a bit.”

Wenham made some other interesting points in his presentation.

  • He predicted that rooftop solar PV systems would evolve significantly over the next five years – driven by time of use pricing that is already charging 57c/kWh or more for afternoon peaks, and the advent of cost competitive battery storage, He said houses with solar will look more like remote area power supplies, with the ability to store large amounts of electricity.
  • He noted that most jobs in the solar industry go to local companies, where the modules are installed, rather than the manufacturers, most of whom are based overseas, and most of these in China. Wenham says module manufacturing only accounts for around 20 per cent of jobs, because the rest (80 per cent) are generated in installation, maintenance, and ancilliary products such as racking.
  • The industry needed a stably political climate to enable this downstream industry to grow. “That’s where the jobs are.” He noted that restrictions were now being put into place on rooftop solar in the form of tariff changes and connection rules. He had sought to put a second array on his own home but had been denied permission. (But being a solar expert he is now looking at a system that will use battery storage to take his house effectively off-grid between 2pm and 8pm).
  • The cost of solar cells is only around 10 per cent of the final cost because of the sharp slump in polysilicon and wafer costs. (See graph below). He said the crucial equation was the cost of the overall module and what he called “encapsulation”, which is the quality that goes into ensuring that the module is reliable and durable, and can meet the 25-year life span. (The conference heard elsewhere that many buyers attracted by cheap panels were being let down by poor quality).
  • Australia continues to lead the world in solar R&D and development. It has held most of the record in high efficiency cells in the last 25 years, and half of the new solar PV technologies that have been brought to market in recent years have orginated in Australian research institutions such as UNSW.

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is many, many people all at once. In other words, we publish a number of guest posts from experts in a large variety of fields. This is our contributor account for those special people. :D



  • mds

    Since I’m finding the time to yammer a lot here, I have to ask a question:
    Mr. Parkinson (or maybe Mr. Brakels), you’re Australian. How is it that a coal exporting country like Australia has end-of-grid electricity prices as high as 27c/kWh, more than twice the national average of 12c/kWh here in the USA? Is the grid that much more expensive to maintain? Are we spoiled by
    government subsidized electricity? …or are your utilities taking advantage of you already?

    • kEiThZ

      Probably peak rates…

    • Bob_Wallace

      According to Wiki, AU electricity prices in August 2012 ranged from 22 to 46.56 cents/kWh.

      (BTW, their carbon price accounted for about 2c of that total.)

      This is what the Australian government states…

      “Historically, Australia has had stable and competitive electricity prices by
      developed world standards. However, over the pastfour years the cost of electricity for households has risen on average by around 70 per cent nationally.

      This is largely because Australia’s electricity networks -the power poles
      and wires that deliver electricity to homes and businesses – were built 40
      to 50 years ago and need replacing.

      This is an expensive task.

      At the same time we all have more appliances, from air conditioners to laptops and flat screen TVs, putting more demand on the electricity system.”

      http://www.ret.gov.au/Department/Documents/clean-energy-future/ELECTRICITY-PRICES-FACTSHEET.pdf

      It should be recognized that without the large installation of rooftop solar which has caused a great drop in demand AU’s electricity prices would have soared even higher.

  • mds

    “He had sought to put a second array on his own home but had been denied permission. (But being a solar expert he is now looking at a system that will use battery storage to take his house effectively off-grid between 2pm and 8pm).”

    Obviously, solar installers will begin offering storage and disconnection from the grid in the future if necessary to deal with problem utilities. More business for them, less for the utilities. Not a good strategy for the utilities.

    Australian utilities will have to decide if they are going to morph into power storage and redistribution companies, or just go out of business. Most utilities in the world’s sun-belt will face this same choice. Those are going to be their choices as solar PV and soon storage continue to become more cost effective. You can pretty much look at the land line phone companies and transition to cell phones as an example of what is coming in the electrical power market. Some will find it more economical not to have any utility connection, just like we probably all know people who have given up their land line for phone service in favor of cellular only.

    A second theme like the cell phone industry is going to be the increased use of solar power in third world areas that had no electricity before. This has already begun and will expand.

  • mds

    “The levelized cost of rooftop solar is estimated at around 13c/kWh in Australia – some say it is already less – so a further fall of near 50 per cent will make it a compelling product for households and businesses looking to reduce the exposure to the high cost of grid infrastructure.”

