“Declining Trends in the solar PV prices-Where it is heading?”

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The solar photovoltaics (PV) industry has seen remarkable cost reductions over the last three years showing a declining trend of over 20% on annual basis. While the solar PV module cost was in the range of 2-2.5 Euro/Wp, in 2009, the module prices have fallen down in the range of 0.7-1 Euro/Wp, in the recent months. The dramatic reduction in module prices have been due to a combination of economies of scale, technological and manufacturing advances, and more efficient use of manufacturing inputs. Apart from the technological innovations, the China factor has also contributed a lot in terms of this price war of the solar modules. While the PV module prices have declined, there has been declining trend in terms of the price of balance of system (BoS) and in last three years the BoS prices have also declined to almost half of the prices in year 2009. The price reduction in the BoS have also been due to the smaller power electronics, streamlined installation technologies and processes, and project development approaches that leverage low-cost financing.

The reduced prices in the modules as well as in BoS, and the low cost financing have contributed to the low cost solar electricity sale price in the recent bids which have already reached to Rs/7/kWh. This raises a big question that can the solar electricity be available to us at a rate of 5 Rs a unit and will reach to the grid parity.

In the above graph showing the solar panel prices declining 20% every year

According to CERC regulation -2012, solar power per Mw cost projected as 10 cr.

Break chart for 1 MW solar power plant

Couple of years back in India cost of 1 MW at 18 cr. At that no serious players in the solar field. After announcing National solar policy and various states policies attracts the international players towards the Indian market.

49% of solar power project cost depends on the solar panels, So in a near future economic of scale indicates that solar power plant cost comes down to the 5 cr per MW

The thin film technology has reached to such stage that you need not to have a glass as substrate; the deposition can be made on a polymer sheet as well. This will bring significant reductiojn in terms of module prices. While we can expect the rollable modules in the form of a sheet, this will significantly reduce the price further due to reduced input cost of glass as a material as well the polymer based substrate will be easy to transport without any breakage.

Power electronics which is used to convert the DC output of arrays into high quality AC also cost about 30% of the overall project costs. Since the current inverters fails after the 8-10 years of useful life, there are efforts going on to increase the useful life of the inverters to 20 years. The inverters which are used currently are central inverters of 500 kW- 1 MW capacity, market may see a trends to use smaller inverters as string inverters of 10 -20 KW capacity. The modular nature of inverters will achieve the mass production and this will also lead to reduce the power electronics prices for PV plants.

The mountings/structures, civil works, and other BOS account for almost 20% of the total project costs. There are manufacturers who have already come out with the polymer based structures, which are lighter in weight and have long life and no corrosion problems. Installation of mounting frames takes lot of times, and some of the developers have started adopting the ramming machines which can install soar mounting frames in hundreds of acres in a day. The gestation time has significantly reduced. Already some of the developers have achieved the installation time of 1 MW per month in recent projects.

Tracking systems which cost currently about 10 % of the total system cost increase the output in the range of 25-30% in energy yield. some of the developers such as Mahindra solar have tried the tracking systems and have been highly successful to increase their yield.

While each of these areas could be pursued as a separate task, as a part of cost reduction strategy, we believe that market is yet to innovate the solar and adopt this in a more indigenously fashion. The future looks bright as the cost of generation of conventional power is bound to increase and will reach in next few years to 5 Rs a unit, while the cost reduction in PV technologies will bring the current cost further down and will be available very soon at a rate of 5 Rs. a unit.

Solar PV Installed capacity (MW) in India as on May 2012 (Source: Firstgreen Consulting Pvt Ltd – Data Compilation)

With the installed capacity of 970 MW, India becomes one of the ten largest PV installations in the world.  The state level RPO (Renewable Portfolio Obligation) policies of Government of India have been the major contributor to this huge installations. The states such as Gujarat has installed solar power beyond its targeted RPOs.

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