For the last 40 years, every time the world production rate of PV doubles, the price falls by 18%.
However, the PV price drop stalled out in 2004 – mainly due to a shortage of silicon. Demand has been artificially inflated by government subsidies (mostly Germany), and the price of silicone went from $25/kg in 2003 to $400/kg in 2008.
Now prices are falling again. I’m sure it’s partially due to a recession induced drop in demand for computer chips and solar panels, but more silicon processing plants are also coming on line.
After hitting $4.20 a watt in the middle of 2008, solar panel prices have slid almost 30 percent to about $3 a watt, with research firm New Energy Finance predicting a further 20% drop this year.
PV prices are likely to continue dropping in months ahead. Renewable Energy World reported, “The cost of photovoltaic electricity is due to plummet in 2009, according to a new analysis by New Energy Finance. Its latest Silicon and Wafer Price Index shows average silicon contract prices falling by more than 30% in 2009 compared with 2008. . . . Furthermore, with thin-film PV module manufacturing costs approaching the $1/watt mark, crystalline silicon-based PV will come under severe competition for larger projects, resulting in margins shrinking throughout the silicon value chain, the company argues. . . . This may pressure crystalline silicon module manufacturers to reduce selling prices . . . $4/watt could drop to $2.60/watt by the end of 2009.
Keep in mind, this is for the PV panels themselves. For residential sized systems the costs break down roughly like this:
$4 PV modules
$2 Balance of system (wiring, disconnects, etc.)
$8 per watt installed