The Price of Solar Electricity Expected to Drop By 50% This Year
A recent report from Greentech Media, citing New Energy Finance, says that the price of creating electricity from solar sources will decrease by up to 50% this year, compared to 2008. The main cause for the price drop is the cheaper solar panels on the market today.
This lower cost is actually the price over the entire period of time that the plant will function. This number is used by banks and utilities to find out how much time it takes to recover their investments and what are the operational costs over the entire life of the plant.
The worldwide market price dropped to $160 for a megawatt hour this year, according to the solar research head of New Energy Finance, Jenny Chase. This price is based on solar plants located in spots that are sunny for a long period over the year, like deserts. In places like these, solar panels can use a thin film, which drops the price of the system.
If the panels are placed in places with less sun, sometimes this means the need to use solar panels that are made out of crystalline silicon, which is more expensive, doubling the price of the electricity that is produced.
Overall, the price of geothermal and wind energy is expected to decrease by up to 10% this year, compared to 2008.
Thanks to the drop in costs, even as governments reduce the subsidy amounts, we see an increase in the demand for solar panels. The smaller price also means that new markets can be open, where the expensive solar panels wouldn’t have been feasible.
Besides Japan and US, other large markets for solar energy are Spain, Germany and Italy. India and China are two countries that recently started to implement programs to incentivize solar energy, so the local demand for solar panels should increase. Local manufacturers of solar panels are expected to benefit most from these programs.
If governments don’t use incentives, the cost of solar electricity can remain prohibitive in some cases, making it easier to rely on coal and natural gas instead of switching to solar power. Until prices drop enough to make solar power feasible by everyone, government subsidies are essential.
