In 2010, the average cost per DC Watt of solar photovoltaics on a utility-scale installation was around $4.57 USD.
By 2015, this number dropped down to $1.82 USD. By 2020, this number has dropped to around the $1.00 USD mark and is expected to continue to go down. However, the cost of the solar panels themselves are only one part of the equation.
There are two additional factors that affect the competitiveness of solar panels when compared to fossil fuel power generation.
- The amount of sunshine available
- The energy policies in the region
The Amount of Sunshine Available
The following map shows the hours of sunshine per year in various locations. The capacity factor of the solar panels is roughly proportional to the solar irradiance.
Cutting the capacity factor in half roughly doubles the LCOE. Not surprisingly, location is key!
The Energy Policies in the Region
The energy policies in the region can have a massive effect on the viability of solar power.
Let’s take the United States as an example. The federal investment tax credit (ITC) and the modified accelerated cost recovery system (MACRS) are two policies that have a very positive effect of the cost of solar.
Here is a comparison of the levelized cost of electricity (LCOE) for solar PV with and without energy policy incentives. We’re using 2017 costs as a basis for the calculation.
The Modified Accelerated Cost Recovery System (MACRS) and Double Declining Balance (DBB) are both tax depreciation schedules in the United States.
Can Solar Panels Get to Grid Parity?
The current consensus amongst industry experts is that we can get to grid parity without any additional technological breakthroughs in solar cells. Increases in manufacturing efficiency and capacity should continue to drive prices down.
The trend of costs decreasing as the cumulative production volume of something increases is a common one in many industries. This is called the “80% learning curve”, and many solar PV companies are hoping to ride it to grid parity.