    An older link with some anecdotal end-of-grid price information:
    http://cleantechnica.com/2012/11/13/2000-mw-of-solar-reached-in-australia/ “2,000 MW Of Solar Reached In Australia” – November 2012
    Comment from “Ronald Brak”:
    “Point of use solar is currently the cheapest source of electricity available to Australian households. The price of a residential installation is now down to about $2 a watt. Most people who install solar own a roof, which means they can usually borrow money for around 6 or 7%. This means that for most Australians solar electricity costs around 10 or 11 cents a kilowatt-hour. This is less than half the cost of grid electricity which is about 25 cents a kilowatt-hour. Obviously this is a good deal and so solar is really taking off here and I don’t see its expansion stopping any time soon, despite major cuts in feed in tariffs.”
    Comment from “RobS”:
    “Our installed out of pocket costs are now consistently below $2/watt and commonly below $1.50/watt and our electric retail rates are ~27c/Kwh. We are so far past parity it’s funny.”

    It is ALREADY compelling, without a “further fall of near 50 per cent”. Even at “13c/kWh – some say it is already less”, residential end-of-grid solar in Australia is already (Ronald Brakels) “less than half the cost of grid electricity which is about 25 cents a kilowatt-hour” (and RobS says some are 27c/kWh). Half the price of the incumbent is the very definition of a disruptive technology, because it allows for savings even including the financing of the transition, the installation of the new technology. …and the cost of installed solar PV is still falling…

  • Mark W

    Under the new rules power provider have the right to disconnect you from the grid, as bob under lined some of the issue that go wrong with grid solar inverters,, but the power provider have the legal right not to connect you even after you outlaid the money for you grid system. There been cases on the east coast of Australia were the power provider prevented connection because of over voltage to the network, power quality issues from his inverter, it could be the same situation with Wenham.

    It appears power provider had legal grounds to prevent him from installing a bigger grid solar setup, or there are pre-existing problems recorded with his system. (Denied permission) utility companies have obligation under safety act, quality of power which must conform to the legal requirements, Power Act 1960,1980,1990,2005. The operation of equipment must not interfere with other customer’s equipment. Solar generators (grid solar system) must conform to the act, prosecution would occur if found outside the parameters of the Act.

  • mds

    Some really great information here, but the first graph is dated. (Was that
    the point?) It is predicting about a 60%
    drop in panel prices from 2010 to 2020. If you look at the last
    graph, using actual measured data for multi-Si PV, you’ll see a 56% drop from
    Jan 2011 ($1.60/Wp) to Jan 2013 ($0.70/Wp).
    There is a 62% drop from Jan 2010 ($1.85/Wp) to Jan 2013 ($0.70/Wp). So we’ve already done the drop the first
    graph predicts. Current predictions are
    for some stabilization or slight increase in prices, but then they will drop
    some more. They can because
    manufacturing prices are still dropping.

    If PV panel prices “fall another 50 per cent” from $0.70/Wp in Jan 2013,
    that would put us at $0.35/Wp, astounding!
    If you consider German and Australian all-in installed costs for solar
    PV were close to $2/Wp last year when panel prices were close to $1/Wp, then we’re
    talking about fully installed costs at $1.35/Wp or less. That should drop solar electricity prices, at
    end-of-grid, from

    $0.13/kWh to ($1.35 / $2.00) x $0.13/kWh = 0.08775 or about $0.09/kWh …or
    less with lowered install prices into the deal.

    • Bob_Wallace

      First Solar has stated that they expect their production costs to be down to $0.42/W by 2017. I’ve seen people predict $0.25/W by 2020 and no one howl in disbelief.

      Someone (sorry, forget who) linked a current price report for installed solar in Australia. It shows a low price of $1.44/W and an country-wide average of $1.88/W.

      http://www.solarchoice.net.au/blog/solar-pv-price-index-may-2013/

      $1.44/W with 4.5 hours (19% capacity) and 5% financing gets the LCOE down to about $0.07/kWh. Natural gas peakers are in trouble….

      • mds

        Thanks Bob! I should have remembered this from one of your comments earlier. Busy at work and home and hard for me to keep up with wonderfully fast rate of progress. Great link!

