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Beyond Subsidized Solar Power: The Path to Grid Parity

If the silicon, wafer, cell and module manufacturers contribute to 60% of the cost reduction and the system integrators and BOS-manufacturers contribute to 40% of the cost reduction, the module price in 2013 for California would have to be $1.95/Watt DC and the system integration price (including all BOS components) $2.06/Watt in order to achieve the 7 year payback return without government incentives. The end customer price needs to be $4.01/Watt DC.

The above paragraph explains the price point for modules and installation price. On the cost side, the manufacturers need to reduce their cost to $1.51/watt DC and the system integration and BOS cost need to be at $1.42/Watt DC. These costs assume an average sales tax of 3% (an average aiming to account for the different sales tax rules for PV) and a gross profit margin expectation of 25% in the upstream segment and 18% in the downstream PV industry.

Reaching these objectives will require an aggressive cost roadmap, especially when taking into account that the above numbers are only representative of the best solar locations in the US.

Theoretically if we aggregate the most competitive manufacturers in the upstream value chain we can get the cost down to approximately $1.25/Watt. In addition, the best-of-class system integrators in the German market are able to install large PV system at a turnkey system price of below $5.00/Watt DC with standard modules.

Thus, grid parity and the ultimate goal of bringing solar to the mainstream are within our reach!

Image Credit: richardmasoner via Flickr under Creative Commons License

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Written By

Angiolo Laviziano guides the strategic direction and long-term vision of REC Solar. He believes that solar electricity will become part of the mainstream energy supply within the next decade, and that the USA will be the world’s largest market for solar electricity within five years. “Our goal is to make solar simple and affordable, giving as many residential and business customers as possible the opportunity to install solar,” says Laviziano. “The positive environmental impact from solar power that we all desire will be realized by making solar electricity economically attractive.” In the 1990s Laviziano worked in the financial industry in Hong Kong before joining Conergy, the largest European renewable energy system integrator. He served on Conergy's board of directors and saw the company through a strong and profitable growth process culminating in its European IPO in 2005. Laviziano received a PhD in Financial Economics from the University of Hong Kong and holds a graduate business degree, equivalent to an MBA, from Koblenz School of Corporate Management in Koblenz, Germany.


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