Solar prices have finally begun their downward trajectory in January, as revealed by the monthly survey just released on solarbuzz.com. Solar panels have not had the volatile prices of fossil fuels over the past year. Solar prices neither rose in early 2008 while coal, oil, and natural gas skyrocketed through early July nor did solar prices fall 60+% since July like those same fossil fuels. That steady price made solar look brilliant in the summer but it backfired when conventional energy prices fell amid the fourth quarter financial crisis. This month, solar prices are finally beginning to slide toward competitiveness as the wild energy ride of late continues into 2009.
In Europe, the January retail price of solar modules fell six cents to a record low of 4.61 euros per watt peak. This was a couple euro cents below the 2004 trough. US solar prices only fell one cent to remain at $4.84 per watt, 11% above 2004 lows. The strength of the euro currency is a major factor in the larger price drop in Europe. In fact, if US prices stayed constant, an equivalent price in Europe using today’s exchange rate of ~$1.35 per euro would translate into a dramatic fall (20+%) in solar’s price below 4 euros per watt. An end 2009 price level below 4 euros per watt seems probable as polysilicon shortages are relieved by higher supplies and lower demand.
For those of us in the US, prices may drop much slower if the dollar remains weak. I would still guess that prices will drop close to the 2004 record low price ~$4.35 per watt by the beginning of 2010. They may even drop further as I discussed last month.
When the price is relayed as cents per kWh, global solar fell .13 cents (.6%) to a January price of 21.19 cents per kWh. A 10+% drop in solar prices during the current year, as I believe is probable, would send prices below 20 cents per kWh toward grid parity in more expensive markets in Germany, Japan, Hawaii, and elsewhere.
Supply catching up with demand can help the solar industry get closer to its goal of grid parity and relevance across most markets. But Obama & Co. and other government actors in the US and abroad who want to support continued solar innovation will need to monitor solar industry profits. We may need more government incentives to help ensure that this promising technology doesn’t lose all its recent momentum in the current economic downturn. Green stimulus packages with solar provisions can help solar become a solid player in the energy sector as wind has emerged in recent years (the second largest new source of electricity by capacity).
SET aims to give you regular updates throughout the year ahead as the crucial solar industry and other sustainable energy sources develop to meet the unique challenges of 2009. Let’s turn the climate and economic crises of today into jobs and security opportunities for tomorrow.