With our world suffering from an environmental crisis, everyone would naturally want to find a way to help save it somehow. One proven way to help the environment is for us to make use of renewable energy sources, particularly solar energy. But even though there’s already that solution laid in front of us, somehow not everyone is still engaged with it. And the primary thing that holds everyone back is the belief that solar energy is expensive.
But here’s the thing: that belief is actually inaccurate. In fact, in our current time right now, the costs of solar energy are dropping — and they will continue to drop in the future.
Related article: Top Solar Statistics You Need to Know in 2019
Why Are Solar Energy Costs Dropping?
Over the last four decades, the costs of solar energy products — in particular, solar photovoltaic modules — have dropped by 99%. That is quite the dramatic drop, and it’s even more dramatic to know that the costs we have right now will continue to fall in the years to come. And though this drop is quite the good news, there is still one question that hasn’t been really addressed. And that is: what exactly are the reasons and factors for this dramatic drop?
Energy Policy Study: Looking at the “Low Level” and “High-Level” Factors
A team at MIT, which consists of Associate Professor Jessika Trancik, postdoc Goksin Kavlak, and research scientist James McNerney, conducted a study on this topic of the falling solar energy costs for the journal Energy Policy, which was published in December 2018. In their paper, they decided to look at the technology-level — or “low-level” — factors that have affected the cost by changing the modules and manufacturing process. Over the years that solar cell technology has been around, it has improved greatly. Solar cells right now are much more efficient at converting sunlight to electricity. Trancik then explains that factors like this are under the category of low-level mechanisms that deal with the physical products themselves.
In addition to that, the team also estimated the cost impacts of “high-level” mechanisms, such as learning by doing, research and development, and economies of scale. Some examples for this are the way improved production processes have cut the number of defective cells produced, which leads to improved yields, and the fact that larger factories have led to significant economies of scale.
This particular study covered the years 1980 to 2012, which is the period when the module costs fell by 97%. With this particular timeline, the team was able to discover that there were six low-level factors that accounted for more than 10% each of the overall drop in costs. And additionally, four of those factors accounted for about 15% each. With these findings, Trancik explains that the results point to “the importance of having many different ‘knobs’ to turn, to achieve a steady decline in cost. In other words, if there are more different opportunities to reduce costs, then it will be less likely to be exhausted quickly.
The Taghizadeh-Hesary, Yoshino, and Inagaki Study
In 2018 as well, another study was conducted, this time by Taghizadeh-Hesary, Yoshino, and Inagaki. And for this particular study, they analyzed the price reduction in solar modules by examining the impact of five economic factors on solar module prices in countries from 1997 to 2016. The five countries were China, Germany, Japan, Korea, and the United States. And the five factors were wages, real interest rates, exchange rates, research and development (R&D) expenditure, and oil prices.
Taghizadeh-Hesary, Yoshino, and Inagaki examined the correlation between solar module prices and five economic factors using an econometric method. They were able to discover five key findings. These are as follows:
- The wages don’t have a big impact on solar module prices. This suggests that the solar module industry is not labour-intensive.
- Real interest rates have a significant impact on solar module prices in Germany, Japan, and the U.S. This suggests that the solar module industry is capital-intensive.
- Exchange rates have a big impact on the solar module prices in Germany, Korea, and the U.S.
- R&D expenditure has a statistically significant impact on the solar module prices in China, Korea, and the U.S. This suggests that government investment in solar PV R&D expenditure has a positive impact on solar module manufacturing efficiency.
- Oil prices have a great impact on solar module prices in China, Japan, and the U.S.
Based on these five findings, we can see that if the renewable energy industry were to excel, then the government should exert a lot of effort. For one thing, they should provide industries with low-interest finance so that the renewable business will accelerate. And for another, they should expand R&D expenditure toward renewable energy technology. This is because the technological advancements required through R&D enhance module performance efficiency, and this reduces the cost of the product.
