PV power generation has long been considered as a costly technology, due to higher installation cost, use of rare earth material like Silicon, and low conversion efficiency, etc. Due to higher upfront cost, the PV installations globally driven through preferential tariffs/ Feed in Tariffs (FITs). PV installations started about fifty years ago and now global PV installations have reached to about 70GW of cummulative capacity and now, the annual global installations have reached to the tune of 28 GW during year 2011, and countries, such USA, Japan, Germany, Italy, CHina,and India are the front runners in the deployment of solar PV technology.
In recent uyears, the rapid cost reductions in PV module prices have led PV as one of the alternative technology which is at par with some of the costly conventional power sources.
THe economics of PV plants is generally assessed in terms of cost per watt peak (Rs/Wp) or in terms of levelised cost of energy (LCOE) and represented in terms of Rs/kWh. While the manufacturing community assess the cost in Rs/Wp, while the investor community assess the economics in terms of LCOE.
Since 2004, regardless of module prices, system prices have fallen steadily as installers achieved lower installation and maintenance costs. In recent years due to excess of manufacturing capacity have globally taken the PV module prices bellow 1 $/Wp figure and which was bellow the marginal cost of production for many of the US PV firms such as FIrstsolar have closed down its European Manufacturing unit, inspite of the fact that last year we achieved largest global POV installations (28GW).
The LCOE for PV has declined by nearly 50% from an average of $0.30/kWh early 2009 to $0.17/kWh early 2012.
Most important determining factors of the levelized cost as being capital costs, capacity factor, cost of equity, and cost of debt. done by firstgreen team shows that the levelised cost of power generated by PV exhibit a particularly high sensitivity to load factor variations, followed by variations in capital cost and financing cost.