By: Daniel Maysick
July 9, 2009
The time to install solar power is finally here. The price of installing a watt of solar energy has fallen dramatically with a few companies announcing they have broken the one dollar a watt barrier. The payoffs for installing solar are now shorter in time and cost savings are growing greater as quickly as price falls.
Among the first to achieve a dollar a watt milestone is First Solar Inc., which announced the achievement in February. First Solar Inc. First Solar Inc. specializes in thin-film panels. From their press release:
"First Solar began full commercial operation of its initial manufacturing line in late 2004. From 2004 through today, manufacturing capacity has grown 2,500 percent to more than 500 megawatts in 2008. First Solar's annual production capacity will double in 2009 to more than 1 gigawatt, the equivalent of an average-sized nuclear power plant. These escalating volumes have been accompanied by a rapid reduction in manufacturing costs. From 2004 through today, First Solar's manufacturing costs have declined two-thirds from over $3 per watt to less than $1 per watt. First Solar is confident that further significant cost reductions are possible based on the yet untapped potential of its technology and manufacturing process."
They have already again lowered their productions costs to 93 cents per watt. Recently at an annual meeting of analysts and investors, PV-tech.org wrote about First Solar once again setting the bar by announcing where it believes the price per watt will end up in the near future.
"On the module side, the new five-year plan calls for 56-68% reductions in the cost per manufactured watt, driving down to a targeted range of 52 to 63 cents per watt by 2014. The largest portion of the cost cutting will be facilitated by conversion efficiency improvements (about 18-25% of the weight, with better throughputs, plant scaling, etc. also contributing)."
The article continues writing about other cost saving measures First Solar uses to keep prices down. Not only does First Solar implement new and improved technology, but it brings to the marketplace at competitive prices. First Solar has developed a business model based on a constant assessment of what is cost effective and technologically capable. For First Solar, it is not always about what technology is most efficient, but the relation between efficiency and cost. The most efficient panels are not the most cost effective.
A price war is forming and will soon be underway in solar manufacturing today reports investors.com.
"The federal comprehensive energy bill could change the whole game for the solar industry. If the bill passes Congress and becomes law, it would require U.S. utility companies to supply around 15% of their electricity from renewable sources like solar and wind power by 2020.This means utilities would need large-scale solar systems to generate enough electricity to meet the federal mandate.
"Up to now, Germany has been by far the biggest solar energy market -- close to a 35% share -- because of its heavily government-subsidized solar facilities. The U.S. accounts for only 5% of the global market, according to analysts. But that could quickly change. The U.S. will be the strongest market in the next two or three years, and could grab a 25% to 30% market share in the long run. If First Solar's business model proves successful and cost predictions are accurate, First Solar's business model will be copied and consumers will continue to reap the benefits from a competitive marketplace.
"And price matters most when you have to build a lot quickly continues investors.com When utility companies shop for solar panels, price matters. They may go for the providers with the lowest prices. Utilities, which largely depend on public money, are very price sensitive. The industry's cost-cutting leader, First Solar FSLR of Tempe, Arizona, has a big advantage when it comes to pricing. The maker of solar panels can now manufacture solar modules for 93 cents per watt, down 5% from 98 cents in its fourth quarter. Still, it managed a hefty 56% gross margin in the first quarter.
"First Solar's costs per watt of electricity beat Chinese competitors. Yingli YGE, a Chinese low-cost leader, could not break $1 per watt in the first quarter even with falling silicon costs. UBS analyst estimates that First Solar charges $1.80 per watt to utility clients for panels while competitors charge around $2.50 per watt, a difference of 25% to 30%.First Solar's thin-film panels are less efficient than the silicon panels, but manufacturing is much cheaper with thin-film making First Solar less of a force in residential construction. However, the cheaper prices are helping them grab the attention of larger purchasers such as utilities."