March 13, 2009

Solar Power Costs Declining

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The cost of installing solar is trending downward. Companies that aren’t in position to reap the rewards will fall behind their competitors, according to a report from Photon Consulting LLC.

The report, “The True Cost of Solar: Race to $1/w,” suggests that by 2012, in sunnier areas, solar power will be generated for less than 10 cents per kilowatt/hour. An executive summary of the report is available here.

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While we all welcome the eventual day when solar PV power achieves price parity with traditional power sources this report appears on the surface to be nothing more than marketing hype to sell an in-depth yet clearly faulted study. Do the math and one finds that in order to achieve a five year simple payback, something no Wall Street firm, VC, or private equity investor would ever accept, and with all of the known financial incentives, rebates, and ITC added together a solar PV system must be installed for under $3 watt net inverter output to be competitive.

That does not include risk abatement, maintenance, cleaning (full power requires clean, soot / particulate free panels), and insurance (provided you can even obtain insurance).

So the practical installed cost to truly be competitive with traditional power sources on a five-year basis is closer to $2.50 a watt net inverter output installed.

The solar industry is its own worst enemy when they go off making these outlandish claims.

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