The Impact of Solar Panel Pricing on Policy and Development

by Akshay Jamdade

Climate Change and Solar PV Basics

Recent years have accentuated climate change as one of the major crises of the century. A changing climate leads to changes in the frequency, intensity, spatial extent, duration, and timing of weather and climate extremes, and can result in unprecedented extremes [1]. The combustion of fossil fuels is one of the major drivers of climate change. The gross production of electricity of the world from fossil fuels, namely coal, accounted for 38% followed by natural gas with 23% and oil with 2.9% in 2018 [2].  The rise in emissions has been contrasted with a steep decline in the cost of a technology capable of generating carbon-free electrical energy from the sun exploited by scientists at Bell Laboratories in 1954: photovoltaics [3].

The decline in PV Cost 

The Solar Panel is an array of electrically connected photovoltaics. The heart of photovoltaic (PV) modules is a solid-state semiconductor device called a “solar cell” that converts sunlight into direct-current electricity [5]. Tracing back to 1958 since the first application of photovoltaic manifested in satellites, the affordability, efficiency, and technological maturity has always been the point of discussion for the climate-friendly power sector [5]. In recent decades, the PV showed the sharpest cost decline of 82% between 2010 and 2019 compared to concentrating solar power (CSP) at 47%, onshore wind at 40% and offshore wind at 29% [4]. The global weighted-average levelised cost of electricity (LCOE) of utility-scale solar photovoltaics in 2019 was 0.068 USD per kilowatt-hour (kWh) as opposed to 0.378 USD per kWh in 2010 [4]. 

The fundamental driver of this change is that PV follows learning curves, which means that with each doubling of the cumulative installed capacity their price declines by the same fraction, unlike fossil fuels [6]. As a result, the new renewable capacity is not only increasingly cheaper than new fossil fuel-fired capacity but progressively undercuts the operating costs alone of existing coal-fired power plants which is evident in Europe in 2021 as coal-fired power plant operating costs are well above the costs of new solar PV and onshore wind [11].  During the past 3 decades, China, Japan, Germany implemented different methodologies and stimulated the PV market in a way that production of PV surged translating into higher installation followed by a decline in prices [7]. Another major factor in the reduction of prices is the policies like net metering and fiscal incentives which in some markets make PV (rooftop) more attractive than buying electricity from the grid [8].

Future Impact on Policy and Development

Boosted deployment of renewables compiled with the electrification of transport and heat applications and enhanced energy efficiency, can achieve over 90% of the energy-related carbon dioxide (CO₂) emission reductions needed by 2050 to set the world on an energy pathway towards meeting the Paris climate targets [8].  Fast-growing PV capacity across the globe is transpiring into several research projects and prototypes to stimulate future market growth by exploring innovative solar technologies at the application level for example Building Integrated Photovoltaic (BIPV) [8,9]. Provisions on concentrating education and skills need to be embedded to extract the maximum from the transition equipping the workforce with adequate skills [8,10]. Socio-Economic benefits can be reaped with the employment of more than 18 million people by 2050 within the PV industry, five times more than the total of 3.6 million jobs in the sector in 2018 [8]. Similarly, sound industrial policies that build upon domestic supply chains can enable income and employment growth by leveraging existing economic activities in support of solar PV industry development [8].

To Summarise: 

• Renewable Energy technology is one of the major tools to combat climate change, Solar Photovoltaic being the one to take precedence and shape the world’s energy scenario in coming years.
• The rise in emissions is being contrasted with the decline in costs of solar panels driven by learning curves, ramped up production, accelerated installation resulting in a decrease in prices along with market favourability and policies deployed for rooftop PV.
• Descent of cost will yield socio-economic benefits, holistic policy framework boosting skills, employment, technological research and development.

References:

[1] IPCC, 2012: Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation — IPCC (Last Accessed 20/5/2021)
[2] IEA, “Electricity Information: Overview” https://www.iea.org/data-and-statistics/charts/world-gross-electricity-production-by-source-2018 (Last Accessed 26/6/2021)
[3] NREL, “Solar Photovoltaic Technology Basics” https://www.nrel.gov/research/re-photovoltaics.html (Last Accessed 20/5/2021) [4] IRENA (2020), “Renewable Power Generation Costs 2019” https://www.irena.org/publications/2020/Jun/Renewable-Power-Costs-in-2019 (Last Accessed 21/5/2021)
[5]EPRI (2009), “Solar Photovoltaics: Status, Costs, and Trends” https://www.smartgrid.gov/files/documents/Solar_Photovoltaics_Status_Costs_Trends_200906.pdf (Last Accessed 21/5/2021)
[6] Our World in Data (2020) “Why did renewables become so cheap so fast? And what can we do to use this global opportunity for green growth” https://ourworldindata.org/cheap-renewables-growth (Last Accessed 21/5/2021)
[7] Sage Journals(2020), “Energy Exploration and Exploitation” https://journals.sagepub.com/doi/full/10.1177/0144598720979256 (Last Accessed 21/5/2021)
[8] IRENA (2019), “Future of  Solar Photovoltaic” https://www.irena.org/publications/2019/Nov/Future-of-Solar-Photovoltaic (Last Accessed 21/5/2021)
[9] “Resource-Efficient Technologies”, Volume 3, Issue 3, September 2017, Pages 263-271 https://www.sciencedirect.com/science/article/pii/S240565371630207X (Last Accessed 21/5/2021)
[10] Clean Energy Solutions Center (2015), “Solar Power: Policy Overview and Good Practices”, https://www.nrel.gov/docs/fy15osti/64178.pdf (Last Accessed 21/5/2021)
[11] IRENA (2021), “Renewable Power Generation Costs in 2020” https://www.irena.org/publications/2021/Jun/Renewable-Power-Costs-in-2020 (Last Accessed 26/6/2021)