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New Energy Finance: Solar power 50% cheaper by year end, other clean energy sources drop 10%

By Joe Romm

"New Energy Finance: Solar power 50% cheaper by year end, other clean energy sources drop 10%"

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By the end of 2009, there will have been a 50% drop in the levelized cost–i.e. the lifetime cost per kWh before subsidies–of solar power, and a 10% reduction in the levelized cost of other sources of renewable energy sectors compared to the end of 2008.  This prediction is a result of detailed quarterly research by New Energy Finance.

“So far this year, the steady decline in the cost of equipment in sectors like solar and wind has been largely offset by the increasing costs of financing,” said Michael Liebreich, chairman and CEO of New Energy Finance. “By the end of this year, however, as capital markets loosen up and equipment prices continue their decline, we will see the levelized costs decline, finishing the year 10% below the end of last year across the board and far more than that in solar.”

So begins a Monday news release from New Energy Finance, whose “global network of 125 analysts” provides “industry information and analysis to investors, corporations and governments in clean energy.”  I had reported a similar prediction back in August (see “Solar panels drop sharply in price“).  Looks like solar PV is going to become competitive sooner than expected.  Guess we won’t need that massive government program to generate breakthroughs to make solar energy cost-competitive after all.

Here’s the rest of the release:

Solar: Photovoltaic (PV) module prices across the board have continued their downward trend, although the rate of decline has tapered. Thin-film remains the low-cost leader in solar with projects as cheap as $3/W, making thin-film projects 25% less expensive than crystalline silicon systems on a levelized basis.  PV projects with tracking systems have seen the least reduction in costs due to the fact that costs for single- and double-axis trackers have remained buoyant relative to panel prices.

Wind: Although new transactions have been few, turbine prices have fallen to their lowest levels in several years at 18-20% below early 2008 levels. To date, this drop in equipment prices has mostly been offset by higher costs of financing.  In the offshore market, costs continue to rise with projects moving into deeper waters, facing increasingly complex construction and capital costs. As capital markets begin to recover, both onshore and offshore projects should begin to see falling levelized costs.

Geothermal: Levelized geothermal costs are particularly sensitive to fluctuations in capital markets and drilling stage debt and equity has been in scarce supply through this year. Drilling costs fell by nearly 50% as drilling rigs flew into excess with a falling oil price, but these have recovered in the last quarter in step with oil. In the past quarter levelized costs have risen by 8-10% but should remain flat at year end.

I expect to see the same price drops in concentrated solar thermal electric power aka “The technology that will save humanity” aka baseload solar aka solar power when the sun goes down once a few GW are installed.

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8 Responses to New Energy Finance: Solar power 50% cheaper by year end, other clean energy sources drop 10%

  1. David Murray says:

    Dear Joe,

    This is very good news – distributed roof top solar has to be the long term solution iff the costs can be dragged down far enough.

    At the utility level concentrated solar thermal, geothermal and hot rocks are the most hopeful.

    Concentrated solar thermal is not only baseload solar. It is even better because it is dispatchable solar. Dispatchable, not base load, is the creme de la creme.

    Kind regards.

  2. Bill says:

    Roughly a decade ago, Resources for the Future did a review of previous cost projections for renewables in order to determine why renewables had not displaced oil, coal, etc. The conclusion was that renewables had actually met the prior forecasts for declining prices, but prices for oil and coal had dropped as well.
    Without government action (e.g., cap-and-trade or a GHG-tax to put a price on GHGs or a renewable portfolio standard), this same sequence is likely to retard renewables in the future. The fact is that coal and oil are cheap to produce and burn and the necessary infrastructure exists for both. They are made cheaper by the direct and indirect subsidies they receive and the fact that their prices do not compensate for the health and environmental damages they do. Any time demand is reduced by renewables, efficiency or a weak economy, the prices for oil and coal will fall until market share is regenerated. Further, massive investments in innovative ways to produce oil and coal at lower costs are made every year by those industries, often with government support (e.g., “clean coal” funding).
    Thus, we should be glad that renewables are getting cheaper, but without government actions to restrain use of coal and oil, those dirty fuels will continue to pollute the planet at unacceptable levels. The market alone will not solve this issue. Without government action, we’re toast.

  3. Scatter says:

    When is this going to feed through to domestic scale installations though? There seems to be little sign of price drops over here in the UK even though people have been talking about significant drops in the wider market for a while now…

    Hopefully the feed in tariff will kick the market into action.

  4. Karel says:

    @Scatter: Price drops are clearly substantial in those countries where installation of domestic solar installations is common practice. For example, domestic installation prices in Germany have dropped by 26% since last year: http://www.solarwirtschaft.de/preisindex.

    FYI: A very good source for PV module prices, you can find here: http://www.pvxchange.com/en/index.php/preisindex_3.html

    Prices are in euro and the language is German, but the diagrams should be clear to everyone.

  5. Chris Dudley says:

    One of the things that was keeping silicon PV prices high was a shortage of purified silicon. This is clearing up so we are beginning to see some of the benefits of scale in manufacturing as well as methods that use less raw materials. Thin film though has been a spectacular story and the US leads there. PV has further to fall and will cost less that concentrated solar thermal power in the long run.

  6. This is very encouraging for all house owners who wish to go green. Solar and wind power is in fact getting cheaper but all the paper work and procedures necessary to go off-grid or at least partially still represent a major slowdown for green energy development. I’ve even heard that in some EU countries you have to be on a waiting list for months for your solar and wind power system to be approved. Too bad.

  7. Michael says:

    Although solar and wind are becoming cheaper we still fail to use the energy we produce.

    energthroughmotion increases the outpt of any power generating dive by up to two thirds

  8. Olivia says:

    I work with Sharp and Solar Panel Costs have come down a lot. It is a wonderful time to start thinking about changing your energy supply to solar. Added incentives right now include tax credits offered by the government and rebate offers from public utility companies.