The cost development of PV energy

Diversification complicates price predictions

In regards to PV energy, we will focus on grid connected systems only, since they represent the large majority of the market. The cost of a grid connected PV system is composed of the PV module cost and the 'BOS' cost (Balance of System). The BOS consists of the structures for mounting the PV modules and of the power-conditioning equipment that converts the DC power of the modules into the AC grid power.

Prediction not straightforward

Three difficulties arise when trying to predict the future cost development of PV energy starting from existing experience curves.

1. The cost decrease over the past four decades was not at all linear. It alternated periods of sharp decline with periods in which it stayed more or less constant. As a result, experience cost curves that do not represent large time spans can result in a distorted perspective.
2. Various PV technologies exist and are difficult to represent with a single experience curve. New types of PV systems may break through in the near future that completely change the average cost of PV modules.
3. Even if the future cost of individual PV modules can be predicted, this does not mean the cost of electricity generated by those PV systems can be easily determined. Factors such as geographical location, local support mechanisms, and the size of systems will have a major influence on the average PV electricity cost.

The cost development of silicon PV modules

Experience curves for crystalline silicon show that the progress ratio has been around 80% over the past decades. This ratio is likely to stay more or less the same on the medium term. The main cost reduction potential for PV modules lies in PV cell efficiency improvement, a decrease in the price of silicon, and in the building of bigger manufacturing facilities. According to the expert assessments of the NEEDS study, the share of the material price in the total cost of the module is likely to grow in the upcoming years.

The expected progress ratio of the BOS is also predicted to be around 80%. The bottom-up analysis shows that the cost reduction of the PV mounting structures is reaching its limit. However, a significant cost reduction potential is still present in the inverter. Current inverter costs of 0.5 euro/Wp (large system) to 0.8 euro/Wp (small system) can evolve to 0.2 — 0.4 euro/Wp in the foreseeable future.

Concerning the cost of electricity from silicon PV modules, the NEEDS study predicts it will drop below € 0.2/kWh within the next five years in the sunny regions of the world (Spain, the US south-west, India, Australia, and southern China). The same could happen in the more temperate regions of North America and Europe within ten to fifteen years. A study by the University of Jaén (Spain) predicts that for Concentrated Photovoltaic power (CPV), the average level of electricity cost will decrease to 0.119 — 0.148 €/kWh in sunny regions by 2015.

Which innovative technologies will break through?

Once the thin film technology and all the technologies currently under development are taken into account, predictions for the PV cost development become much harder to make. The expert assessments of the NEEDS study show that the efficiency of thin film PV modules could make a big leap forward in the coming decades. Also, modules with a combination of thin film and silicon technology, combining the small material use of the former with the high efficiency of the latter, can lead to significant cost reductions. Moreover, more innovative alternatives are under development such as dye-sensitized photochemical solar cells, conducting polymer cells, quantum solar cells, and modular organic solar cells. It is very difficult to predict which of these technologies — if any — will break through, and if they do, when this breakthrough will occur, and above all, how its learning curve will look.