Within the next four years, solar power in China could be as cheap as coal for generating electricity, according to a think tank with ties to the Chinese government. In some regions of Australia, it’s already as cheap to buy solar-powered electricity as it is to buy coal-fired power, the Sydney Morning Heraldreported this week. Two years ago, a U.S. solar company called FirstSolar announced that it had created a solar panel that costs just a dollar per watt to manufacture. According to a report published this summer by Ernst & Young, by 2013, making a solar module for that price will no longer be an achievement, it will be the industry average.
Solar power is getting cheaper. It’s something of a parlor game among energy companies and analysts to predict when, exactly, solar will achieve “grid parity” with coal and other cheap sources of electricity—in other words, when it will be just as economical to buy clean, renewable energy as it will be to buy coal power. There’s no clear answer: government subsidies will play a role, and solar will become a player in some regions and countries long before it makes sense everywhere. And just because solar is cheap doesn't mean it will become the world’s primary source of power overnight. When solar is as cheap as coal, it’ll make more financial sense for investors to build solar plants. But they’ll still have to be built.
And to build plants that produce cheap solar power, cheap panels are a requirement. In the United Kingdom, for instance, the subject of the Ernst & Young report, solar modules account for around 40 percent of costs in all but the largest solar electricity systems. In the largest ones, the modules account for more than 50 percent of costs. (Installation is another big cost driver.)
This reality presents a challenge to the companies that actual make the panels: how to stay profitable as the price of your product drops dramatically? In Australia, one solar cell manufacturer announced this week that it would outsource production to China, where wages are lower and costs cheaper. In the United States, EverGreen, once a leading solar company, filed for bankruptcy this week. It, too, has closed a factory—this one in Massachusetts—in favor of China-based manufacturing.
Don’t start bemoaning the state of green jobs just yet, though. Part of the reason solar panels are getting cheaper is that companies are still finding the most efficient ways to make the most effective panels. EverGreen succeeded for a while because it had found a way around using huge quantities of expensive silicon, the primary ingredient for most solar cells. Since the peak of EverGreen’s success, the price of silicon has plummeted, and its more expensive manufacturing process has become a liability.
Ely Sachs, the Massachusetts Institute of Technology scientist who developed EverGreen’s technology, is already onto a new business, 1366 Technologies. The new company does use silicon, which while cheaper than it used to be, is still expensive. But instead of building the material into a block and slicing off solar wafers, like most solar manufacturers, 1366 will use a technique that creates individual wafers, saving silicon in the process and potentially cutting manufacturing costs in half. And the company is expanding: in June, it received a loan guarantee of $150 million from the Department of Energy.
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