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Polysilicon Prices To Drop in 2012, Bringing Solar PV Prices to 70 Cents a Watt

By Stephen Lacey  

"Polysilicon Prices To Drop in 2012, Bringing Solar PV Prices to 70 Cents a Watt"

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Image courtesy of Bosch Solar

The structural oversupply of solar modules on the global market has driven down prices for photovoltaic panels at an astonishing pace. And new analysis shows that decline will only continue into 2012.

In 2011, the average selling price for crystalline silicon PV modules was cut in half — falling from $1.80 at the beginning of the year to $0.90 in December, according GTM Research.

With a glut of silicon now on the market, buyers are starting to renegotiate contracts downward. This could help drop the average price for crystalline silicon solar modules to as low as $0.70 a watt. Brett Prior, a senior analyst with GTM Research explains how a ramp-up in silicon production activity in 2011 will impact the market over the coming year:

In 2011, in the polysilicon industry — and the solar supply chain in general — manufacturing outpaced end-use. After a half-decade of silicon demand outstripping supply, the aggressive expansion plans finally overshot. This supply/demand imbalance will push producers to lower contract prices closer to the level of manufacturing costs at $20 per kilogram, and will force higher-cost manufacturers to exit the industry. While the solar market will continue to grow at a 10 percent to 20 percent pace in the coming years, reductions in the amount of silicon used in each module means that end demand for polysilicon will grow at a slower pace. The end result is that the current roster of over 170 polysilicon manufacturers and startups will likely be winnowed down to a dozen survivors by the end of decade.

Great news for the economics of solar projects. Not so great news for smaller, high-cost silicon producers.

Silicon is the most expensive material for conventional solar modules. When the industry faced a shortage of silicon from 2005 through 2008, the prices for solar modules stayed high. Since then, manufacturing processes have evolved to use less silicon, helping drive down the cost of production. (For more on this, see: Anatomy of a Solar PV System: How to Continue “Ferocious Cost Reductions” for Solar Electricity).

The relentless price reductions are likely to open up demand in a variety of new markets in 2012, and stimulate continued development in countries that had been written off due to steep decreases in incentives. (See: Germany Installed 3 GW of Solar PV in December — The U.S. Installed 1.7 GW in All of 2011).

Global solar PV installations for 2011 are expected to tally around 24 GW — up from 17 GW in 2010. With incentive cuts in the U.S., Germany, Italy and the UK, analysts predicted a flat or down year in 2012. But the continued price elasticity in solar PV may make 2012 yet another solid growth year — with some projecting installation of up to 30 GW of PV installations.

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26 Responses to Polysilicon Prices To Drop in 2012, Bringing Solar PV Prices to 70 Cents a Watt

  1. That’s great news! One year ago we installed 3.2 kilowatts of solar on our roof at a cost of $5.25 per watt. I checked with our installer, and he said that the current cost would be $4.95 per watt. If the cost of silicon drops to 70 cents a watt, what will this mean for the installation cost?

    • Stephen Lacey says:

      The impact will be varied — it all depends on cost of the rest of the equipment, the effectiveness of the installer, the amount of paperwork, the size of system, etc. Typically, residential system costs are slower to fall than commercial and utility-scale systems because it’s a much more dispersed value chain.

      For example, if you look at the cost of installing a sub 100-kw system in Germany, it was about half that of the U.S. That’s because it has a more mature industry and a more efficient incentive mechanism.

      • Mark Shapiro says:

        That’s why BIPV is so important: it eliminates the cost of installing PV*. It does not reduce the cost of installation, it eliminates it.

        * Caveat: This is only true for buildings that use both roofs and electricity.

  2. Jake Johnson says:

    I’d like to point out, as a solar company owner, these articles drive us crazy. Every single client now retorts with, “why is your quote so much more than $0.70/W?”

    • Tim says:

      They drive me crazy too, because I have no idea what fraction of total cost the PV modules comprise. It would seem as though the PV contribution to the total cost would become neglible, but I can’t really tell what that point is.

  3. NASA GISS has released an extensive analysis of 2011 global climate and temperature:

    http://data.giss.nasa.gov/gistemp/2011/

    In their ananlysis they find 2011 was the planets 9th warmest year in the instrumental temperature record with an anomaly of 0.51C above the 1951-1980 average.

    NOAA also released their annual report on the 2011 U.S. and global climate:

    http://www.noaanews.noaa.gov/stories2012/20120119_global_stats.html

  4. Mark Shapiro says:

    Calling all entrepreneurs, builders, designers, architects, investors, and political leaders:

    PV at $0.70 per Watt is begging us to integrate PV into all new buildings. It is calling, begging, screaming, demanding, cajoling, rhapsodizing, sirening, and then asking politely calmly, and clearly.

    BIPV. Make PV panels into a standard roofing material.

    • Speedy says:

      0,70$/W is only for the silicon cell. You need to add a lot of metal, glass and plastic before you get an installation ready module. The price of those components is more likely to rise slightly than to decrease.

  5. Mark Shapiro says:

    At $0.65 per Watt, PV will start caterwauling!

    Please, someone heed the call!

    • Mike#22 says:

      With a little redesign of the module’s aluminum frame’s profile, and a complementary set of flashings, the modules would work as big shingles. The modules would need to be strengthened to carry the rare foot traffic, and the firefighters would need a way to get around up there. And snow guards. The snow really rips when it comes off the glass, But yeah, this is a no-brainer.

      Siding too.

      • Ric Merritt says:

        Before we go there, we need quite a lot of pilot projects and some years of real-life experience. Here is Wisconsin we get a nice variety of weather. My insurance company just covered most of the cost for many residents on my side of town to replace whole shingled roofs after a hailstorm. Pioneers and early adopters are great, but most folks will want to see years of experience before making the investment.

        Fair warning: if you are cooking up a reply along the lines of “Wait, hear me out, this’ll work great, believe me”, no one is much interested. If you have a link to somewhere that has a decade of experience under their belt, that would be the beginning of progress.

  6. Leif says:

    Corporations need to get PV into the homes of the third world first where a $25 or $50 investment can truly change a life of abject poverty.

    • Mark Shapiro says:

      Right. One billion families could have some light, and a cell phone charger, for a total of $25 – 50 billion.

      Amazing.

      • Leif says:

        Even a radio. Phone to phone technology could make each phone a cell station and eliminate tower infrastructure. For only slightly more cost a refrigeration system for vaccines could be supplied to local health care facilities. But alas, guns and ammo are more profitable. Very strange.

  7. David B. Benson says:

    Fine but I still don’t understand how to compute LCOE for utility scale solar PV installations, much less residential scale.

    • Mark Shapiro says:

      LCOE depends largely on interest rate and assumed lifespan.
      I’m glad people try to do it, but I prefer a simple ROI instead.