Solar Prices Set To Fall 70 Percent In 8 Years

A recent research report by McKinsey & Company, entitled Solar power: Darkest before dawn, has suggested that despite the current solar manufacturing company shakeout, the solar energy industry is far from being in its death throes. What’s more, the cost of solar could drop by 70% over the next 8 years.

The analysts have concluded that solar pv (solar photovoltaic module) demand could reach 100 gigawatts (100,000 megawatts) per year by 2020. Back at the turn of the new century, global solar pv demand was just 170 megawatts a year, so that would be enormous growth. The report estimates that this growth would bring into the market more than $1 trillion in investments from 2012 to 2020.

Currently, the first wave of solar manufacturing companies is suffering from an oversupply and dramatic price cuts of solar panels. These internal market issues have been driven by years of government subsidies which lifted capacity, and by new manufacturers entering the market in numbers – including from China.

It’s not that these issues aren’t serious, they are, but the report suggests the solar industry is now maturing, and this will most likely usher in more stability and substantial growth for solar companies left standing. If these companies, and smart emerging players, can manage costs well and keep innovating, they will stand to benefit from growing world demand for economical solar energy.

The report suggests that solar pv costs should continue to decrease as manufacturing capacity scales during the next 3 to 5 years. It’s estimated that costs could decrease 40% by 2015 and another 30% by 2030 – 70% over 8 years!

It is thought that even if government subsidies decline or even disappear, the solar industry should be able to survive and thrive. The industry should be able to grow based on market demand and “viable stand–alone economics”.

McKinsey suggests that the crucial cost reductions over the decade will come from incremental cost reductions in solar deployment, rather than solar technology breakthroughs in the lab.

Do you agree that the solar industry is far from dying, and the severe shakeout we are now seeing is just part of its overall growing pains? It’s certainly tempting to compare the growth of solar with other technology industries that have experienced exponential growth over decades, but have had growing pains along the way.

Image CC licensed by Walmart: Large solar panel installation on a Walmart store

Via thinkprogress and TriplePundit