How the cost of solar panels is lowering can teach us how to make new technology more cheap.

Solar panels are inexpensive and becoming more so. According to recent research, solar now costs less per kilowatt-hour than coal and gas. Even a current US tariff on Chinese solar cells and modules (the components that go into solar panels) hasn’t made a difference in the industry.

Researchers at the Massachusetts Institute of Technology (MIT) have developed a model to determine which factors have impacted solar panel cost-per-watt changes since the 1980s.
Better module efficiency was the leading cause of decreases in solar panel cost per watt between 1980 and 2012. Most of those efficiencies came from government and commercial research and development funds. By 2001, however, economies of scale had begun to play a larger part in the cost reductions of solar panels.

The expense of tracing

The researchers point out that they’re focusing on cost rather than price because the cost is more representative of technological developments in their approach. In contrast, prices frequently reflect some form of artificial markup. (Of course, price drops are commonly accompanied by expense reductions.)

Cost reductions have been considered across the board. The Department of Energy recently stated that utility-grade solar had attained a cost goal of six cents per kilowatt-hour. The department is currently looking into reducing residential solar costs to five cents per kilowatt-hour. Researchers recently attempted to determine whether a three-cent-per-kilowatt-hour price reflected prices in the Middle East. Despite government intervention, they discovered that the prices were reasonable despite previous expense reductions.

The paper divides costs into “low-level” and “high-level” cost changes to examine how solar panel costs have changed over the last 40 years. Changes in materials costs, wafer area, module efficiency, and the scale of the plant that makes the panels are all examples of low-level mechanisms. High-level procedures include solar panel technology enhancement research and development, learning-by-doing, and economies of scale. When high-level changes are combined with low-level modifications, the researchers may examine the engineering and policy/management improvements that have driven solar panel cost reductions.

The difficulty with this approach was that many distinct variables often change simultaneously, so determining whether a change in one item caused a drop in cost-per-watt was not as simple as evaluating if a change in one thing caused a decrease in cost-per-watt. Instead, the researchers constructed a two-step cost equation that calculates the cost for each period before calculating the cost between two time periods. The researchers explain that such a model “directly shows how variables impact overall cost, making it easier to evaluate what modelling assumptions are being made.”

How can technology be made more affordable?

As a result, between 1980 and 2012, advancements in module efficiency had the biggest impact on solar panel cost per watt. Engineers and materials scientists are working on improving the efficiency of solar cells, and efficiency advances of fractions of a percent are frequently newsworthy.

Changes in the price of silicon and non-silicon materials have been the next two greatest drivers of cost reductions for solar cells since 1980. Cost reductions were also aided by thinner silicon wafers and decreased silicon consumption in general.

According to the study, plant-size adjustments, which result in economies of scale, have also had a key role in reducing solar panel costs since 2001. The research states that larger factories cut costs “via shared infrastructure, reduced labour requirements, improved production, and better quality control.” “Plant size became a notably important element in the more recent time, contributing nearly 40% of the drop in module cost,” it continued.

Government and commercial R&D spending have contributed the most to solar panel cost-per-watt reductions since 1980. On a technological level, this expenditure fueled low-level efficiency advances critical for the solar sector.

The researchers noted, “Our model can be utilised to do prospective studies to guide future technical and policy efforts.” However, what worked in the previous may not work in the future. “Several new Chinese plants with typical sizes of 1–2 GW/year have surpassed our dataset’s typical 2012 plant size. However, there may be a limit to how big plants can go, and economies of scale savings may run out with time.”

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