Cost progress on photovoltaic

Renewable Energy World had an interesting article on a recently published report on the photovoltaic (PV) market.

The Photovoltaic market grew by 40% last year, and totalled about 2500 MW worldwide.  This is about one sixth the size of the worldwide wind market.  But when I started in the wind business around 2000, the solar market was 1 tenth the size of wind, so it is growing faster.

The market is being driven by the grid connected sector, although other sectors showed good growth too.  Germany installed 40% of the PV.  Government support programs have been key to driving the growth.  And to put it in perspective, Germany installed the equivalent of 2 Pickering units in 2006 based on installed capacity.

Because of the growth, there have been shortages of polysilicon, a basic building block from most PV.  So prices and profits have been high.  The PV industry used to rely on surplus silicon from the semi conductor industry.  No longer – there isn’t enough surpluses to accomodate the PV demand.  So foundries dedicated to making PV grade silicon are being built, but it takes several years to complete construction and begin production.   In the meantime, product is in short supply, and prices are high.

Foundries that make silicon dedicated for PV can make a lower grade of silicon than semi conductor silicon, and it will still work fine.  An impurity in a semiconductor destroys a chip, but it makes virtually no difference to PV.  That will allow cost reductions.  The rapidly increasing volumes are driving innovation, such as thin film technologies, and improved manufacturing processes.  So the cost of manufacturing PV is dropping, but the price isn’t, since demand is robust.

The report mentions the large increase in supply forecast for 2008-2010, and suggested that prices could drop by 20% in each of 2007, and 2008, and 10% in 2009 and 2010.  Of course the PV panel is only a part of the cost of a solar installation, so fully installed costs won’t fall as steeply.  But it will still help.

Ontario offers Standard Offer Contracts for PV that pay 42 cents/kWh for 20 years.  My back of the envelope calculations show that it is very difficult to make a return at this price today.  The price paid probably needs to be double that.  But if the prices of PV do indeed drop, then the financial viability of installing PV will improve.

It will take awhile for prices to drop enough to make PV work in Ontario.  In the meantime, we should look at improving the price we pay for solar generated electricity, so that we can catch up with the Europeans and others, and hone our skills in installing solar panels.

The day is coming when solar will be competitive – do we want to be a leader, or laggard?

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