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What's Happening from Environmental Building News

March 1, 2008

PV Prices Rising

Historical Experience Curve for PV Modules

Persistent silicon shortages and high demand are causing prices of PV modules (and installations) to rise in recent years, even as production, measured in peak megawatts, has increased.

A recent report by PV News indicates that the average cost of photovoltaic (PV) installations has risen slightly in the last three years, from $6.93 per watt in 2005 to $7.25 in 2006 and $7.62 in 2007. The escalation in price is a departure from an eight-year trend in which increased demand for PV systems resulted in consistent price reductions (see graph). The report consists of data from California and New Jersey, which together represented over 85% of the U.S. market in 2006 (due to particularly attractive rebates). Although data are not complete, Steven Strong, president of Solar Design Associates in Harvard, Massachusetts, and an expert in building-integrated-PV systems, confirmed the trend. “The industry is under increasing demand,” he told EBN. “Manufacturers are trying to add more production capability but that takes a while to come online.”

According to market reports, the industry has also grappled with persistent polysilicon shortages, causing the average selling price of solar cells and PV modules to rise in recent years, including during the first quarter of 2008. “Modules are 50%–60% of the cost of the entire system,” said Strong, who predicts that “you won’t see cheap PV modules in the near term.” Strong noted that less expensive technologies, such as thin-film solar cells, are unlikely to lower prices for customers, because an oversubscribed market provides little incentive for manufacturers to keep their prices down.

Especially for commercial electricity customers, power-purchase agreements—in which companies pay the upfront costs of solar-power projects in exchange for a contract requiring the customer to buy the resulting electricity (see EBN Vol. 17, No. 2)—may be one way to handle these rising costs.

– Rachel Navaro

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