Rising input prices halt long-term drop in solar costs

A fall in the cost of solar photovoltaic (PV) modules to parity with fossil fuel-fired plants has driven record capacity installations in recent years, but rising raw material prices could slow future growth.

The cost of solar PV modules dropped sharply from $4.90/W in 2000 to $0.80/W in 2015 and $0.20/W in 2020, based on 2015 prices, according to a presentation by module producer Canadian Solar. The mean unsubsidised, levelised cost of energy dropped to $37/MWh for solar in 2020 from $359/MWh in 2009, putting it below other power generation sources, such as wind at $40/MWh, gas turbines at $59/MWh and coal at $112/MWh.

This drove the adoption of solar generation around the world to a record high as more than 100GW of new capacity was installed in 2020. China alone installed around 48GW, a 60pc increase from 2019. Developers plan to increase capacity globally by at least 15pc in 2021, but module costs are likely to increase just as solar power becomes cost competitive without subsidies, which could have an impact on project plans.

Solar modules predominantly use silicon-based technology, and supply shortages have prompted a sharp spike in prices for raw materials including polysilicon and PV glass since last summer. Solar equipment manufacturers expect prices to remain elevated while material producers build new capacity. Polysilicon prices were high in the fourth quarter of 2020 and have recently increased by another third, the president of Canadian Solar subsidiary CSI Solar, Yan Zhuang, said.

Polysilicon prices climbed to an average of 98 yuan/kg ($14.98/kg) last September from Yn59/kg in May and June, and although they slipped back to Yn81/kg in December, they have spiked to an average of Yn108/kg in March, reaching as high as Yn127/kg. At the same time, PV glass prices have climbed to Yn42-43/m² this year from Yn24/m² in July 2020.

The strengthening of the Chinese yuan against the US dollar, euro, Japanese yen and other currencies has further increased the cost of the materials, which are predominantly produced in China. That in turn has tightened margins for solar equipment manufacturers, which are starting to pass on the higher costs to their customers.

"As solar transitions from a subsidy-driven to a market-driven industry, we need to fundamentally re-evaluate today's solar market dynamics. We are approaching the bottom of the solar cost curve and the era of ever-declining solar module prices is largely behind us. In fact, in the near term, solar module prices will increase," Zhuang said.

US targets continued cost decline Solar could account for 30-50pc of US electricity supply by 2035. Considering the impact of costs on solar adoption, the US Department of Energy (DOE) has accelerated the cost-reduction target in its solar energy strategy. It aims to cut the cost of solar power in the US by 60pc within the next 10 years, and is providing $128mn in financing to the domestic industry to reduce equipment costs and accelerate deployment.

The DOE is accelerating its target for utility-scale solar costs by five years — setting a new goal of reducing the cost to 3¢/kWh by 2025 and 2¢/kWh by 2030, from 4.6¢/kWh in 2020.

The funding includes $20mn for the development of thin-film cadmium telluride (CdTe) modules as an alternative to silicon. Although more efficient than some silicon technologies, higher costs for CdTe technology have limited its competitiveness outside the US. The primary CdTe module producer, First Solar, is based in the US and has benefited from tariffs on the import of silicon-based panels from China.

The CdTe PV Accelerator programme will form a consortium under the National Renewable Energy Laboratory to advance CdTe technologies, which account for a fifth of the modules installed in the US. The consortium will advance low-cost manufacturing techniques and domestic research capabilities, aiming to maintain or increase US production of CdTe PV materials and modules through to 2030. It aims to enable CdTe cell efficiencies above 24pc and module costs below $0.20/W by 2025, and cell efficiencies above 26pc and module costs below $0.15/W by 2030.

The DOE is also investing $40mn in 22 research and development projects developing perovskite technology, using lightweight calcium titanium oxide or similar compounds that are more efficient and cost less to produce than crystalline silicon. And the DOE is providing $7mn for projects to enhance silicon-based PV system components to increase their life span to 50 years from about 30 years to reduce the cost of energy and waste.

By Nicole Willing

Solar polysilicon and glass prices

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