        Here’s an older one with some anecdotalend-of-grid price information:
        http://cleantechnica.com/2012/11/13/2000-mw-of-solar-reached-in-australia/ “2,000 MW Of Solar Reached In Australia” – November 2012
        Comment from “Ronald Brak”:
        “Point of use solar is currently the cheapest source of electricity available to Australian households. The price of a residential installation is now down to about $2 a watt. Most people who install solar own a roof, which means they can usually borrow money for around 6 or 7%. This means that for most Australians solar electricity costs around 10 or 11 cents a kilowatt-hour. This is less than half the cost of grid electricity which is about 25 cents a kilowatt-hour. Obviously this is a good deal and so solar is really taking off here and I don’t see its expansion stopping any time soon, despite major cuts in feed in tariffs.”
        Comment from “RobS”:
        “Our installed out of pocket costs are now consistently below $2/watt and commonly below $1.50/watt and our electric retail rates are ~27c/Kwh. We are so far past parity it’s funny.”

        Seems like residential solar in Australia may be like 1/3 or 1/4 of their end-of-grid prices now. Yeh, that’s just a little compelling. I think the author is wrong when he says that it will be compelling in the future. Clearly, it is now. As you now, there are a number of low cost storage technologies coming to the market.
        Australian utilities will have to decide if they are going to morph into power storage and redistribution companies, or just go out of business. I find it amazing consumers are threatened by the utilities. Utilities are supposed to be government regulated businesses, run for the benefit of the people. WE should be revoking THEIR permits, when they fail to consider our interests, not the other way around. Oh well, the tipping point is here and as with all disruptive technologies, it is speeding up as it makes more and more
        economic sense. The madder the Utilities make the people, the worse the counter reaction will be when it comes. At 1/2 the cost they cannot win. At 1/4 the cost…

        Thanks again, mike

  • jburt56

    The fraction of jobs in solar manufacturing will continue to fall due to robotics.

  • UKGary

    One thing missed by the author is that the cost of an installed solar array is only around 1/3 made up of the solar panels themselves – with the rest relating to other hardware such as inverters, racking, cables safety switches, and labour relating to the installation including any costs of permitting, and installer margin on the hardware.

    If the cost of panels were to halve in the next 5 years without other costs dropping, the installed cost would only drop by around 1/6.

    In reality, we might be nearer to a situation where panels only drop slightly in price, There is likely to be a substantial increase in panel efficiency and improved temperature coefficient – with more kWh delivered per kW installed. Balance of system costs per kWh delivered will drop due to less racking, cable and labour per watt, an increase in array size and higher output per kW installed.

  • Tim

    Denied permission
    There is a lot of talk on the subject, but when it comes to installers failing to inform customers about this problem that the network provider is not allowing people to connect due to a number of factors, congestion of grid solar power already within the district area, structure damage, power surges, and over voltage from the solar inverters and array. I know of someone who installed a large system and during of operation her unit was found to cause power surges to the neighbours electronic equipment exploded and sequentially was reported to the authorities, whereby they immediately disconnected her system. Now in that area authorities are denying permission to any new applicants. Those neighbours and the authorities are taking some sort of action proceedings against the solar home.

    • Bob_Wallace

      One of two things likely happened.

      1) The installer somehow screwed up.

      2) The inverter was faulty.

      Over voltage from inverters simply does not happen unless the inverter is malfunctioning.

      Your report is meaningless. There are millions of grid-connected solar systems and the problem you report is pretty much unheard of.

      Take your FUD elsewhere, please.

      • Mark W

        New laws put in place in parts of Australia that prevents grid solar power to be installed for that.
        “All new solar systems in Queensland are required to go through an assessment process with the distribution business to ensure they do not adversely impact on the grid.”

        Many been turn away.

    • Mark W

      If power network stop you, go off the grid like Wenham is think of doing,(But being a solar expert he is now looking at a system that will use battery storage to take his house effectively off-grid between 2pm and 8pm). he had been denied permission to expand his rooftop solar.

      Kiss the power network good bye.

      • Matt

        storage is coming, so for anyone who can the network will convince them off the grid. BUt it will not save the people invested in coal. PV/wind keeps dropping, large company that need grid for power will also get storage to by off peak. So old coal generate will be loosing money. If you still own any stock in Auz, Germany thermal power plants (check you funds) dump them yesterday. If in US them dump them tomorrow, todays a holiday.

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