Solar PV costs will fall by half by 2020, but prices won’t

By Giles Parkinson on 24 May 2013

Wenham, who is the head of the ARC Centre of Excellence in Advanced Silicon Photovoltaics at theUniversity of New South Wales, and is also  the chief technology officer of Suntech, says advances in efficiency, manufacturing and materials will lead the drive to lower costs – but prices would not fall as much because the major players needed to recover their margins.Australian solar pioneer Stuart Wenham predicts that the cost of making solar PV modules will fall another 50 per cent at least by 2020 – even after the 80 per cent fall in the last few years, although consumer prices may not fall as much.

Even so, a fall in costs of such magnitute highlights the enormous potential of solar PV in the modern electricity grid. Wenham noted that rooftop solar had already reached grid parity in more than 100 countries, and was approaching parity at a wholesale level in competition with fossil fuels such as coal and gas.

The levellised coat of rooftop solar is estimated at around 13c/kWh in Australia – some say it is already less – so a further fall of near 50 per cent will make it a compelling product for households and businesses looking to reduce the exposure to the high cost of grid infrastructure. At those prices, it will also be well below the cost of new coal and gas, and even match prevailing wholesale prices, causing a radical remodeling of the grid.

Wenham used two interesting graphs to illustrate his point. The first is the assumed fall in costs over the next 8 years. “Solar has always been thought of as costly. That is no longer true,” he said during a presentation at the Solar 2013 conference in Melbourne.

(This and the other graphs are sourced from the International Technology Roadmap for Solar PV).

The second indicates why consumer price falls will not match the scope of those cost reduction because the market needs to be rebalanced. As this graph below illustrates, the relationship between price and market size has gotten out of sync in recent years – mostly because of the increase in capacity encouraged by various subsidies and incentives – and this would need to be redressed for the major solar manufacturers to continue to operate.