US consulting firm Photon forecasts the “fully-loaded” cost of solar power will decrease at least 30% over three years, from US$3.60 ($4.30) per W in 2006 to US$2.50 in 2010. This price includes all costs of manufacturing, installing and connecting solar power systems, without incentives or tax breaks.
The report expects the cost of solar energy will drop below the price of grid electricity sourced from coal-fired power plants.
“With a cost of US$0.10 to US$0.15 kWh by 2010, the cost of solar will be below the price of grid electricity for at least 50% of OECD residential demand,” it said.
In Germany it is forecast to cost US$0.18 per kWh by 2010, in California US$0.13 and in Spain US$0.12. Best practice manufacturing and installations in sunnier locations will further reduce cost to around US$0.10 per kWh.
In addition the report says low cost of solar is driving emerging trends within businesses, such as solar-fuelled power purchase agreements, posing new risks for traditional energy companies.
However, one bit of good news for traditional generators is that makers of solar photovoltaic systems are not likely to immediately pass cost reductions on to customers because demand is greater than the available supply.
The report raises one red flag on its bullish forecast for solar, with market forces potentially keeping prices high for several years.
