Price per Watt Dips Quickly

The price of a single solar module in Europe fell 2.2% (10 euro cents) to 4.34 euros per Watt. The August price was almost 8% below that of August 2008 and represents a new record low. And remember, this price survey is for single modules, so large orders would get lower prices.

In the US, prices fell 2.4% (11 cents) to $4.45 per Watt. The August price is now less than 3% above the record low set a few years ago. The price of solar electricity fell almost 2% to reach a new record low in all three categories:

Residential fell below 36 cents per kWh for the first time at 35.89 cents, commercial fell below 26 cents for the first time at 25.77 cents, and industrial slid to 20.07 cents per kWh.

The eight-year survey witnessed two new monthly records: number of lower prices for modules and the rate of decline (described above). A total of 176 modules had lower prices (12.7% of the survey) compared to the previous record of 126 (9.2%) in May of this year. The previous record change was an increase in prices at 142 modules in August 2005.

And Demand Poised to Grow

Solarbuzz also reported that more solar projects are moving again, a sign that demand should pick up quickly in the months ahead. Economic recovery, green governmental policy, and more attractive prices are the main drivers of this increase in demand.

Bottom line: While solar electricity prices remain higher than most conventional electricity markets, they are getting more and more competitive as the months roll by. September should be an exciting month as prices continue to decline and finally reach a record low in the US. Combining further solar price reductions with a return of tight oil market this winter should help the price of solar reach its most attractive point ever relative to other energy sources.

Onwards in the Sustainable Energy Transition-

Prices fell faster than costs

In the first quarter, the average selling price (ASP) of solar modules fell like a rock. Meanwhile, solar producer costs fell less quickly. For instance, China Sunergy reported its ASP fell 45% from $2.97 in the fourth quarter to $1.64 per watt! This price is 50% below their first quarter 2008 price. Sunergy took a loss of $8.8 million as its costs fell a slower ~37% pace.  They estimate a return to profitability in the second quarter on lower costs (since most of their residual high-priced polysilicon has been cleared from inventory).

Lower Polysilicon Cost Allowing Profit at $2 per Watt

Polysilicon production has now more than caught up with demand.  And major polysilicon producer, Michigan-based Hemlock Semiconductor, just announced yesterday the ahead-of-schedule completion of a plant to make an additional 8,500 tons of polysilicon per year (a more than 10% increase in its global supply). The spot price of polysilicon is reported to have fallen more than 60% from last year to as low as $65 per kilogram. Such a low polysilicon price brings silicon-based solar producers back into competition with thin-film players like First Solar moving forward.

Shipments likely to grow in second quarter

Many companies are not only predicting a return to profitability in the second quarter, but an increase in sales. For instance, Trina Solar expects to ship 23-33% more modules April-June (60-65 MW vs. 48.8 MW in the first quarter). Overall, 2009 may be a repeat of 2008 capacity growth levels ~6 GW, but revenue will be significantly lower. As long as solar producers are successful at reducing costs, the future is beginning to get bright again for industry growth.

Within a few days, I’ll share the early June tally for solar prices. And we’ll get a sense of how quickly this climate-friendly energy source can get competitive with the fossil fuel-fired power plants that dominate today.

Onwards to Sustainability-

Prices Today Require Government Incentives

Solarbuzz.com estimates that May 2009 solar PV prices equal 36.88 cents, 26.68 cents, and 20.78 cents per kWh for residential, commercial, and industrial electricity, respectively. Thus, only the state of Hawaii (with its 25+ cents per kWh average has an electricity market where solar can compete with little supportive policy this year. But PI projects solar module prices to fall 25% in 2009, 19% in 2010, and more than 10% in both 2011 and 2012. This would translate into a locked-in price for solar electricity of around 20 cents, 15 cents, and 12 cents per kWh (assuming that installation costs would also fall, though around half the module price drop pace).

2012 Grid Parity in Almost Half the US

Huge electricity markets such as California, Texas, Florida, and New York will join Hawaii by 2012 as long as electricity prices keep rising (I use a price rise of 3.5% per year – much less than the 4.8% per year increase over the last eight years). Since there is state and federal policy supporting solar through the mid-2010s, private consumers already benefit from cost-effective solar in many of these states (Why else would Wal-Mart be deploying it?). And thanks to falling prices for solar, the amount of government support per kilowatt can be lowered as it becomes many times more effective at deploying solar.

Even if electricity prices only rise 1% per year (thanks to effective efficiency and low-cost wind power deployment), solar grid parity is poised to arrive during the mid-2010s.

