Graph of the Day: The plunging cost of solar PV

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The plunging cost of solar PV from the end of 2008 to the start of 2012 has been well documented. It amounted to a fall of around 70 per cent. What is less well understood is that the price of solar modules continues to fall dramatically, as our Graph of the Day clearly shows.

This Graph of the Day is taken from Monday’s presentation of the annual results of Yingli Green Energy, which has overtaken Suntech and First Solar to become the world’s biggest manufacturer of solar PV modules.

It shows two things, the non-silicon cost per watt has fallen 25 per cent over the past 12 months, and the cost of silicon has fallen even further. In the first quarter of this year, Yingli expects its non-silicon costs to fall “another few cents” per watt, and for silicon prices to stay in the low $20s/w over the year.

The good news for Yingli, and for other solar manufacturers, is that while manufacturing costs continue to fall, the price of modules is stabilising and may even rise. Yingli expects its margins to emerge from negative to positive mid-to-high single digits over the year.

The reason for this is that in Europe the levelised cost of the electricity for solar PV is now below the retail price of electricity in many markets, particularly in countries like Germany, Italy and Spain, and the economics of solar PV begin to make sense without government support.

“Solar solutions built on these new models will emerge during 2013 and form the backbone of sustainable PV industry and infrastructure within Europe.”

What’s more, the Japanese and the US markets will continue to surge, as will Latin American markets (where Yngli is sponsoring the FIFA World Cup in Brazil in 2014). Most of all, China is emerging as the biggest market, supported by a 1RB/kWh (15.6c/kWh) tariff for utility scale solar, and free grid connection for all distributed solar installations less than 6MW. (Australian solar developers must weep in frustration)

Still, that may not be enough. One analysis from Nomura Securities suggested that Yingli will need to make margins in the 20s (per cent) to deliver sustainable profit. Maxim Group, though, said Yingli’s strong cash balance gives it “years of breathing room.”

Here’s a late addition to the story, another graph of the plunging cost of solar PV over the last two years, showing the all-in cost of modules, provided by analysts at US-based Maxim Group.

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Email: giles(at)reneweconomy.com.au