Solar Costs Continue to Drop but Areas of Opportunity Remain

Solar energy is already exceedingly cheap, but experts believe costs will only drop further. Even the overly positive forecasts of yesterday have consistently been beaten by solar energy’s realities, driven by its status as a viable, cost-effective solution. Nevertheless, opportunities to further cut costs remain.

Back in 2000, the International Energy Agency (IEA) forecasted that by 2020, the world would have installed 18GW of solar power. But this amount was surpassed in 2007. “When I got this job in 2005, I thought maybe one day solar will supply 1 percent of the world’s electricity. Now it’s 3 percent. Our official forecast is that it will be 23 percent by 2050, but that’s completely underestimated,” said Jenny Chase, Head of Solar Analysis at BloombergNEF in an article from The Guardian.

Important energy-focused entities are counting on the growth solar to bring a significant cost reduction. For example, the US Department of Energy (DOE) said in a statement released in March 2021 that it had set “an ambitious new target”: slashing solar energy costs by 60 percent before 2030. The Biden-Harris administration set its sights on solar specifically as a cost-effective way to foster decarbonization and move towards a fully-green energy powered economy.

If costs are already cheap, it helps to examine where gains can still be made. The National Renewable Energy Laboratory (NREL) outlines the entire supply chain and where opportunity for improvement can be found, such as in manufacturing and installation. In a roadmap, the laboratory shows how the industry standard silicon solar cell can be decreased in cost over time, with major steps towards this goal already taken between 2015 and 2019. The lowest amount of progress can be made in the final assembly stages and in the cost of silicon and cell metallization pastes. Through processing advancements, efficiency gains and ever greater economies of scale, costs can be cut mainly in cell fabrication, wafer processing and balance-of-module materials.

The module itself will be a main factor in cutting costs, NREL predicts. But another main barrier is the concept of ‘soft costs.’ Issues such as taxes, land acquisition, transmission, overhead and profit margins remain somewhat similar over time. Cutting these costs will be a matter of fostering positive regulation as well.

Even though the Mexican market does feature its own solar manufacturing, the volume dwarfs in comparison to those of market leaders in China. Installation, however, will be of increasing relevance to the Mexican market now that distributed generation-based solar is primed for take-off. But no matter how far costs can be cut in renewable, regulation must be aligned with its development if its real benefits are to be enjoyed. “The cost of renewable energy in Mexico is one of the most competitive in the world, but for it to directly benefit final consumers, regulation must favor its distribution,” said Bruno Riga, Country Manager Mexico & Central America in an MER interview.