Related article: Top 10 Technological Breakthroughs in the Solar Industry 2019
Falling Cost of Solar Energy: What Are the Implications?
Solar energy will become cheaper than fossil fuels by 2020.
The first obvious implication of the falling cost of solar energy is that soon enough, this form of renewable energy will finally be cheaper than traditional fossil fuels. According to IRENA’s Renewable Power Generation Costs in 2017, the cost of PV electricity has fallen by 73% since 2010 while the cost of generating power from onshore wind has fallen by 23% around the same time. And if the cost falls even further, then the organization says that all renewable technologies should be competitive on price with fossil fuels by 2020.
To elaborate on this point further, we should compare the average cost of renewable energy and fossil fuels. Globally, onshore wind schemes are now costing an average of $0.06 per kWh, and the cost of solar PV is down to $0.10 per kWh. Meanwhile, the cost of electricity generation based on fossil fuels usually falls in a range of $0.05 to $0.17 per kWh.
So, if IRENA is right and the prices for renewable energy will keep falling, then by 2020, onshore wind and solar PV projects could be consistently delivering electricity for as low as $0.03 per kWh. That will be quite an impressive feat.
It is now cheaper than running existing coal.
While it’s great to hear that solar can beat fossil fuels in the future, right now, we can relish in the fact that solar has actually beaten coal already. A new report by Carbon Tracker reveals that 42% of global coal capacity is currently unprofitable and the U.S. could save $78 billion by closing coal-fired power plants.
Moreover, all over the U.S., renewable energy is beating coal on cost. The price to build new and solar has fallen below the cost of running existing coal-fired plants in Red and Blue states. In addition to that, Lazard’s annual Levelized Cost of Energy (LCOE) analysis reports that solar PV and wind costs have dropped a whopping 88% and 69% since 2009, respectively. Meanwhile, coal and nuclear costs have decreased only by 9% and increased by 23%, respectively. Even without considering the current subsidies, renewable energy costs can become considerably lower than the marginal cost of conventional energy technologies.
Basically, all of this means that customers can save money when utilities replace existing coal with wind or solar. And with the prediction that clean energy generation will only continue to fall, that might actually become a reality sooner than we thought.
Takeaway: Falling Costs of Solar Energy Boosts Global Climate Action
With the implication that solar energy will become really cheap in the years to come, it’s understandable if we get really hopeful of the future. As was already mentioned earlier, climate change is real and happening in our time right now, and if we want to put an end to all these environmental problems, we should do something. Solar energy is one of the best things that we can do right now, and it’s great to hear that more people have resorted to this form of energy source. But to hear that in just a year or so, solar will be so cheap that it will be even more accessible for everyone? Well, that’s a piece of even better news.
That is why right now, we’re understandably hopeful of what tomorrow can bring. We’re hopeful that governments all over the world will fund the renewable energy industry so that better technologies will be developed, thus lowering the prices of the products and services themselves. We’re hopeful that everything will go to plan and that the cost of solar energy will continue to fall. And of course, we’re hopeful that all the falling prices of solar energy will really lead us to the restoration of our planet’s glory.
Right now, everything is still up on the air. But with all this good news we’ve heard about the falling cost of solar energy, we can dare say that we’re on our way there.
Related article: 10 Corporations That Have Gone Big On Solar
Clean energy professionals often complain that solar PV receives somuch attention compared to other sectors like solar hot water,geothermal and biomass. I’m sympathetic to that sentiment. But I alsothink the attention is deserved.
Solar PV is unique. Because manufacturing can scale so quickly andthe technology can be deployed so rapidly on existing infrastructure,the rate of innovation in PV is arguably faster than in any other energy sector. The digital age has made us accustomed to constant change,which is probably one reason people get so impatient with the seeminglyslow pace of change in the energy sector. The rate of change in PV mostclosely resembles what we see in the IT sector, which makes it a verycompelling story.
