How Much Has Solar Energy Cost Decreased?


It is one of the main themes at the World Future Energy Conference here in Abu Dhabi. Solar power, and other technologies: such as wind power, are no more expensive than traditional fossil fuels in many parts of the world. Indeed, they are cheaper.

The major oil and gas players Acknowledge this. Dr. Adaba Sultan Ahmed al Jabber, the Foreign Minister of the United Arab Emirates, said at the lavish opening on Monday made the cost of solar energy, which compete with traditional energy sources, and would not be derailed by the decline in the oil price.

He saw made on an opportunity to advocate for the elimination of fossil fuel subsidies, which he noted surpassed Those of renewable energy by a factor of 5: 1 in 2013.

“If we have the courage and the ability to say yes thinking against different, can deliver better future” he told the conference.

This from a country in the top eight oil producers in the world, and the top seven in gas reserves.

A day earlier, the International Renewable Energy predicted that solar Substantial cost would fall in the years ahead, underlying its competitiveness with fossil fuels. If government policy makers do not understand this, IRENA said, then risked They make poor decisions about their Energy Future.

Last week, the Saudi Arabian Power Company ACWE, with some $ 24 billion in assets, set a world record low for the price of solar energy in the largest tender in the world. CEO Paddy Padmanathan, RenewEconomy told in a interview on Monday did the price of solar energy will be at least by one-third decline in the coming years. He expects that at least half of the 140,000GW of power capacity in the Middle East and North Africa will be installed over the next decade to be solar.

Padma Nathan’s prediction consistent with our story of the German Bank last week, which said solar her coverage of “grid parity” can extend to 80 percent of the global market in the next two years, assuming a 40 percent reduction solar costs by the end of 2017

We will see more of the Padma Nathan interview in the coming days. But first, since our story about the predictions of solar grid parity German bank Attracted search interest, we thought we would in more detail about where the Deutsche Bank analysts see the 40 percent decline to go solar.

The forecast is not really strange because most manufacturers talk of efficiency and cost improving all the time, and the will of Padma Nathan question of scale and the reduction in borrowing costs.

So here’s a summary of what the German Bank Vishal Shah, one of the leading and best connected Analysts in the industry say about the future of solar module costs. Much of it is focused on the Rooftop Market, but many of the lessons are the same for industrial scale. And in any case most of the solar energy in developing countries without grids installed will be distributed solar power, and the big turning point in established markets energy in the advent of parity for roof installations. (All $ are $ US).

German Solar Costs

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Today Solar Energy Cost

German notes had total module cost of the leading Chinese solar companies have fallen from about $ 1.31 per watt in 2011 to about $ 0.50 / W in 2014. It says this primarily due to the reduction in processing costs, the decrease of poly silicon cost and improvement of the conversion efficiency.

That represents a decline of about 60 percent in just three years. German bank says improving the overall costs may fall another 30-40 percent in the coming years, with the greatest cost savings are likely to come from the residential segment as scale and operational efficiency.

It sees a precedent for this in the oldest major solar market in the world – Germany. “The costs are now well below the cost in the United States and other less developed markets, and the total installed costs have dropped about 40 percent over the past three years in the country. The exact drivers behind cost reductions may vary from country to country, but we believe that the German example continues to prove that the total cost of the system must still a bottom, to achieve even in relatively mature markets. ”

Total cost reductions will not come from poly silicon

While a large proportion of the cost reduction over the past 5-10 years is the result of poly silicon price reductions will Necessarily future cost reductions come from non-related panel balance of the system cost. Poly silicon price cuts are good for significant areas of cost savings, and were once the largest cost component in panels, but this is dramatically and rapidly changed over the last decade. The darstellt now no more than 10- 11 cents per watt so even if cost is halved, the effect on total system costs would be incremental – not revolutionary.

Solar Panels Price Decrease to $ US0.50 / watt

German bank says did while overhangs as trade dropped or minimum price agreements can cloud the short-term market inefficiencies will be worked out in the long run and the clearing price will reach $ 0.50 or lower in the coming years.

Companies such as SunEdison have publicly targeted $ 0.40 cents per watt panels by the end of 2016, and many Tier 1 Chinese manufacturers achieve sub- $ 0.50 / W in 2014:. Considering did most manufacturers are improving 02 / 01 cents per quarter, less than ten cent improvement (to reach $ 0.40) for the next 12 quarters probably conservative.

If panels are sold at a 10 cent gross margin for a total cost of $ 0.50 / W, producers would achieve 20% gross margin – well above recent historical averages. Furthermore, transport and “soft costs” inefficiently increase the price of the panels, governments must improve with trade issues.

Inverters and racking costs are therefore decrease too

Inverter prices fall Typically 10-15 percent per year, German bank says, and expects this trend to continue in the future. Large solar installers already reaching $ 0.25 / W or less at large supply deals, and additional savings will be found in the coming years. Component cost, next generation improvements, and incremental production efficiency will drive savings on the production side, while new entrants and the continued price competition, margins will remain competitive.

Shelving and other balance of system costs are often overlooked as a source of cost reduction, continuous improvement of efficiency, streamlining and possible developments in the materials lead to incremental improvements of around $ 0.25 / w to about $ 0.17 / w.

Installation costs will decrease by a third in the US

Cost of the installation side will come primarily from economies of scale, and may fall from $ 0.65 / W to $ 0.45 / W. In fact, solar installation jobs likely to increase to keep pace with the demand Substantially, but more experienced installers with better tools and techniques on larger systems are likely to more than offset any wage growth through efficiency gains, says Deutsche Bank.

Sales and Customer acquisition costs will decrease even Further


German bank sees considerable room for improvement in the long term the cost per watt terms – of $ 0.50 / W to $ 0.20 / W – AS Solar gains mainstream acceptance, is recognized as a cost-competitive source of electricity, and businesses new / developing improved methods of interacting with customers.

Already we are seeing develop the domestic US companies automated online system for customer sourcing and synthesis system alone should be as Solar begins to ‘sell themselves’ make substantial further automation. While adoption is quiet in the early stages in most markets, think Can we do the cost level in the coming years, where homeowners start intrinsic value of solar energy itself achieve recognize generation.

We believe that this will have two consequences:

  1. clients who prefer to have their own system and have the ability to do so could finance their solar installation through multiple types of solar loans already gaining popularity and
  2. Customers who focus on the monthly electricity bill will continue to sign PPAs for solar energy priced below retail electricity price curve.

Furthermore, the wild card for a third Prong of the solar explosion lies in the regulations. As utilities begin competing solar installations Regardless of credit (under a third ownership model) offer, this would open up the market for another large source of potential customers.

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