Can Cheap Solar Panels Get Any Cheaper? Hell Yeah!

Panel prices have dropped 80% in 4 years – can they get any cheaper?

If you want to buy some absolute junk you can currently buy bottom end, ultra cheap solar panels for $0.50 per Watt. But I wouldn’t recommend it.  Unless you want to risk your roof turning into a giant barbecue.

Most solar panel factories have been losing money hand over fist for at least the last couple of years. Many of the largest companies have lost many hundreds of millions. This has led many observers to believe that solar panel manufacturers will have to start raising prices in order to survive. In fact there is evidence of this starting to happen with panel prices rising slightly in the first 2 months of 2013.

So is this the end of dirt cheap solar panels?

Not on your nelly!

Whilst I do expect solar manufacturers to increase their gross margins, by rising prices in the short term, I firmly believe that in the medium term, the relentless march of technology will have a much stronger influence on solar panel prices, pushing them down, down ,down.

When I say this to many people I know in the solar industry, their response is: “But Finn, panel prices have already come down 80%, largely through technical innovation, surely there’s not much left to improve?”.

Which is of course bollocks. That’s like saying computers aren’t going to get any cheaper because what used to cost $10million can now be had for $35 in the guise of a Raspberry PI, and they can’t get any cheaper than that can they?

Of course, computers are always going to get cheaper and more powerful, and so are solar panels.

Just 2 examples from my inbox this week:

1) Drastically reducing the price of monocrystalline silicon ingots.

When I lived in not-so-sunny Glasgow, I worked for a while for a (now defunct) company called Photonic Materials which grew crystals for medical imaging machines.

(I actually got fired from the company, but that’s a story for another time!)

They used a method known as the “Czochralski Method” in which you get big, energy-hungry machines that run for days slowly pulling a tiny crystal “seed” out of a molten pot of spinning, melted crystal. You set the machine going on the Monday, and with any luck, come Friday arvo, along with a massive energy bill, you’ll also have a wine bottle sized ingot of single-crystal.

This is how monocrystalline ingots are made, which are later sawn up like salami to make a solar cells. The method has been virtually unchanged for decades.

Now a German mob called PVA TePla AG (trips off the tongue eh?) a manufacturer of solar silicon crystallization systems has come up with a way to grow multiple ingots at the same time. So potentially you will be able to get multiple ingots from the same machine, with huge savings in energy, capital equipment and everything else that makes silicon one of the most expensive ingredients of a solar panel. Say hello to much cheaper monocrystalline solar panels thanks to these crystal growing wunderkinds!

2) Thin film solar finally gets its efficiency where it needs to be.

Thin film solar technology has always had the potential to make solar panels dirt cheap. This is because it doesn’t use expensive silicon and, in theory, you can make the panels on a giant “printing press” where the solar is sprayed onto a flexible roll, which is then chopped into sheets. Voila; a solar panel every few seconds! Possibly.

However the reality has always been a lot more disappointing that the theory. Thin Film panel efficiencies (typically around 10%) have always been about half that of their crystalline based competition’s. Which has meant that you need twice the roof space if you choose thin film. This has been a huge disadvantage in residential solar, where roofspace is generally at a premium. The result is that only a tiny minority of Aussie roofs have thin film panels on them.

However, just last week, First Solar announced a record 18.7% solar cell efficiency for their CDTE thin film technology. And here’s the kicker: This was achieved “using processes and materials — including the glass substrate — that are designed for commercial-scale manufacturing”.

This means thin film panels can finally compete with mono and polycrystalline panels in terms of efficiency (and roofspace). And that will only bring residential solar prices down.

But it’s not just the solar panels getting cheaper…

Don’t forget  –  although solar panels are the biggest component cost of your solar system – the cost of the inverter and installation also add significantly to the final solar power system cost.

Let’s start with the inverter. I believe that, in residential solar,  micro inverters are going to make central inverters obsolete within 3 years. Already 40% of Californian installations use them. A micro inverter is a small box of power electronics, one for each solar panel, each attached to the solar panel. They completely do away with central inverters. And as we have all experienced, anything that is made of electronics gets cheaper every year and better every year. Yes – even power electronics.

Currently there are 3 disadvantages to micro inverters.

1) They are more expensive that a single central inverter.

2) Their efficiency is slightly lower and

3) If they fail you have to get on the roof to replace them.

But fast-forward a year or two and  I can see micro inverters becoming so cheap, efficient and reliable that they’ll become the norm, and make for even cheaper solar systems.

And as for installation – whilst I don’t see solar installers taking a pay cut any time soon – I’m sure some genius will soon come up with a very radical concept that makes installing solar panels plug and play. That would hugely reduce the amount of time that a qualified solar installer would need to be on the job. Perhaps they would just have to rock up to do the final connection into your switchboard and meter, whilst a much less qualified tradie or apprentice fitted the newfangled plug and play panels on the roof…. Hang on .. that’s how some ultra cheap solar companies do it already (except without plug and play panels)! But in the future it may actually be safe to install solar panels without a highly qualified installer on your roof.

So what I’m trying to get at here is this: When you bring all these technological advances together, you can see that the price of solar is only going one direction in the medium to long term. Down. It’s happened with every technology ever invented. Solar is not gonna be the exception!

So should you wait for solar to get cheaper before you buy?

This is a question I get asked a lot here at SolarQuotes:

“Hey Finn, I hear that the next solar advance is just around the corner, and panels are going to be much cheaper and much more efficient. Should I wait for that to happen? I don’t want obsolete technology on my roof…”

And my answer is always the same. Yes new technology is just around the corner. It always will be. And, yes solar panel prices will always be dropping. But if you are always waiting, there will never be a time when you can actually buy. Imagine if you made that argument with computers 20 years ago. You would never have owned a computer because a better, cheaper one is always 3-6 months away.

At the end of the day, here’s the rub. The payback of your solar system doesn’t matter. The price you pay for solar compared to what it might cost next year doesn’t matter. If you want to buy solar purely from an economic point of view (and you have the cash or access to credit  at a reasonable interest rate e.g. home equity) then the only question that matters is this:

If you are paying cash: Will your electricity savings/earnings from solar be worth more to you that the interest you would have got from keeping the cash in the bank?

If you have to borrow money: Will your electricity savings/earnings from solar be worth more to you than the repayments on the solar loan?

That’s all you need to work out.

If the answer is yes (and it often is), then from day one you will be better off in cash terms, compared to life without solar. Waiting to get solar will actually cost you money.

If the answer is no, then do the calculation again in 12 months. Solar will be cheaper by then, trust me on that one!

(And if you want to do the calculation in 2 minutes, my solar calculator will do the trick)