Wednesday, February 25, 2009

Solar Power, $1 per Watt

The cost of solar panels keeps falling year after year. And at the end of last year, the manufacturing cost fell below the magic level of $1 per watt.

That was at First Solar, a company that emphasizes low manufacturing costs for solar panels. First Solar’s panels cost less but are not as efficient, in terms of their use of space, as the panels from other manufacturers. Still, the results are indicative of the direction the industry is going in.

One dollar per watt is not just a nice-sounding milestone for manufacturing efficiency. It is also roughly the level at which solar panels become attractive enough to persuade people who have money to take money out of the bank and buy solar panels. In the right situation, solar panels are now a better, safer investment than money in the bank.

What does $1 per watt mean? In a less-than-ideal installation, a watt of solar capacity may provide a kilowatt-hour of electricity per year. With electricity costing 20¢ per kilowatt-hour, solar panels could theoretically replace part of a home or business’s electric purchases with a 5-year payback. That is, the solar panels would cost as much as the electricity they would generate in their first 5 years. That is probably the financial threshold that could make solar panels a popular do-it-yourself project. In practice, the cost of a solar installation is still much higher than $1 per watt, but having manufacturing costs for panels fall below $1 per watt shows that we’re getting closer to the point where solar panels become widely popular.