Price of PV systems is not likely to drop much.

by Ginosar  


For many years solar advocates project with "great certainty" that the price of silicon photovoltaic systems will drop substantially as popular demand increase. This is contrary to actual market experience and contrary to basic economics. They use two main arguments for the "coming price drop" which is always just around the corner. One is comparison PV with computer chip price drop; another one is price drop with quantity.

1. Computers are the opposite of PV. Almost all PV systems are made from highly refined silicon slices mounted in large panels. Computers also use similar silicon slices but in the opposite way- make them very very small. Again, the only thing computers and PV system share is that both are made from highly refined silicon slices. All other key factors are opposite. Computer manufacturing concentrate diligently on putting a larger and larger number of transistors, the basic computer element, per silicon area. Their goal is to minimize the unit size thus uses less and less costly silicon per computing function. They do not reduce the price of the refined silicon, they put more capability in each silicon chip.

It is the opposite with PV. PV systems needs very large amount of silicon to be exposed to the sun to capture sufficient amount of energy. A PV roof system is typically 7 meter square per kW, 50,000 times the typical size of a computer chip. Therefore, there is no relationship between price drop per computer function and hoped for price drop of silicon PV.

2. PV price will NOT drop by increase demand and manufacturing. Producing "free" electricity from the sun is a very appealing proposition. Therefore PV systems has appeal beyond their energy production. PV price projection thus can more correctly be compared to the price of the popular Toyota Prius hybrid car. A three kW PV roof system cost about $5,000 more than a full feature Toyota Prius, $25,000. Prius buyers are willing to pay substantial premium in order to reduce their CO2 footprint. A commendable decision. However, this premium price did not drop despite substantial increase in Prius production in the last few years. High demand allows Toyota to retain its high prices.

Similarly, PV command higher prices that do not show any decline. When we add to the emotional attraction of PV the considerable rebates by local and Federal governments, the price of the PV is more likely to rise than to drop. Buyers look ONLY at their own out-of-pocket costs. Seller's emphasis buyer's net price all along the sale cycle.

Demand will be kept up by rebates and PV system price will increase due to the rebates.

The likelihood of substantial price reduction is extremely unlikely. It contradicts evidence, it contradicts basic market experience. The industry is mature, with savy advertisement, and generates billions in yearly profit.

The US can not afford to waste nearly a $ Trillion on old, inefficient PV technology.

..."Severin Bornstein, director of the University of California Energy Institute, said there is no guarantee that cost (of PV) will decline- and that prices could actually increase as demand for silicon goes up.

Borenstein said the money would be better directed towards solar technology and improving the amount of energy generated per panel rather than paying for expensive materials being manufactured today. He also suggested that energy efficiency improvements and wind power would be cheaper.

"This plan is very inefficient way to push forward an industry," Borenstein said. "It's like building a bigger freeway with the hope that somebody will build better cars. We should be subsidizing research and development."

He suggested that solar power is "an intuitive appealing notion" that does not make economic sense.

(Sacramento Bee Dec 18, 05 p A4 Solar: Critics says money better spent on more research)



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