The Positives and Negatives of an Exponential Drop in Solar Cost

The cost of a unit of solar energy appears to be following Moore’s Law with solar costs dropping exponentially from $22 a watt in 1980 to $1.40 a watt today. But this positive price development for the consumer could prove to be a temporary set back for the solar industry. 
Moore’s Law, originally written to explain the advancement of computing hardware, predicts that the efficiency of technology in relation to price will double about every two years. If solar tech continues it’s current pattern it will cross $0.12 per kilowatt hour, the current average retail price of electricity, in 2020. In 2030 solar electricity will likely cost half the price of coal power. This price decrease is due to manufacturers learning to fabricate solar for less and the increase in solar cell efficiency (with 20% to 41% efficiency today – an unheard of rate 30 years ago).

Obviously, the plummeting price of solar is good news both for consumers as well as the environment. The cost of solar panel installation dropped 20%, which explains why solar panel installation continues to grow by 15% per year. The average cost of a solar array is now $30,000 before the 30% federal tax credit. Solar is also the most readily available and renewable energy source. “In 88 minutes, the sun provides 470 exajoules of energy, as much energy as humanity consumes in a year.”
solar But unfortunately, for the solar industry, there is Moore’s Second Law. The Second Law states, “As the cost of… power to the consumer falls, the cost for producers to fulfill Moore's law follows an opposite trend: R&D, manufacturing, and test costs increase steadily with each new generation…” More and more manufacturers jump on the low production cost bandwagon, increasing competition, and driving down profit margins. In just the last six weeks manufacturers reduced solar panel prices by 15 percent, but prices are falling faster than manufacturing costs. 
One light at the end of the tunnel for manufacturers is the emerging solar industry in India. Export-Import Bank in the U.S. just approved a $16 million loan to India’s Azure Power Rajasthan to construct a 5-MW project using the First Solar’s (a U.S. based company) panels.

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  • Posted on Aug. 27, 2011. Listed in:

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