Benefits and Barriers: Costs and Market
Though costs for solar electricity remain high in comparison to other electricity sources, they have declined significantly over the past thirty years. Still, photovoltaic costs can appear prohibitive to many electricity users, particularly when compared with utility power. Increased market demand and innovations in technology are needed to reduce these costs.
Production Costs
The main factors behind the high cost of photovoltaics are twofold. First, photovoltaic panels are relatively expensive to produce. Second, the market for photovoltaics has been relatively small until recent years, so photovoltaic production has not achieved the economy of scale necessary for truly low costs.
Both of these factors are gradually changing. Demand has increased over the past thirty years, and much research and development work has been done to increase the efficiency and lower the costs of photovoltaic systems. In fact, costs have fallen dramatically since the 1970s when photovoltaic panels first appeared on the consumer market. In 1975, the average cost for photovoltaic modules was $30 per watt, or $30 per the unit of electricity a panel could produce. By the 1990s, this cost had dropped to approximately $5 per watt.
Technological developments that improve efficiency and lower manufacturing costs are expected to continue reducing overall costs. As these costs fall, it is expected that demand will continue to increase due to the other benefits of photovoltaic systems. There is no set date when photovoltaics are predicted to become competitive with utility power, but some sources predict it will happen sometime within the next 10-20 years. If advanced technologies emerge from research and development that cause a significant drop in prices, this timeframe could be shortened even further.
Installation and Use Costs
The other area where costs can be incurred is in installation of a photovoltaic system, as multiple components are needed to help photovoltaic panels transfer their electricity to an end use. In many cases, these components can double the cost of a photovoltaic system. However, much of this additional cost can be reduced as installation experience increases within the building trades and as new methods are developed for installing and connecting photovoltaics to their end use.
There are several financial benefits linked to installed photovoltaic systems. The primary benefit is the possibility of reduced electric bills and the potential for net metering, where excess electricity from a photovoltaic system can be sold back to the utility. While these benefits do not currently balance out the initial costs of a photovoltaic installation, they can help in reducing these costs.
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