Lawsuits, insolvencies, price wars, intensifying international trade disputes, disruption of highly regulated power markets and the business of utilities — all these headline-grabbing current events miss the most important point when it comes to solar photovoltaic (PV) power technology, systems, and markets, asserts Giles Parkinson in a RenewEconomy blog post yesterday. That critical, overlooked point is that solar PV costs continue to fall, and sharply.
Parkinson points out a key, neglected point in an announcement made by the troubled Suntech, China’s and the world’s largest manufacturer of crystalline silicon PV cells and panels: its manufacturing costs are expected to fall another 30% in 2012, to 55 cents per kilowatt (kW), excluding the cost of raw, solar-grade silicon. This year’s drop is in addition to a 75% fall in the previous two years.
Intense Competition Driving Innovation, Downward Shift in PV Costs
Intense competition — private and government sector — to gain a dominant share of the fast-growing global market for solar PV is driving manufacturers and businesses all along the supply and value chain to do all they can to lower prices, and that’s leading to innovation, Parkinson points out.
He also notes that in a solar PV industry report last week, Deutsche Bank managing director and senior analyst Vishal Shah wrote that “the cost of utility-scale solar is coming down so quickly that developers are in a position to sign power purchase agreements of less than 10 cents/kWh. This was not expected to occur until closer to the end of the decade.”
Yes, headwinds persist, Shah continues. They’re considerable when it comes to deploying rooftop solar, including resistance and political lobbying by well established, highly regulated, and well funded electric utilities. Regulatory hurdles shield these utilities from competition and rising nationalist protectionism.
While Shah remains “very cautious” about investing in solar energy stocks, innovative retail financial models, such as third-party ownership and community solar investments, combined with rapidly declining retail costs are driving rapid growth. “Although we agree solar is starting to become competitive with conventional power generation sources in several regions worldwide, it may be still too early to step in,” Shah was quoted as saying. “The key reason is that while costs are falling, so too are prices,” Parkinson adds.
ArkX Investment Management analyst Tim Buckley doesn’t believe solar PV prices will rise even when the price wars end. “We’re not going to see a price rebound,” Buckley told RenewEconomy. “Margins have been crunched to zero, but Suntech shows that dramatic cost reductions are still coming through system – whether it is the manufacturing system, or installation cost, or even on silicon. That still leaves double-digit price deflation as base case for the next 2 to 3 years.”
Graph Credit: IMS Research