Why Are Solar Panels Expensive?
A number of factors have resulted in the high cost of solar panels, most notably a shortage of processed silicon in the face of higher demand. As silicon manufacturers adjust to growing demand and produce more, the market expects solar panel prices to drop. Does this Spark an idea?
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Crystalline Silicon
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The demand for processed or crystalline silicon comes not from the solar power industry, but from industries such as manufacturers of computer chips. Demand for processed silicon outpaced its production as the solar power industry has grown and began to compete with other silicon-based industries.
Government Subsidies
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High prices for solar panels have led to government subsidies, which have continued to drive up demand and cost, especially in countries with the heaviest subsidies, such as Germany.
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Production Figures
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According to Ted Sullivan, analyst at Lux Research, an independent research firm, the availability of processed silicon amounted to only 15,000 tons in 2005. Sullivan predicts that production could increase to 123,000 tons by 2010 as factories respond to growing demand.
Prices
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Demand for processed silicon has driven the price to $450 a kilogram, over ten times normal levels. The cost of solar panels has made solar power, at more than $4.80 a watt, three times as expensive as conventional electricity, according to Solarbuzz, an industry tracking firm. The US federal tax credit lowers the price to consumers to about $2.87 per watt, according to Andalay Solar.
Price Projections
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Greater production will lead to lower prices for solar panels, but disagreement exists as to how low they will go. Predictions by analysts at research and industry firms like Photon Consulting, Solarbuzz and the Prometheus Institute range from decreases of 20 to 50 percent.
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