History of solar energy prices

There is a clear trend towards an increase in the installation of solar power plants. One of the main reasons for this is the fall in the price of photovoltaic modules, which are one of the most important components of any solar power plant. Let’s take a look at why this is happening.

How did solar become so cheap?

In 1975, the first solar panels cost about $115.3 per watt. By 2010, this price was already $2.15 per watt, and by 2021 it will be only $0.27 per watt. We are witnessing a significant reduction in the cost of one of the most important green technologies – by almost 90% in the last 10 years.

Graph of solar panel prices over time (logarithmic scale)
Graph of solar panel prices over time (logarithmic scale)

In many parts of the world, it is already cheaper to generate electricity using solar technologies than using traditional methods such as nuclear or thermal power plants fired by coal and natural gas. This can be considered an unqualified success.

What has contributed to such a rapid reduction in technology costs?

The energy crisis

In the 1970s, the world faced an oil crisis. This led to increased pressure to research and develop alternative energy sources. The US federal government allocated more than $8 billion to research and development of solar energy technology. As a result of this programme, the efficiency of solar panels doubled. A process began whereby increased production of modules led to a reduction in their cost. 

After the programme ended, it was the Japanese who continued to work in this area. By the end of the 1980s, they had developed small but relatively powerful modules for powering watches, calculators, etc.

But so far, the global market for solar modules has been insignificant.

The driving force

In many developed countries, the process of introducing economic incentives for the use of renewable energy sources (RES) began in the mid-1990s. But the most influential was the feed-in tariff policy introduced in Germany in 2000. The German government promised to pay renewable electricity producers twice the market price for 20 years.

There was a boom in the installation of solar capacity. Demand for solar panels increased – the more they were produced, the cheaper they became.

At some point, China entered the market for manufacturing components for solar power plants, leading to a rapid increase in the production of solar panels. Prices began to fall even further. The success of China’s first commercial solar module manufacturing company contributed to the growth of competition in this market. 

This came full circle, as the development of the technology contributed to falling prices, which in turn attracted new players to the market, which increased demand, and increased demand stimulated further development of the technology…

Many countries around the world began to introduce legislation that stimulated the development of the renewable energy market, including Ukraine, which introduced a mechanism of state support for the industry through a feed-in tariff in 2009.

In just half a century, solar panels have gone from being an expensive niche technology used in space to one of the cheapest sources of energy in the world. 

In summary, we can confidently say that today, thanks to a significant reduction in the price of equipment, the installation of solar power stations is becoming not only an environmentally ethical act, but also an economically viable one. And the prospect of legislative incentives for such decisions is becoming another important factor that will bring even more benefits to the owners of solar power plants.

 

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