Solar Costs Are Dropping. Is It in Your Future?

With all the bad press from the federal bailout of Solyndra, one fact was forgotten. Sales of Solyndra’s alternative solar cell design dropped, leading to its bankruptcy, because of a glut in the market of polysilicon, the semiconductor used in the most common type of solar panel. In fact, polysilicon’s price was reported to have plunged by about 93% since 2009 making standard designs of solar panels now less costly than Solyndra’s and more affordable than ever.

So what does this mean for the solar industry, and does that make getting electricity from solar a more viable alternative for a facility? According to Bloomberg, because the cost has dropped so greatly, the top five producers of polysilicon have doubled output and will likely produce more polysilicon than needed to meet global demand for solar panels in the foreseeable future. While this may lead to a shakeout in the industry and some shutdowns, all prognostications are for a settling of the market price around or only slightly higher than its current price, leading to a period of cost stability for polysilicon.

Given the dropping and likely price stability for solar panels, is this the time for a facility to “go solar?”  Some recently published articles indicate that some key concerns remain. First, price. While polysilicon prices have dropped markedly, it represents only about a quarter of the total cost of solar PV. Last summer, the price for solar was about $0.20/kwh, not competitive with fossil fuel-based electricity from a utility. A drop of 25% may still not make it competitive. In addition, the upfront cost to install solar panels on a roof or in a parking lot is still relatively high compared to wind turbines and, of course, compared to the relatively low cost for hooking up to existing utility electricity lines. So while prices for a system will drop, it is unlikely to be a sure fire alternative to traditional electricity sources from a direct cost point of view.

Another concern is government subsidies. A decline in the price for solar PV may signal government agencies in these cost-cutting times to reduce or no longer subsidize potential solar purchasers. Subsidies, even if small, are important to potential solar purchasers as it signals to the company a reduction in long-term risk of such purchases.

A final thought concerns the public. Besides being able to utilize “free” electricity from the sun and possibly selling excess electricity generated back to the grid, too, how will a company’s stakeholders and the public view this? While the customer base (both retailers and the public) would be pleased to see publicity photos of new solar PV cells providing clean energy, companies know that the bottom line is holding the line on prices. Since a company by nature must pass all costs on to the products it sells, companies are concerned that solar PV may still put them in a non-competitive position compared to relatively cheaper electricity from the established grid.  Executives are still concerned about the issues that have been holding up solar PV growth in the first place.

Marc Karell is the owner of Climate Change & Environmental Services. Read more useful material in the company’s blog: www.CCESworld.com/blog. CCES experts can help your firm evaluate whether alternative energy is right for you and can help develop a program and research the best available subsidies to lessen the upfront costs and risks for you. CCES has the technical knowledge and real life experience to help all kinds of firms set up “green”, climate change, and sustainability programs that result in many of the benefits listed here. We can help you organize your program, as well as gain the maximum financial benefits possible. And we can help you get the most publicity out of the program results and train you to run your own program independently in the future.