A New Notion of Grid Parity

Since solar has a locked-in price due to a marginal cost close to zero as you harvest the free sun, grid parity is not when the price of solar is equal to the price of conventional fuels. I am saying that it is instead when the price of solar is equal to the expected price of conventional fuels halfway through the life of the panels. So grid parity in 2012 based on a price of 20 cents per kWh means that I expect the price of electricity in a given market will be at least 20 cents in 2024.

Why Should Fossil Fuel-Powered Electricity Prices Rise

A rising price for oil beyond $100 per barrel is likely due to the rising marginal cost of production. Such an increase would pressure natural gas prices to double back above $9 per MBtu and weigh bullishly on electricity prices. Along with the cost of carbon dioxide finally being internalized into the cost of burning fossil fuels, solar power’s relative price is set to collapse.

Bottom Line: This time of sustainable energy transition is an exciting period to be around for. Solar panels today are like cell phones in 1999. In just a few years, they will be ubiquitous. Passage of federal climate legislation is a crucial step we need to take soon, and then we can all reap the rewards from leading a low-carbon energy future — green jobs, energy security, lower electricity bills (while prices per kWh may rise, efficiency sends the per capita bill down), cleaner air, and a more stable climate.

I’ll keep you up-to-date as solar reaches grid parity in market after market like a set of slow-moving dominoes.

Onwards-

Europe price falls to record low

The price per watt of a single module fell to 4.52 euros (a drop of 2 euro cents (.4%) from April). This is a record low and is 4% lower than last May.

US solar price at 3 year low

The price in the US fell four cents (.8%) from April to $4.70 per watt. This is 2.3% below last May and the lowest price since December 2005. Prices are now ~8% higher than their 2004-05 record low. Thus, if prices continue to slide at the current pace we will see new record lows in the US by early 2010.

Solar PV Electricity Prices Down .4%

The fall in module prices translates into a fall of .09 cents (.4%) in the price of industrial solar electricity to 20.78 cents per kWh. This price is the lowest since March 2005 and only 2.4% above the record low set in June 2004. Therefore, we are poised to reach record low solar electricity prices by the end of the year.

Bottom line: Slower demand in 2009 has allowed solar producers to more than catch up with demand. Prices are falling significantly, but have a ways to go before they set record lows in the US and worldwide. And since the price of natural gas and coal are currently ~70% below their 2008 highs, the solar market will continue to be policy-driven until potential grid parity in the early 2010s via fossil fuel price recovery and further solar price reduction.

Grid Parity by 2011?

Such cost reduction puts them on track to more than achieve their goal of 65 cents per watt by 2012. In fact, if their costs fall 5% per quarter through the rest of 2009 and in 2010, they would reach 65 cents per watt by January 2011. Such a price would probably translate into grid parity in 2011 as long as solar installers can reduce their costs as well.

Profits More Than Triple 1st Quarter 2008

First Solar reported profits of $165 million ($1.99 per share), versus 2008′s $47 million (57 cents per share). First Solar’s stock price has so far shot up 25% on the news to almost $190.

As a low-cost leader, First Solar is doing much better than many of its peers who have falling profits due to the recession.

Bottom Line: First Solar is showing the world that solar can compete even in a low energy price future. A few more quarters like the last one for them, and grid parity will become a reality for solar in many of the world’s electricity markets.

I don’t own any First Solar stock, though I wish I did

Onwards to a climate-friendly energy future-

Whether domestic solar installations will maintain the quick pace of the first quarter, it appears that the market will grow in 2009. This is a huge feat amidst an economy expected to shrink more than 2.5 percent.

Wal-Mart & Whole Foods Celebrate a Solar Earth Day

Whole Foods announced today that they will triple their solar installations from powering 10 stores to 30 stores nationwide. Wal-Mart made a similar commitment: to roughly double its solar use from the 18 stores that currently have large solar installations.

Texas Poised to Join the Solar Party

Texas has been the US leader in wind power for several years now. But despite outstanding solar potential and relatively high electricity prices, Texas was not even a top ten solar state in 2008. The Texas Senate today passed a bill which could dramatically change that. The bill authorizes the collection of small monthly contributions from utility customers that add up ~$100 million per year over five years to support solar deployment. The program will combine with federal incentives to pay as much as 50-60% of the cost of new solar. If this bill becomes law, Texas may soon compete with New Jersey for the #2 spot after California.

Bottom Line:

A mix of governmental support, private environmental initiative, and carryover demand from 2008 appear capable of keeping the solar industry healthy enough to grow in 2009. If so, 2010 could be the real coming out party for solar as a major energy player on the global stage.

