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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.


(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.


“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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