And it’s not just journalists who are giving PV so much attention –it’s playing out in the business world as well. In 2011 alone, fourmajor U.S. projects totaling 1,850 MW of capacity have switched from CSP to PV because the economics of PV have changed so drastically while the economics of CSP have changed more slowly. A recent Reuters story on the trend had some very telling quotes:
“The pace is quickening,” GTM Researchanalyst Brett Prior said of the numbers of projects making the switch to PV. “You can build a PV project all-in and it will cost less upfrontand cost less ongoing. You will make more money on that project, and soit just makes sense to switch it.”
“PV is available now and financeable now,” said Sean Gallagher, managing director of government and regulatory affairs for K Road Power. “The production of SunCatcher technology has been delayedfor a couple of years. It can’t be deployed as soon as PV can bedeployed.”
“Our CSP is a little bit more restrictive,” [Edward Sullivan of Solar Millennium] said. “We have to develop 250MW chunks, so that requires us to develop large continuous swaths, whereas PV is much more flexible.”
What is driving these changes? There is a lot of fascinating research and pre-commercial activity happening around plastic solar cells, inks, fibers and other materials. But the most exciting innovationsare coming from businesses finding new ways to manufacture, finance,package, sell and install solar – all with today’scommercially-available technologies.
We covered some of the factors in a post last month on “ferocious cost reductions” in the sector. In this post, we’ll break down a few of the pressurepoints that companies are addressing to continue driving thosereductions.
By the end of this year, we’ll have about 50 GW of solar productioncapacity, according to Shayle Kann of GTM Research. That has caused achronic oversupply of modules, driving down prices 50% in two years andforcing manufacturers to drop costs in synch. (The average selling price for solar PV modules is $1.50, and will likely fall to $1 by 2013.)
There’s some debate in the sector about how long companies will beable to push costs for silicon-based technologies downward. But CharlieGay, a 35-year veteran of the solar industry who is president of Applied Solar, believes that silicon, which represents about 80% of the market, “is a very long way from being tapped out.”
Every decade, he says, the thickness of silicon wafers have been cutin half while efficiencies have increased. He believes that companiescan realistically reduce the thickness of wafers from 180 microns todayall the way down to 50 microns while still maintaining efficiencies.
“The industry is just now moving into the second generation,” explains Gay, where manufacturers are using printed circuits, texturedcells, different interconnect wires, better sawing techniques andphotoluminescence technologies to inspect cells at a higher throughput.“Crystalline silicon has a very long continuum of progress.”
Also nipping at the heels of conventional silicon are a variety ofthin films that can be manufactured at an even lower cost – but alsocome with lower efficiencies.
First Solar has driven the cost of manufacturing cadmium-telluridethin films (which are about 15% of the market) to under 70 cents a watt; Amorphous silicon thin-film equipment manufacturer Oerlikon says itscustomers have cut module production costs to well under a dollar, andare on a path to get below 70 cents a watt in the coming months; andCIGS producer Solar Frontier, which just opened a 1 GW facility for thehigh-efficiency thin film, says that its technology is competitive withleading thin film manufacturers.
However, due to low silicon prices and continued innovations inmanufacturing, silicon-based module producers are closing in on the $1per watt per watt cost threshold – taking away some of the competitiveadvantages thin films have enjoyed.
This race to the bottom is happening fast. And it’s still heating up. “We are truly realizing what scale brings to an industry,” says Charlie Gay. “The pace of innovation is enormous and there’s still a ton ofroom for plenty more with these technologies.”
Hard Costs: Balance of Systems and Labor
Innovation in manufacturing is an important piece of the picture. But as module costs continue their steady decline, all the other components(racking, wiring, power electronics, labor) makes up a greater share ofthe total system cost. A recent report from GTM Research shows that Balance of Systems technologies will makeup a majority share of a PV system’s cost in the next year, going from44.8% of a utility-scale crystalline-silicon PV system in 2010 to 50.6%in 2012.
