Climate

Solar panel prices to fall by up to 40 per cent by year end

Solar roofThe long-awaited drop in prices for solar photovoltaics (PV) appears to be close at hand. Soaring demand for PV and high prices for silicon have kept PV prices up for the past several years, but had two beneficial impacts:

  • Producers ramped up polysilicon production
  • PV companies pursued designs with less silicon.

The result is that Business Green reports:

The price of solar panels could fall by as much as 40 per cent by the end of the year as huge increases in polysilicon supplies lead to a sizable fall in production costs for solar panel manufacturers.

Analysts have been predicting this price drop for a while [— I had heard this prediction at a climate solutions summit in January 2008].

If this drop does materialize, it is quite a big deal and will help keep demand on its staggering growth rate with PV becoming one of the largest job-creating industries of the century, projected to grow from a $20 billion two years ago to a $74 billion industry by 2017 (see “Sharp to boost thin film solar capacity 6-fold to 6000 MW by 2014, U.S. hits snooze button“).

Here’s the rest of the story:

That is the view of industry analyst New Energy Finance, which is predicting solar module prices could fall by between 30 and 40 per cent as a result of recent investments globally to increase production of silicon.

Polysilicon prices hit a peak of $400 per kilogram last summer, but as investments to increase capacity have come online, prices have fallen to between $30 and $40 per kilogram and experts are agreed they are likely to continue dropping.

“A massive increase in silicon supplies is coming through at the moment that will lead to a fall in solar module prices,” predicted Angus McCrone, chief editor at New Energy Finance. “In one way it’s bad news for solar companies because it will put pressure on margins as prices fall, but in another way it will trigger lots more demand from both large solar project developers and consumers as well as from businesses installing rooftop panels.”

The predictions come as a consortium of China-based solar firms called on the Chinese government to lower the allowance it offers by 75 per cent. The companies said that with the industry benefiting from falling polysilicon and production costs the government should cut the incentives it offers in an attempt to encourage officials to authorise more large-scale solar projects.

Underlining this bullish outlook, China-based solar panel manufacturer Suntech Power Holdings announced an upbeat outlook for the year, estimating that demand from the US could reach 700MW during 2009 as a result of President Obama’s new stimulus package, and confirmed it was on track to begin shipping thin film panels in the second half of the year.

The company’s confidence that demand throughout 2009 would continue to expand was echoed by a raft of other developers last week as Sun Well Solar announced it completed its first 40MW thin film solar cell production line ahead of schedule, and T-Solar confirmed it had begun volume production of what it claims is the world’s largest PV panels at its factory in Spain.

Moreover, US solar panel installation specialist Borrego Solar Systems announced it was to expand its commercial and government sales and installation business in a move that has also seen it sell its residential arm to Vermont-based groSolar.

However, the outlook for the industry is not entirely rosy with Suntech’s share price slipping two per cent following the release of results showing it posted a net loss of $65.9m during the fourth quarter, while seeing revenue climb just four per cent year-on-year to $414.4m.

Analyst ThinkEquity Partners downgraded the company’s stock, citing fears that tightening capital conditions and weak demand from Europe would impact overall demand, while any boost from Obama’s stimulus package would take time to be felt.

McCrone said that SunTech and other solar firms were being impacted by wider stock market concerns. “There are concerns about financing and falling margins for some solar companies, but you also have to remember we are in a bear market, so companies are not getting much reward even when they come up with pretty good results.”

There were also the first signs that falling polysilicon prices will eventually level off after Chinese polysilicon wafer manufacturer LDK Solar announced it was delaying plans for a new factory until 2010, as a result of plummeting prices. The company also reduced its fourth quarter earning estimates and announced the decline in prices means it is now planning to take an inventory write-down of $210m to $220m.

Still, with the massive investment in PV by venture capitalists, with the tax credits from the stimulus and bailout bills, and with new technology coming onto the market, I fully expect the price declined to be even greater over the next several years.

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6 Responses to Solar panel prices to fall by up to 40 per cent by year end

  1. darth says:

    So when should I consider putting solar on my roof? This fall? We also have the 30% tax credit (unlimited) so the combination may make it a no brainer this year.

  2. Greg Robie says:

    darth, how about thirty years ago . . . unless you, like the rest of us, wanted our kids and grand kids to live with hell and high water (which is, in fact, what has been, and with quandaries like this, is still, our choice). The smart grid “solution” to jump-starting the use of renewables is a strategy that similarly panders to such quandaries. Getting consumers to think “like yesterday,” as an answer to your question and to reduce our consuming of carbon fossil fuels for electricity, is something leadership is still shying away from.

    Do you think this is could be because the smart grid and large centrally owned and managed alternative electrical generation is a capital intensive approach that is of interest to the monied elite (for they can invest large sums of cash for long periods of time at all-but-guaranteed high rates of return–like nuclear plant construction did in the ’60s and ’70s), and/or because the consumer doesn’t want to take responsibility for figuring out how to live sustainably relative to our energy intensive lifestyle choices?

  3. John Hollenberg says:

    Darth,

    Good question. My sister was thinking about putting solar on her roof a few months ago, but decided the $40,000-50,000 price was too high. If the prices decrease by 40%, rooftop solar would be a much more attractive option.

  4. Alex 77 says:

    John/Darth –

    Residential PV installations generally have a gross cost of $20-$40k, depending on how much energy you want to produce. The net cost, however, is vastly lower in many states.

    CA, OR, CO, HI, NJ, AZ, NY FL, & MA, just to name a few states, offer rebate and/or state tax credits which bring solar system costs down considerably.

    Combine those with the 30% Federal Tax Credit, and a homeowner ends up often paying only 20-50% of the gross system cost.

    I live in Oregon, and just installed a 4 kW DC solar system with a gross cost of $29,000. After the state rebate program, tax credit, and federal tax credit, I’ll end up having paid just over $8,000 – 28% of the original price.

    Solar is very attractive many places right now. Go to this website to see what solar incentives are available to your area – http://www.dsireusa.org.

  5. There’s an interesting comment on the bottom of that Business Green article, which suggests that the current price for solar-grade polysilicon is about $130, not the $40-50 suggested in the article.

    Can anybody confirm this information?

    Secondly, does anybody have ballpark figures on how much polysilicon there is in a watt of (conventional) solar capacity?

  6. It is great to save money from our electricity bills.
    Saving is really important nowadays, we have to earn more in order to live graciously. The sun is a gift from God, that we really need.