Economic Factors on the Modern Photovoltaic Market

School of Electrical & Computer Engineering

Author: Gregory T. Forcherio

SURF Research Symposium

August 3rd, 2011

[1]

Introduction Photovoltaic (PV) research is heavily driven by market demand and green-energy hopes of the future. Commercial and utility level thin film PV systems have almost reached grid parity worldwide, but the residential market comprised of crystalline Silicon has been left behind. Because area is constrained in a residential system, higher efficiency Silicon modules are used to achieve desirable electricity levels. Despite higher efficiencies than industrial thin films, current technologies of crystalline Silicon (c-Si and Sanyo cells) residential systems need to be researched further or refined in order to reach grid parity. By surveying the current market and economy of residential PV systems, the capital cost was broken down into system parts and module manufacturing processes.
[1]

Typical On-Grid Residential PV System

COST

7% 6% 5% 32%

BREAKDOWN
1) Solar Modules 2) Inverter 3) Circuit Panel 4) Loads 5) Meter 6) Utility Co.
Picture from Vaughan Mechanical Blog

35% of inverters used in the U.S. were made domestically [1] Europe dominates inverter production ends up being most expensive electrical part after frequent failure
Where the imbalance starts

Problems and Questions How and where can costs be cut in a residential PV system be cut to reach grid parity? If polycrystalline solar cells can be made 1% more efficient through research, what is the impact on price?

[6]

In an era of energy price competition, all sources of energy

Global Wafer Market Share, 2009
[1]

15% efficiency

are evaluated by their Levelized Cost Of Energy (LCOE).

Capital Recovery Factor Capital Cost

cents ~ 38 kWh
16% efficiency

However, careful module placement and cheap suntracking technologies could lower prices easier

O&M Cost Fuel Cost = 0 for solar cells $

[1]

Poly Si

Wafer

Cell

Module

System
[5]

LCOE

$ kW

1 yr h 8760 yr

$ kWyr %

cents ~ 37 kWh

Btu kWh
Heating Rate

MMBtu
National Renewable Energy Laboratories agrees with this, and has shown module efficiency gains play little role in energy price past ~15% [7]

But yet owns 40% of the global polysilicon market Of cost: 14% 18% 13% 19%
Price Markups 36%

Capacity Factor

Annual Solar Photovoltaic Installations in Selected Countries, 1998-2009

4,000

The three biggest surges in PV market

[2]

3,500

were a result of government incentives!

Rebates
[3]

Module receives 1000 W of power from Sun

25o C

W 1000 2 m

Improving module performance is only a small factor in final cost improvements, but increasing the capacity factor has larger impact
Results and Conclusions Residential PV system costs are highly dependent on imported module and inverter costs as well as government incentives, which can reduce system costs up to 50%. Though much time and money is put into cell efficiency research, LCOE trends show that this may not be

Germany
3,000

Feed in Tariff

Megawatts

2,500

Feed in Tariff
2,000 1,500

pays for certain portion home owners are paid

Spain

of system costs usually >20%

for excess electricity generated into the grid

Rebate
1,000 500

United States Japan Italy

0 1998 2000 2002 2004 2006 2008 2010

If you're going to establish a feed-in tariff, you need to figure out how to make it market-responsive. - Julie Blunden
Vice President of public policy for SunPower Corp.

1m 1m
Modeled Capital Cost based off $2.29/W for a modules
added to $4.81 for remaining costs

the most efficient way of cutting costs. Further LCOE study shows that increasing the capacity factor has a larger impact on cost. Larger steps towards grid parity could result from more efficient wafer and module fabrication, and cheap sun tracking methods [8]. More immediate steps

After rebates and incentives

the up front cost will drop 30% to sometimes 50%

In the U.S., who has adopted combinations of these ideas

[4]

15% efficiency +1% 16% efficiency

Acknowledgements: I would like to thank Xufeng Wang, my graduate mentor, for his guidance and pointing me in the right direction for my research, Dr. Mark Lundstrom, my professor, for giving me this opportunity, and Dr. Muhammad Alam for his help in improving my analysis. [1] U.S. Solar Energy Trade Assessment 2010, Greentech Media, November 2010. [2] L.R. Brown, World on the Edge: How to Prevent Environmental and Economic Collapse, Earth Policy Institute, 2011, W. W. Norton & Co., New York, U.S. [3] A. Luque, S. Hegedus, Handbook of Photovoltaic Science and Engineering, 2nd Edition, 2011, John Wiley & Sons, U.K. [4] Database of State Incentives for Renewables and Efficiency, 2011, Available: http://www.dsireusa.org/incentives [5] Simple Levelized Cost of Energy (LCOE) Calculator Documentation, NREL, 2011, Available: http://www.nrel.gov/analysis/tech_lcoe_documentation.html [6] Gregory T. Forcherio (2011), "LCOE Calculator," DOI: 10254/nanohub-r11406.3 [7] Thin Film Solar Cells: Manufacturing and Installation Cost Considerations, NREL, 2011 [8] $1/W Photovoltaic Systems, U.S. Department of Energy, 2010.

$7.10 W $6.96 W

$0.14 price drop W

Assuming material cost is the same and larger inverter is not needed

can be taken by manufacturing domestically to eliminate transportation costs and importation fees. In the future, an investigation of the capacity factor impact a single axis sun tracking system could have for ground installations, and its resulting energy price change.