Solar Panel Drops to $1 per Watt: Is this a Milestone or the Bottom for Silicon-Based Panels?

A long-sought solar milestone was eclipsed on Tuesday, when Tempe, Ariz.–based First Solar Inc. announced that the manufacturing costs for its thin-film photovoltaic panels had dipped below $1 per watt for the first time. With comparable costs for standard silicon panels still hovering in the $3 range, it’s tempting to conclude that First Solar’s cadmium telluride (CdTe) technology has won the race. But if we’re concerned about the big picture (scaling up solar until it’s a cheap and ubiquitous antidote to global warming and foreign oil) a forthcoming study from the University of California–Berkeley and Lawrence Berkeley National Laboratory suggests that neither material has what it takes compared to lesser-known alternatives such as—we’re not kidding—fool’s gold.

Even if the solar cell market were to grow at 56 percent a year for the next 10 years—slightly higher than the rapid growth of the past year—photovoltaics would still only account for about 2.5 percent of global electricity, LBNL researcher Cyrus Wadia says. “First Solar is great, as long as we’re talking megawatts or gigawatts,” he says. “But as soon as they have to start rolling out terawatts, that’s where I believe they will reach some limitations.”

Even the current rate of growth won’t be easy to sustain. Despite the buck-per-watt announcement, First Solar’s share price plummeted more than 20 percent on Wednesday, thanks to warnings from CEO Mike Ahearn about the effect of the credit crisis on potential solar customers—as much as 10 to 15 percent of current orders might default. He recently told analysts in a conference call that “as good as things look for the mid-term and beyond, the short-term outlook for the solar industry in our view has never looked more difficult.” (A transcript is available at SeekingAlpha.)

First Solar’s eventual goal is “grid parity,” a phrase that refers to making solar power cost the same as competing conventional power sources without subsidies. Right now the cost of making panels accounts for a little less than half the total cost of installation. The company estimates that it needs to get manufacturing costs down to $0.65 to $0.70 per watt, and other installation costs down to $1 a watt in order to reach grid parity—goals First Solar plans to reach by 2012.

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