Evaluating the Causes of Cost Reduction in Photovoltaic Modules

The cost of solar photovoltaic (PV) modules has fallen by 99 percent over the last four decades. What exactly accounts for that stunning drop?

Today (i.e. 20th Nov 2018), a group of researchers from MIT, USA (Associate Professor Jessika Trancik, postdoc Goksin Kavlak, and research scientist James McNerney) have published a paper in the journal “Energy Policy” proposing, what caused the savings, including the policies and technology changes that mattered most. The study covered the years 1980 to 2012, the period during which module costs fell by 97 percent. For example, they found that government policy to help grow markets around the world played a critical role in reducing this technology’s costs. At the device level, the dominant factor was an increase in “conversion efficiency,” or the amount of power generated from a given amount of sunlight.

They have categorized the cost-reducing reasons into two parts, that is,

-      low-level (i.e. technology level) factors

-      high-level mechanisms. 

The team looked at the technology-level (“low-level”) factors that have affected cost by changing the modules and manufacturing process. They found that there were six low-level factors that accounted for more than 10 percent each of the overall drop in costs, and four of those factors accounted for at least 15 percent each.

The team also estimated the cost impacts of “high-level” mechanisms, including learning by doing, research and development, and economies of scale. Examples include the way improved production processes have cut the number of defective cells produced and thus improved yields, and the fact that much larger factories have led to significant economies of scale.

The study found that the relative importance of the factors has changed over time. In earlier years, research and development was the dominant cost-reducing high-level mechanism (for example improvements in the devices and in manufacturing methods). For about the last decade, however, the largest single high-level factor in the continuing cost decline has been economies of scale, as solar-cell and module manufacturing plants have become ever larger.

In terms of government policy, policies that stimulated market growth (such as renewable portfolio standards, feed-in tariffs, and a variety of subsidies) accounted for about 60 percent of the overall cost decline. Government-funded research and development in various nations accounted for the other 40 percent. 

Source: MIT News Letter