Over the last couple of years there has been a clear global downward trend in the prices for solar cells and microchips. There are a number of underlying reasons for this trend, which include oversupply of the commodity materials that the solar cells are manufactured from, reduction in European and American government subsidies to solar companies and manufacturers, oversupply of cheap solar panels produced in China, and new players from China and Taiwan in the supplier mix. While this reduction in prices has been positive for consumers both in Europe and USA who have been taking advantage of the lower prices to either install or lease solar panels for their homes and businesses, this downward trend has contributed to a number of big bankruptcy cases among both US and European manufacturers. It remains to be seen whether this trend will continue and what will be its consequences for consumers of solar power and for the growth of the industry itself.
Polysilicon Prices Drop
Polysilicon, a brittle charcoal-colored semiconductor baked in ovens at 600 degrees centigrade, is a cheap raw material that is used in the manufacturing of solar cells and microchips. According to Bloomberg research, only three years ago it sold at $475 per kg, but since then the top five producers have more than doubled their output, causing the prices to drop a whopping 93% Currently, the price for polysilicon is only $33 per kg. This overproduction trend is set to continue according to analysts at Macquarie Group Ltd: next year the industry is projected to produce 28 percent more of the raw material than will be consumed, which is up from 20 percent this year.
Changes in government incentives
Int the recent months governments in US and major European solar power producers such as Germany have started pulling the plug on subsidies and incentives to the solar industry. This change in government policy is due in part to the economic crisis and its aftermath that affected the banking industry, and in part to a sentiment among policy makers that now the industry is mature enough to survive on its own without federal tax dollar support. Previously, in Europe these programs have been successful in fueling consumer demand for solar systems, but also made a significant contribution to bringing down the unit cost of solar photovoltaics. The largest global solar power producer, Germany, has started to cut subsidies as early as June 2008. During that time, German government approved a law cutting its solar subsidies by 10%. Moreover, under this law subsidies are scheduled to fall another 8%-10% each year for the following 3 years. In the US, the Obama administration, which has been an avid supporter of the budding domestic solar industry which promised to deliver more jobs to the struggling economy, has taken a lot of heat as a result of a recent string of bankruptcies filed by major US solar manufacturers such as Solyndra and UniSolar, who were forced to shut down their plants and laying off their workers.
New solar suppliers in the mix
Another important underlying cause of the retail solar module price reductions is a shift in module supplier mix. Over the last five years, European, Japanese, and US manufacturers have lost a staggering share of the market to Chinese and Taiwanese manufacturers. Chinese manufacturers are able to offer solar panels at significantly lower prices due to lower labor, materials, production and infrastructure costs as well as sizable government subsidies that are being pumped into the Chinese solar industry to make it competitive among the leading solar industries of Germany, Japan, and USA. Currently, A Chinese-made solar panel with 220 to 240 watts of power costs between $165- $196, while an American-made one with 240 to 260 watts costs $240- $288. By being able to offer such rock bottom prices Chinese manufacturers captured 60% of the 2.8 billion US solar modules manufacturing sector. In fact, this is the reason why so many of the US manufacturers have been forced to file for bankruptcy and have demanded that intervention from the US government in the form of punitive import taxes for Chinese imports of solar panels. Another factor that contributed to the drop in global prices is that the Chinese and Taiwanese manufacturers have flooded the global market, producing excess supply amongst weakening global demand. Data compiled by Bloomberg found that due to excess production capacity in 2011, producers were forced to lower prices, depressing margins and prompting 15 of 17 members of the Bloomberg Large Solar Index to post quarterly losses.
Prices for solar panels hit an all time low
In 2011, prices for solar panels fell 47 percent. According to research and analysis by SolarBuzz (an NPD Group Company), as of March 2012, 329 of all solar module prices are below $2.00 per watt (€1.48 per watt) or 34% of the total survey. In February, there were 302 price points below $2.00 per watt (€1.52 per watt), 31% of the survey. A number of German retailers are offering the lowest industry prices on various products. For example a German made multicrystalline silicon solar module is $1.06 per watt (€0.78 per watt). A German monocrystalline silicon costs $1.10 per watt (€0.81 per watt) The lowest thin film module price is $0.84 per watt (€0.62 per watt), also from a Germany-based retailer.
By 2015, Suntech’s in-house analysts predict that solar electricity will be as cheap as grid electricity in half of all countries.
Levchik (Leo) is a renewable energy activist from Boston, MA, and has been involved with alternative energy and green construction since 2004.
In 2009, Leo and his green roofing company (CoolFlatRoof.com) sponsored Boston’s Solar Decathlon Team, providing materials and installation labor to install a cool white roof on the top of Curio home (Joint effort by Tufts University and Boston Architecture College) – more info about the project here.
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