Much Cheaper Now, and Still on Your Rooftop

Solar Power generation costs have dropped to an extent where a unit of solar power is cheaper than what you pay to the utilities in some regions.

According to an analysis at Queens University in Kingston, Ontario, solar photovoltaic systems are very close to achieving the tipping point and becoming mainstream.

According to Joshua Pearce, an associate professor of electrical engineering and materials science at Michigan Technological University and a member of the team that conducted the analysis, the price of solar panels has dropped 70% since 2009. Equally important, it is now evident that assumptions used in previous studies to compute the cost of solar power generation were flawed.

"Historically, when comparing the economics of solar and conventional energy, people have been very conservative," says Pearce.

When computing the cost of photovoltaic energy, analysts need to factor in variables like cost to install and maintain the system, finance charges, how long it lasts, and how much electricity it generates.

Following an exhaustive review of previous studies, Pearce and his colleagues concluded that the values given those variables were out of whack.

"It is still a common misconception that solar PV technology has a short life and is therefore extremely expensive," he said. However, PV panels are solid-state electronic devices with no moving parts and should last a long time. "Based on the latest long-term studies, we should be doing our economic analysis on a 30-year lifetime at minimum," Pearce said.

In addition, most analysis assume that the productivity of solar panels will drop at an annual rate of 1 percent or more, a huge overestimation, according to Pearce. "If you buy a top-of-the-line solar panel, it's much less, between 0.1 and 0.2 percent."

Finally, "The price of the solar equipment has been dropping, so you'd think that the older papers would have higher cost estimates," Pearce said. "That's not necessarily the case."

Equipment costs are determined based on dollars per watt of electricity produced. Very recent studies set the amount between $2 and $10. The true cost in 2011, says Pearce, is under $1 per watt for solar panels on the global market, though system and installation costs vary widely. In some parts of the world, solar is already economically superior.

For example, France's Solairedirect recently bid to supply solar power to India's national power grid at Rs7.49 (US$0.14) per unit (kWh), a rate that is below the average cost of power generated by diesel generators, which is about Rs 13 (US$0.25) per unit.

The Solairedirect bid is no aberration or market capturing ploy. Other companies have successfully bid in the Rs8.00 to Rs8.28 range.

The environmental benefits of using solar power - reduced pollution and carbon emissions - are not factored in in economic studies like Pearce's.