The article discusses the cost and forecast of photovoltaic (PV) power generation, focusing on how electricity generation costs are calculated and how they compare to other energy sources. The cost per kilowatt-hour includes all investment and operational expenses, such as equipment replacement, maintenance, and even land costs for ground-mounted systems. This allows PV systems to be evaluated against traditional power plants in terms of economic viability.
Several factors influence the calculation of electricity costs, including the system’s life cycle, initial investment, operation and maintenance expenses, discount rates, and location. The report considers different technologies—crystalline silicon and thin-film—and various market segments: residential (3 kW), commercial (100 kW), industrial (500 kW), and ground-based (2500 kW) systems. Key countries analyzed include France, Germany, Italy, Spain, and the UK, which collectively held a significant share of the European solar market in 2010.
PV system prices consist of components like solar modules, inverters, cabling, and installation. In 2010, modules accounted for 45–60% of total system costs, making them the most critical factor. Over time, the cost of these systems is expected to decrease due to technological improvements and economies of scale. The report forecasts a learning rate of 20% for PV modules, meaning that as cumulative installations double, module prices will drop by 20%.
Inverters also play a major role, with smaller residential systems having a higher learning rate (20%) compared to larger commercial or utility-scale systems (10%). Distribution equipment and cables depend on material costs, efficiency, and system size, while installation costs vary based on labor and local regulations.
To calculate the true cost of electricity, the report accounts for the system's life cycle, depreciation, and discount rates. These rates vary depending on the country and market type, reflecting differences in financial environments and risk levels. As awareness of solar technology grows and it becomes a more attractive investment, return rates may decline, signaling improved affordability.
Looking ahead, the report outlines an intermediate scenario, projecting a 20% learning rate for PV modules through 2020 and gradual reductions in other components. By 2020, PV system prices could fall by 36–51%, significantly improving competitiveness. Europe, especially Germany, has already seen dramatic price drops, with module prices falling by 50% over five years.
Despite progress, some countries still face higher costs due to limited competition and complex administrative procedures. However, as markets mature and become more efficient, prices are expected to stabilize and continue declining. The study concludes that all market segments—residential, commercial, industrial, and ground-based—are likely to achieve competitive electricity costs within the next decade, even in regions with lower solar irradiation.
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