Exporting Green Power

An installation of this size is estimated to provide all the power needs of the small nation-state and even allow them to export electricity to their neighbors in Italy. The Vatican already has a sizable solar installation that powers the 6,300 seat dome where weekly mass is held. That system was made possible by a donation of $1.5 million of panels from German solar producer, Solarworld. This time around, Italy’s supportive renewable energy policy (a generous feed-in tariff) helped to make the project economical.

The 100 MW solar farm is slated to be built ground-mounted on 740 acres that the Vatican owns north of Rome. Such a large installation is equal to almost half the size of Italy’s whole solar market in 2008. Initial cost estimates run as low as $450 million which, if realized, would be a leap forward in solar cost reduction to below $5 per watt including installation costs (making the source much more competitive with new fossil fuel-fired power plants).

It Doesn’t Stop with PV

The Vatican also plans to utilize solar thermal systems to heat and cool the staff cafeteria. And they are looking into projects to process their waste and even their horses waste into usable energy as well.

Will Other Religious Institutions Lead as Well?

Caring for God’s Creation is a value spoken by practitioners across the world’s faiths. I hope these visible efforts by the Vatican help to inspire similar progress in the Sustainable Energy Transition at churches, mosques, and synagogues — and in the homes and schools of their practitioners. Thank you for your leadership on environmental stewardship, Pope Benedict XVI.

The US overall solar market grew at a tepid 17% rate in 2008 with cumulative installations at 1.265 GW. Solar PV and water heating systems were installed at a record pace, but pool heating systems grew slower than in each year 2005-2007. No new concentrating solar power (CSP) plants were added to our national capacity (~420 MW), but over 6 GW are currently in the pipeline. Grid-tied PV and solar water heating capacity grew by 58% and 40%, respectively.

States in the Lead

California is again the PV market leader with more than half of the national capacity installed in 2008. California now has over 500 MW of PV capacity. New Jersey remained the #2 state market despite its small size. The rest of the top ten was made up of Colorado, Nevada, Hawaii, New York, Oregon, Arizona, Connecticut, and North Carolina – respectively. The US now has more than 1 GW of grid-tied solar PV.

Hawaii is the leader in solar water heating systems. The state now requires solar water heating in all new construction. Florida is the #2 state, followed by California, Colorado, Arizona, and Oregon. Total national installations currently total 485 MW, which remains far behind China.

Though unknown to many, solar pool heating remained the largest segment of the US solar energy market in 2008. It grew 762 MW or less than 10% due to the housing price bubble.

Total solar energy capacity finished 2008 at almost 9 GW compared to wind’s ~25 GW. So when some people say solar is miniscule, they are misleading. While solar growth will be slower in 2009, 2010 promises to be a big year that makes the solar industry comparable to its renewable cousin wind and other more conventional incremental energy options.

Here’s to US growth catching up with our friends in Germany and Spain within a couple years — putting our country back in a leadership position of the Sustainable Energy Transition!

In the US, module prices were last at this level in April 2006. But they still have another 10.5% to fall before they pass the all-time low ~$4.33 (20.3 cents per kWh) reached in 2003-04. Travis Bradford of the Prometheus Institute believes module prices will fall 20+% in 2009 and even below $2 by 2012, fostering a global market size similar to the current wind industry within three years. The global economic challenges of 2009 seem to guarantee the solar price slide will continue throughout most of the upcoming year if not longer since manufacturing supply has caught up with demand.

It’s an exciting time for solar as the costs get more competitive with fossil fuels in the months ahead. I hope SET’s involvement in the Solar College Initiative will help higher education institutions take advantage of this growing opportunity, and also help the solar industry keep a sufficient level of demand during the tough economic quarters to come.

Onwards in the Sustainable Energy Transition!

And solar is not the only renewable energy Atlantic City (AC) can brag about. In late 2005, AC built a 7.5 MW wind farm to power its wastewater treatment plant. The five 1.5 MW turbines have long been the only major wind installation in New Jersey, though the state plans to build an offshore wind farm in the early 2010s.

Of course, these solar and wind systems don’t mean Atlantic City is necessarily a perfect model for the sustainable energy transition ahead. AC is self-proclaimed “Always Turned On,” and many of those lights can probably use an upgrade to compact fluorescents and LEDs.

Nonetheless, Atlantic City definitely deserves some praise for their leadership in renewable energy deployment. And New Jersey also deserves kudos since state incentives were crucial to make these projects viable. Princeton University and other NJ institutions can get inspired to utilize more carbon-free renewables for their power needs as well.

Here’s to continued renewables and efficiency deployment to prevent us from needing to build any more fossil fuel-fired power plants throughout the US and beyond. Thanks for helping to lead the way, AC!