That is pushing a lot of the pressure onto BOS manufacturers to drop their costs along with the module producers:
“The PV market has new focus,” said Shayle Kann, Managing Director of GTM Research’s solar practice. “While the module willremain the most costly single part of a PV system for the foreseeablefuture, the large combined cost of BOS components will inevitablyengender greater activity and innovation across the BOS value chain. Weexpect to see BOS consolidation, integrated business models andincreased supplier competition in the coming years as more companies see the BOS as a major revenue opportunity in the PV market.”
Recognizing this trend, the Rocky Mountain Institute put together a roadmap for BOS cost reductions, projecting that with current technologies and practices, the industrycould reduce hardware costs from the $1.43 a watt for a utility-scalesystem today to between 60 and 90 cents a watt within the next fiveyears. The recent GTM Report shows a similar path, projecting a 29 centper watt reduction by 2013.
On that trajectory – even without additional cost reductions inmodules – achieving a levelized cost of energy (LCOE) for solar of 13cents/kWh across a wide range of U.S. of markets is within sight. And if we can get module prices down to 70 cents a watt (which is veryrealistic), an LCOE of 8 cents/kWh in the next 4-5 years is veryattainable.
Soft Costs: Business and Regulatory Efficiencies
As solar businesses mature, they become more efficient atsecuring financing, managing projects and navigating the regulatoryenvironment. But there are still additional costs that can be wrung outhere too. On the residential side, non-labor soft costs that come fromgenerating leads, quoting projects, and processing incentive paperworkadd up to $1 per watt – and about half of that can come from permitting.
(Chart from the Institute for Local Self Reliance, using SunRun data.)
The solar-services company SunRun has been on a mission to streamline residential solar permitting and inspection around the U.S. With around 50 cents a watt for a 5 kW system going toward permitting, that addsabout $2,500 onto the final cost. SunRun has been pushing hard for federal standards around permitting, which the company says couldpotentially open up solar services to half of American households.
“Local permitting and inspection processes are the bane of the solar industry, and costs are falling at a ?glacial pace. Certaininstallers experience this cost rising, and some even refuse to sell incertain jurisdictions that have especially cumbersome processes. Thesecosts are unnecessary and counterproductive, and streamlining willsupport safety through efficiency and repetition.”
SunRun CEO Ed Fenster has been working closely with the government on the issue, saying that Department of Energy Secretary Steven Chu “getsit” and believes “we can get to where we need to go, even though most of the attention seems to be on technology.”
Under the DOE’s recent Sunshot Initiative, which aims to reduce solar costs 75% by 2020, $12.5 million has been set aside to encourage localgovernments to compete with one another around developing streamlinedplans for permitting. Another $15 million will be put toward zoning andinterconnection regulations.
In the meantime, there have been a few recent changes on the state level,which Fenster says have been “promising but come with plenty of tension. Permitting fees are precious.” In Colorado, the governor signed a billlast month that makes permitting easier and caps fees for solar PV andsolar hot water systems. Vermont also recently put in place an easypermitting procedure. These were two key victories for the solarindustry, but the rest of the permitting landscape across the U.S. isstill incredibly scattered.
The permitting and regulation issue is an easy fix for the industrythat could provide a major leap downward for the installed cost of solar systems. In Germany, for example, the average cost of a system is about 40% cheaper due to a better permitting process: “It’s all about localpermitting. It’s amazing how much impact this can have – there’s noreason why we shouldn’t be able to do the same thing they’ve done,” says Fenster.
The Road to Cost Reductions: We Are Already on it
The cumulative impact of these cost reductions is enormous – we’retalking about stripping multiple dollars from a system’s cost in a veryshort period of time, bringing us to a price of electricity that ispotentially very competitive in many areas of the country, not just inthe Southwest and California. These dramatic changes aren’t coming fromearly-stage technologies in labs, they are coming from today’sbusinesses that are reaching new level of maturity.
These examples don’t begin to cover the numerous innovations intechnology, financing and business development that are driving cost ofsolar electricity today. But they offer some of the highest potentialfor improving the economics of PV.
