Solar costs continue to fall

November 2, 2011

By Drs. Robert & Sonia Vogl
President and Vice President, Illinois Renewable Energy Association

The cost of the recent solar installation in Rockford does not reflect current market conditions, as the price of the panels was part of the agreement reached in bringing the Wanxiang solar assembly plant to Rockford.

Solar electrical production is global in scope. In 2005, annual installation of panels reached 1 gigawatt. In 2011, annual installations are expected to exceed 28 gigawatts, with a cumulative global capacity exceeding 40 gigawatts. In a mild climate such as California’s, that 40 gigawatts could power more than 8 million homes.

Photovoltaic (PV) production has been doubling every 1.3 years. Every doubling of production has led to a cost reduction of 23 percent. If the trend continues, three more doublings could lower electric prices to 6 cents per kilowatt in sunny Arizona. Even if the growth rate were cut in half, Tam Hunt estimates by 2030 the world could be producing 16 terrawatts per year, which would roughly equal the estimated global electric demand by then.

Hunt indicates that in California, solar has reached grid parity where electric rates are high and sunlight is abundant. He expects that between 2015 and 2020, grid parity will also be reached in most Western states, Hawaii and New England, even without government subsidies.

His estimates are for utility-scale solar projects only, as installation costs for smaller systems for residential applications do not benefit from economies of scale. For large utility scale systems, installed costs are from $3 to $4 per watt, while residential systems run from $5 to $8 per watt.

Yet, residential customers may continue to invest in solar systems for a variety of reasons. As equipment costs fall, their appeal to home owners increases. Where consumers can sell their excess power back to the utility, rising costs of electricity will help offset the upfront costs of investing in a system. Some customers will seek to become zero-net-energy users, where the power they consume over a year will be offset by the power produced by their home system. A few will seek to become independent from the grid, and either use a battery system for storage or install a small-scale generator for backup power. A new 4.1 kW system with battery backup is being installed near us. It will approach energy independence.

Hunt suggests that projects of 20 megawatts or less targeted for local consumption, rather than sent to distant markets served by the transmission grid, will appeal to local officials. Solar installations can be placed on many roofs and abandoned industrial sites in urban areas, limiting the need to expand the grid. Communities that install such systems will gain a measure of energy independence and security.

Some challenges remain for the solar industry. The economy is not good, debt is high, and capital is scarce. Many economists believe it will take years to recover the slowing demand for electricity. Fossil fuel interests are not keen on losing market share, and will continue to challenge the renewable industry.

Drs. Robert and Sonia Vogl are founders and officers of the Illinois Renewable Energy Association (IREA) and coordinate the annual Renewable Energy and Sustainable Lifestyle Fair. E-mail sonia@essex1.com.

From the Nov. 2-8, 2011, issue

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