Solar Panel Prices Continue Dropping, Grid Parity Not Magic Bullet for PV

A recent report by Ernst & Young shows yet again how dramatically solar PV module prices are dropping. The report, which focuses on the UK solar market, illustrates the continued downward price pressure on panels due to a steady ramp-up in global manufacturing capacity. By 2013, the average selling price of a solar module will be down around $1 a watt, from $1.50 today.

The Guardian writes: “this suggests that falling PV panel prices and rising fossil fuel prices could together make large-scale solar installations cost-competitive without government support within a decade.”

However, it’s important to remember that these are simply module prices — the actual cost of solar electricity is determined by the cost of other equipment, construction and installation, and permitting. Low module prices do not in themselves bring grid parity.

But what exactly does grid parity mean? A must-read Greentech Media piece by Shayle Kann points out that the term actually means different things in different markets:

In my opinion, there will be two achievements (both occurring over an extended period of time across various locations) that will make solar mainstream. For wholesale generation, it will be the point at which large volumes of solar become attractive to utilities even accounting for dispatchability. This could achieved either through the competitiveness of solar plus energy storage, or by making solar so cheap that supplementing solar generation with natural gas or another peaking resource beats the peaking resource alone.

For retail generation, the difference will be made when consumers can see significant cost savings from a PV installation that are assured. In essence, the droves of new solar customers will be driven by cost savings, not cost parity.

The bottom line is that the solar industry is thriving even in our complicated, semi-parity world. Over time, prices will continue to fall and incentives will become increasingly unnecessary. In the meantime, let’s see grid parity for what it is: an attractive idea that will just be one among many factors enabling the solar revolution.


— Tyce Herrman and Stephen Lacey

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