With its development and deployment at an unprecedented rate since 2010-2012, solar photovoltaic energy is undoubtedly the fastest growing renewable energy. The year 2018 saw a massive installation of photovoltaic panels with the addition of a capacity of about 102 GW worldwide, equivalent to 18 Robert-Bourassa generating station, in only 12 months.

The price of solar photovoltaic panels continues to plummet faster than expected. In 2015, the bill was US $ 0.65 per kW and, according to previous estimates, should have reached US $ 0.40 in 2040. However, the price was already US $ 0.37 as of 2017 and was around $ 0.25 as soon as the third quarter of 2018.

The fall in photovoltaic panels prices: two shocks

The incredible collapse of solar energy prices can be explained in two stages:

1. In recent years, China has invested heavily in the production and installation of solar power plants. This investment was US $ 126.6 billion in 2017, three times more than the US and Europe. The entry of Chinese photovoltaic panels into the global market has reduced prices by almost 50% between 2013 and 2017.

2. A second shock occurred on May 31, 2018 when China announced the end of subsidies dedicated to the installation of solar power plants on its territory. This change led to a drastic and sudden drop in demand and created a surplus in the market. This not only had the effect of canceling the expected slight rise in prices due to the trade war between the United States and China, but even plunging prices even further. The latter price decrease would be estimated at approximately 30% according to the latest estimates.

Stabilization to come

The fall in prices, however, should soon be stabilized by cost pressures.

The costs of a solar installation include not only the panel value, but also the value of the equipment and labor costs required for the installation. Costs other than panel costs are called soft costs. These costs do not decrease, but rather tend to increase with inflation.

As panel costs are becoming cheaper, soft costs are becoming an increasingly important part of the price per kW. We must therefore expect that the fall in prices will slow down and soon stabilize. However, this should not slow the growth of the sector, which is expected to remain exponential at more than 12% annually until 2022 according toSolarPower Europe forecasts.

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Author Ismaël Gueymard

Ismaël studied management at Paris-Dauphine University as well as in sociology and international management at the University of Quebec in Montreal. Trinational, he has acquired professional and academic experiences in Canada, the United States and France. Ismaël specializes in real estate, infrastructure and technology.

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