Quantum dots might be small, but they could have a big impact on the efficiency of photovoltaics.
Research presented Feb. 20 by Stanford University chemicalengineering Professor Stacey Bent at the annual American Association for the Advancement of Science meeting in Washington, D.C. showed that asingle layer—less than a nanometer thick—of quantum dots tripled thesolar efficiency of the tested cell.
Quantum dots, in principle, can reach higher efficiencies than traditional photovoltaics, which are limited by the fixed energy level they can absorb. Quantumdots, however, can be fine-tuned to absorb different energy levels, Bent said.
“The thing that’s nice about the quantum dots is you can choose whatspectrum by the size,” she said. Different sizes of quantum dotscorrelate to different areas of the solar spectrum, she added. Smallerquantum dots respond to higher-energy light levels—bluer lights—whilelarger quantum dots respond to lower-energy light levels.
For the subset of molecules studied, the research group found that they had the same effect on the solar cell, she said.
“[The research] is pretty specific to these sensitized solar cells.It could be used in dye-sensitized solar as well,” she said. “Theirefficiencies have been quite low. The hope is they can get to higherlevels.”
At present, the sensitized solar cells developed by Bent and herresearchers are only 0.4 percent efficient. But, according to a Stanford press release, the tested cells were not optimized. Bent and herresearch group can fine-tune the cells to further improve theefficiency.
The cadmium sulfide quantum dots used in the experiments are notideal for solar cells, Bent said in a press release. Going forward, thegroup will try using other quantum dot materials. The group will alsoattempt using other molecules for the organic layer, and could redesignthe photovoltaic cell in an attempt to absorb more light and producemore electrical charge.
The research could have further implications for other forms of photovoltaics.
“We are very interested in looking at modifying interfaces in avariety of solar cells,” she said. “We are looking at doing interfaceengineering to improve the efficiency.” However, that research wouldlikely require different strategies to implement.
A recent CNBC.com piece at asked the question: “Does the solar industry have a PR problem?” Unfortunately, the story itself is the PR problem.
The piece cited a March study from two reputable organizations, SolarTech and San Jose University,which found that only 39% of Americans think solar is reliable and only11 percent think it’s affordable.
The article was attempting to address an important point:
That solarcompanies still have a lot to do to counter perceptions that solardoesn’t work. But rather than take a detailed look at customerexperiences to actually figure out if solar is working, or examine theimportant steps solar companies are taking to address the problem, the reporter highlights the opinions of companies with a direct financialinterest in pushing the perception that solar doesn’t work:
Jim Nelson, CEO of solar manufacturer Solar3D, says that, true to the perception, solar technology is not quite ready for primetime.
The problem, says Nelson, is that solar is generally still not pricecompetitive with fossil fuels for energy generation. Paradoxically,government efforts to subsidize the purchase of solar panels actuallyslow down the adoption of innovation that should ultimately makerenewable energy more affordable.
By encouraging consumers to buy immature and inferior solartechnology right now, government subsidies risk locking people intosolar systems that are inefficient, expensive, and may or may notultimately pay off to the consumer. “They’re encouraging people to use things that don’t work,” he says….
Tim Young, CEO of solar cell manufacturer HyperSolar, says that ahousehold solar installation using photovaltic, PV, cells — whereinlight is converted into electricity by displacing electrons in siliconcells — typically needs 10 years to pay for itself, and after 20 yearsthose cells will have substantially degraded.
“For people who are either very well-off, very passionate about greenenergy, or both, that could be a fine trade-off. But for the massconsumer — or for that matter for power-supplying utilities — that’s abig negative for now.”
Doesn’t work? A big negative?
Let’s be very clear: These two companies don’t even have a product yet. They’re both working on prototypes for new solar cells (we covered Solar 3D in a previous post.) And at this very early stage of development, theirsuccess depends in part on convincing people that today’s technologiesdon’t work.
