The Chinese government recently announced a five year plan that included 1 trillion yuan (about US$144B) investment for solar power. This money is part of a larger $361B package for renewable energy – and it continues significant investment in the solar industry. Currently, China has some serious air quality issues to deal with and is putting serious money towards it. As part of this large investment in CO2 free electricity, I estimate China will install 165GW of solar power before the end of 2020. This large volume of solar power — along with the world’s continued growth in solar — will lead toward a 28¢/watt solar panel by 2019, 20% lower than today’s price.
Generally as any industry scales, the prices of its parts fall and accessibility becomes more universal. Product pricing falls in many areas including:
- Cost of raw materials are reduced as mining scales; though commodities can be very volatile
- Improvements in technology of subcomponents; solar cell efficiencies are headed upward – more wattage in same hardware means lower pricing
- Assembly processes get smarter with those new and improved sub-components; robots do more and more solar panel assembly (1, 2, 3 versus hand assembly)
- Banks offering cheaper money; cheap money follows success
The computer processor industry had Moore’s Law to represent these price drops with scale. It seems the solar power world has Swanson’s Law. In 2016, the industry blasted past the Swanson’s projection bottoming out the price chart and pushing the frontier faster than contemplated.
I added in the final two data points in red to the above chart. That added information included 2015, which saw a cumulative volume of around 250-260GW of solar power reached, and solar panels resting around 60¢/watt. In 2016, we saw solar systems pricing aggressively fall, driven by solar panel pricing. About 330-335GW of cumulative global volume is expected at the end of the year. Swanson’s Law says module pricing falls 20% per every doubling of cumulative global volume. Per the above chart, that means modules should be at 80¢/watt – but we’re now at 36¢/watt. By 2019 – when we’re expecting 670GW of volume – solar panel pricing would be projected to be about 65¢/watt, instead we’re projecting closer to 28¢/watt – more than 50% lower than projected.
Factors that have led to this amazing acceleration in falling pricing are more than technological – there are economic forces at play that are more than likely to continue. Credit should be given to China’s scaling of manufacturing for the broader price drop over the past several years, and then boom-bust cycle of solar incentives put out by the Chinese government for 2016-2017 for the second half 2016 price drop.
If China keeps pushing its market internally and solar’s growth reaches the projected amount worldwide in the above chart, along with the massive investments from research facilities around the world, and entrepreneurial innovation – who knows how cheap solar power can get.
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