It is expected that solar energy will occupy an increasingly important position in the energy mix in the future. This will affect the position of gas within the electricity sector. For that is also, in the long term, dependent on the costs of producing solar energy. This is a good reason for analysing cost trends for this method of generating electricity, referring to past data and future predictions. Why has the price of solar energy dropped so sharply in recent years?
Historical drivers for cost reductions
The silicon (Si) solar cell is the most widely applied solar cell technology. Within the range of Si solar cells, we make a distinction between monocrystalline silicon (mono-Si) and multicrystalline silicon (multi-Si). Mono-Si cells are characteristic for their high efficiency and high production costs. Multi-Si is cheaper because it uses lower quality silicon, but this also contributes to its lower efficiency. In addition to the raw materials costs, two other aspects are important for Si solar cell cost trends: increasing efficiency and reducing production costs.
Silicon solar cell efficiency has not shown much improvement since the late 1990s. And that is understandable. At 25 percent, the maximum has been achieved -in theory- for a mono-Si solar cell. Materials science teaches us that the fundamental limit for Si is 29 percent. But if we take account of reflectance losses and electrical resistance losses in a solar cell, there is only small potential for improvement.
The level of production costs is affected in particular by how efficiently raw materials are used and whether manufacturers have introduced economies of scale or other process improvements. Both aspects are examined in more detail in the figures below. Figure 1 shows the use of Si in the production process. Between 2004 and 2012, solar cell thickness decreased from 300 µm to 180 µm; this is shown by the green bars. During the same period, total silicon used in the production of solar cells dropped from 16 g/W to 6 g/W, a cost saving in raw materials of 62.5 percent.
Figure 2 shows the extent to which total production volume affected production costs. It is clear that a much greater reduction in costs took place between 2006 and 2013 than the 62.5 percent mentioned above, being in fact almost 85 percent. The main cause is the growth in Asian production and its related lower costs.
The pattern of falling costs of the last few years will probably continue. Si prices are falling, but the costs associated with a solar panel do not relate solely to silicon but also to other components. Because the prices of the other components are not falling as quickly as Si, we expect the falling costs of Si solar cells to level off.
There is also scope for new, non-silicon-based technologies, to effect efficiency improvements and further cost reductions. Developing these new technologies will take time, but expectations are that they will cause costs to fall significantly. However, in all probability, we will have to wait until the next decade for these developments.
In the short term, cost reductions relating to Si technologies will continue, admittedly at a slower pace. In the long term, emerging technologies will ensure that costs continue to fall further. We are getting nearer to a time when electricity from solar energy can compete with conventional power stations on price.