In April, for the first time since June 2004, the retail price of solar panels has declined in nominal terms -- to $4.87 per watt of capacity. The resumption of the long-term trend of retail price declines is good news for a couple of reasons. It may indicate that the economy as a whole is working out of its recent inflationary spell. Also, it may indicate that solar panel manufacturers specifically are continuing to innovate and utilize their capacity more effectively in the face of rapidly growing demand and shortages of crystalline silicon.
Prices as tracked by Solarbuzz. Read Solarbuzz's web site for an interesting discussion of these prices.
The April price is the same in nominal terms as the January 2003 price. In real terms -- using the GDP Personal Consumption Expenditures Implicit Price Deflator as the measure of inflation -- since January 2003, the price has declined 9.4%, or about 2.25% per annum. This compares to double-digit annual declines before the inflationary spell. Obviously, it makes all the difference in the world whether the prices are declining 2.25% per annum or in double-digits per annum. 2.25% annual declines would mean that solar power will not be competitive with conventional power generation for several decades. Double-digit annual declines would mean that solar power is within a decade or so of competitiveness with conventional power generation.
In order to maintain a trajectory of large price declines and eventually to compete with conventional power generation in a meaningful way, the solar panel manufacturers need to ramp up production very quickly. Given the recent shortages of crystalline silicon, I wonder whether the panel manufacturers that use crystalline silicon (most of the big manufacturers) will see their production increases limited substantially.
I have been following some start-up companies that make thin-film solar panels using crystalline CIGS (copper, indium, gallium, and selenide) rather than crystalline silicon. Perhaps these manufacturers will be able to set the pace of capacity increases. The most ambitious of the group appears to be Nanosolar, which this year is attempting to bring on-line up to 430 megawatts in manufacturing capacity. To put this increase in perspective, 430 megawatts would represent roughly a 25% increase in the global solar panel market. Because the increase is so large, and Nanosolar is a startup, my first instinct is to wait and see regarding these claims. But the company has been hiring executives from the IBM/Hitachi hard disk drive division and has taken in an enormous amount of Silicon Valley venture capital. Other CIGS start-ups include Miasolé.