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The first question anyone investing in solar PV power plants in India has is: What is the capital cost of solar PV power plants?

A solar PV power plants today costs about Rs 16 crores per MW in total capital expenses.

As a rule of thumb, the solar module represents 40-50% of the total installed cost of a solar PV power system. Therefore, a reduction in cell prices is of high relevance to those looking to invest in PV plants. We will discuss trends in solar module cell prices as well as what we at EAI expect the total capital costs of solar PV power plants in future.

Over the past 30 years, there has been a 95% decrease in solar PV module costs and a concurrent doubling in the typical solar PV system energy conversion efficiency. The prices for high power band (>125 watts) solar modules has dropped from around $27/Wp (Watt Peak) in 1982 to around $4/Wp in 2005.

What can be said about long-term forecasts? Will PV module prices continue their historical downward path, at what rate of decline? Will there be saturation?

According to optimists, there is potential for further reduction in PV module prices, through innovation and economy of scale, based on the historic pattern, down to US$1/Wp for a world PV market of 1-10 GWp.

Pessimists, on the other hand, point out that the PV learning curve does not reflect the time variable. So, although the cost decline will almost certainly happen eventually, in fact it could be delayed for a considerable time.

However, there are reasons to be optimistic about cost reductions (US$/Wp) of PV modules:

  • Until now, crystalline silicon modules using electronics grade silicon scraps as feedstock have dominated the world PV market. Their manufacturing processes derive from the electronics industry and are not optimized for PV module production.
  • Significant cost reductions will be achieved as soon as dedicated production facilities for solar-grade silicon are justified by demand.
  • Even sharper module cost reductions can be expected in the case of thin film PV cells, irrespective of the basic semiconductor employed (amorphous silicon, CdTe, CIS, or others). First, this is due to the use of a much smaller amount of semiconductor material and to much lower energy consumption rates. Secondly, thin-film manufacturing techniques (direct deposition) allow the direct manufacturing of 1,000 cm2 integrated solar modules (i.e. a-St) and are particularly well suited for mass production.

Another reason for optimism is that several types of laboratory test cells show much higher efficiencies than those of present commercial modules. More efficient modules need less area to produce the same amount of energy. As a consequence, efficiency gains will lead to a reduction in both specific (US$/Wp) module costs and “Balance-of-System” (BOS) costs, which also account for a high percentage of current costs.

At EAI, we did an analysis of what could be the total capital cost per MW for a solar PV power plant in the next decade. And this was what we got:

Capital Costs for Solar PV by Timeframe – Predictions for India

Solar module costs comprise about 50-55% of the total capex. The solar module costs (for crystalline solar cells) have dropped by about 90% between the early 1980s and 2010.

Increased capacity and scale of production might lead to a future cost reduction of up to 20% by 2012.

Crystalline solar cell efficiency is also expected to go up from the present 16% to about 20% in the near future. Due to technological advances, the average cell efficiency for crystalline- based silicon modules has increased by 1% every two years. Cell efficiency is expected to go up from the present 16% to about 17.5% by the end of 2010, and is expected to touch 20% by 2015.

Given the fairly low efficiency of a solar cell, a change in module efficiency by 1% (say from 16% to 17%) equates to an increase in the energy yield of a cell by 6% or the whole system by a respectable 4.5%.

Using these and other relevant data, EAI estimates the following cost reductions over the next ten years

Cost Reductions in Solar Modules

Between 2010 and – % Cost Reduction for Solar Modules
2012 25
2015 40
2020 60

Projection of Capital Costs over Time

Using the above data, EAI projects the following capital costs over time, for different scales of solar PV power plants.

Capital Cost over Time All costs in Rs Crores/MW

Capacity (MW) 2010 2012 2015 2020
1-5 17 14 12 8.5
5-10 16 11.5 11 8
10-50 15 12.3 10.5 7.5
50-100 14 11.5 10 7