We are not making a judgment about the viability of the technologiesthese companies are developing. We would, of course, love to see themsucceed and help drive continued innovation in the industry. However, if the reporter had any clear understanding of why these companies makethe claim that solar doesn’t work, he would have been able to put theirstatements into context. But no. Instead, he perpetuates the myth thatsolar doesn’t work.
So, does solar work for the consumer? The story mentions one company, Sungevity, which is providing financial services to customers along with the installation. Other leading companies include SunRun,Solar City and the up-and-coming BrightGrid Renewable Finance – whichhave installed tens of thousands of systems between them.
These service providers allow a homeowner to invest in solar withouthaving to pay up-front for the system, and instead purchase theelectricity or lease the system. (Think of these products likepoint-of-sale financing that car dealerships offer when sellingautomobiles. Can most people afford a car up-front? No. But thefinancing tools make cars affordable for people.) In most cases, thecustomer pays less for solar electricity than they previously paid forgrid-based electricity. And guess what? They still get to watchtelevision and run their dishwasher.
And how about the tens of thousands of people who live off-grid inthe U.S. and use solar for all their electricity needs? Well, today’stechnologies work for those applications too. A couple months ago, oneof our readers left a comment on the old Climate Progress site (luckily I had copied over the comment) about how frustrating it is to hear theclaim that solar doesn’t work repeated over and over:
“I live off grid in VT, and can’t tell you how many timesI’ve run into people who have tried to tell me solar can’t work where Ilive “because there’s not as much sun.” Even telling them that solar ismy family’s sole power source in northern Vermont is sometimes notenough to break through that particular myth!”
And how about solar being a “big negative” for the utility? Perhapswe should look at the levelized cost of energy from solar in Californiacompared to a peaking natural gas plant – an inefficient plant that must be ramped up for just a few hours a day to meet demand. The cost ofelectricity from these plants can get over 40 cents a kilowatt-hour, making solar competitive in many areas of the country. That doesn’t even count the cost of thehigh environmental damage done by natural gas peakers, which isconsiderably higher than that of high-efficiency gas plants.
And in some states with tiered retail rates that reflect the cost ofthat generation, customers can pay up to 30 cents a kilowatt-hour forelectricity!
We’re not talking about solar as a baseload power source here. We’retalking about solar where it makes sense — and cents — as a peakingresource that can offset the most expensive electricity for utilitiesand consumers while stabilizing the grid. For that purpose solar workstoday. To suggest that companies are “encouraging people to use thingsthat don’t work” is simply wrong.
The SolarTech/San Jose University report wasn’t about whether solarworks or not, it was about countering the perception that it doesn’twork through better communication with customers. Pam Cargill, a solarconsultant, summed up the findings from the report well:
Here’s the take away for residential solar companies:
- Installing companies need to make proposals simpler to understand.
- Installing companies need to simplify their solar energy system offerings into comprehensive products that resonate with generalconsumer understanding.
- Marketing of solar energy needs to respond to, as Amory Lovins of the Rocky Mountain Institute put it, mainstream America’s concerns of “hot showers, cold beer, and lit rooms.”
- Consumers need access to unbiased information: real performance data from installations and technology-neutral explanations ofwhat the system can do and how they work.
Unfortunately, the CNBC reporter made the story a technology issue,when in fact it’s a business and communications issue. But is thatreally a surprise?
Sanyo is already one of the leading solar panel manufacturers in the world and is now trying to take the lead with the development of theworld’s most efficient solar module. The company has recently developedthe HIT-N230, which is being claimed to have an energy-efficiency of20.7 percent.
The company achieved this by increasing the number of tabs from twoto three and making tabs thinner. These tabs were then applied with AGcoated glass, which allows them to trap light and reduce reflection andscattering of light. The company’s N series HIT modules are scheduled to be launched in Japan in autumn 2010 and the HIT solar modules areplanned to hit Europe in early 2011.
Via: Akihabara News
Rikki Suarez majors in Creative Writing and loves writing about renewable energy, clean technology, and solar power.