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Technology advancements to lower solar power costs over long term
Technology Advancements to Lower SOLAR POWER
Costs Over Long Term
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Solar power may continue to see declining costs over the long term, resulting from technology advancements as well as a reduction in soft costs that are set to take place over the coming years.
BY FITCH SOLUTIONS
The cost of solar power has declined significantly over the past decade, with the levelised cost of energy (LCOE) for solar falling from a weighted average of USD248/MWh in 2010 to USD68.4/MWh in 2019. According to financial advisory and asset management firm Lazard, the LCOE for utility-scale solar power reached USD36/MWh in 2021.
The steep decline is the result of several factors including a rapid decline in module costs, increased competition and economies of scale from significant growth globally. Notably, soft costs, which include customer acquisition, permitting, financing and installation costs, continue to account for a significant portion of overall project costs. Increasing cost-competitiveness plays a key role in our upbeat long-term solar growth outlook, in which we forecast global solar capacity will increase 144% from 716GW in year-end 2020 to 1 747.5GW in 2030.
LONG-TERM GROWTH OUTLOOK
Improvements to the technology of solar project components will reduce project costs and improve the overall efficiency of solar power projects. Anticipated technology advancements are:
More powerful and efficient modules. Solar module manufacturers will continue to make technological advancements towards more powerful and more highly efficient models. The increase in power modules also coincides with improvements in overall proficiency, with manufacturers working towards efficiencies upwards of 23-25%. This in turn will reduce costs throughout the solar project value chain, as using fewer modules will reduce the amount of racking, tracking and balance of system
Key View
Matt Klug
Above: Atomic scale view of the perovskite crystal structure forming (self-assembling). The potassium ions (in red) are decorating the surfaces of the structures to heal defects and immobilise the excess halides.
Below: Global: Solar capacity, MW and generation, TWh (2020-2030).
in 2020, according to the National Renewable Energy Laboratory. That said, advancements in solar PV module, racking, tracking, and inverter components will reduce installation and labour costs.
Furthermore, it is anticipated that governments around the world will continue to work towards streamlining permitting and financing processes and improving policy to encourage both solar and wind power investments as they work towards net-zero and renewables targets. For example, the Dominican Republic’s National Energy Commission has been working with ProDominicana, the country’s export and investment centre, to create a new streamlined platform that foreign investors can use to invest in the market’s non-hydro renewables sector.
© 2017 by Elsevier
(BOS) components, labour hours, shipping and in some cases even the amount of land required for the project.
Improved tracking technologies. Single-axis and dual-axis solar tracking systems boost project yields by up to 40%. As such, while tracking systems lead to higher capital costs, they are increasingly being adopted by solar developers. Tracking manufacturers are now progressively focusing on creating products which expand the suitability range and ease of installation for solar PV projects on traditionally difficult and highcost terrains, including steep slopes, landfills or hilly landscapes. In addition, Fitch Solutions anticipates that manufacturers will continue to work towards improving their tracking system designs to reduce assembly, installation, and operation and maintenance costs further shrinking the cost difference between fixed-tilt and tracker systems. These advancements in tracking technology, as well as cost declines due to their increasing adoption, will expand the suitability of solar onto difficult terrain and further reduce costs throughout the lifespan of solar power projects.
Digitisation in solar power projects. Advancing data analytics and digitisation within the solar industry will help developers cut development costs as well as operation and maintenance (O&M) costs. For example, using Artificial Intelligence and machine learning software can efficiently determine the ideal placement and design of solar power systems. Automated software can also speed up the process of project permitting, which remains a costly barrier both in terms of time and money, particularly in the US. For example, in July 2021, the US Department of Energy (DOE) launched the Solar Automated Permit Processing Plus (SolarAPP+) tool, a free platform that allows local governments to automate and significantly expedite the permitting process for residential solar projects.
Finally, the increasing use of digital twins – digital replicas of real solar facilities that can analyse function and working conditions – can be used to both reduce costs and boost the performance and output of solar power plants. For example, companies can use digital twinning to predict the timing of when certain equipment will break, reducing O&M costs.
Schematic representation of two different configurations used perovskite solar cells.
Structure of perovskite solar cells (PSC): (a) HTL-free PSC and (b) ETL-free PSC.
HISTORICAL COST DECLINES
Soft costs will also continue to decline over the coming decade in markets across the world, both because of the technology improvements as well as increasing government support for the sector. According to IRENA, soft costs’ share of total utilitiy-scale solar PV costs range from 29% in German to 57% in Russia. Within the US where the permitting process is costly both in time and IRENA, Fitch Solutions money, soft costs accounted for a respective 35%, 55%, and 64% of the cost of utility-scale, commercial and residential solar projects Global: total installed solar capacity, MW and solar power LCOE, USD/MWh.
IRENA, Fitch Solutions
Select markets: share of utility-scale solar PV total costs by category, 2019.
In the last decade, perovskite materials have emerged as promising alternatives to silicon. This image shows an artist's representation of the inner workings of a perovskite solar cell.
Alex T. at Ella Maru Studio (University of Cambridge)
SOFT COSTS
Ongoing advancements in solar cell technologies, particularly perovskite solar cells, are creating the potential for additional significant improvements in conversion efficiencies and sizeable cost declines by the middle to end of the coming decade. Perovskites are materials that have the same specific crystal structure as perovskite crystals. Research into the use of perovskites in solar cells has progressed rapidly, with the conversion efficiencies for standalone perovskite solar cells improving from 3% in 2006 to a high of 25.8% as of December 2021.
Layering perovskite material on top of silicon yields an even higher power-conversion efficiency with a potential limit of nearly 40%. For comparison, a typical silicon solar panel currently has an efficiency of around 20%. In addition, methods to produce perovskite cells are both cheaper and faster than silicon cells. For example, in 2020 researchers at Stanford University announced the invention of a manufacturing method for perovskite modules which costs USD2.70 per sq. metre, while a typical silicon module costs roughly USD27 per sq. metre.
That said, several barriers to large-scale commercialisation still need to be addressed for perovskite solar cells, including the need to improve durability and reduce the risks of lead-toxicity. In December 2021, it was reported that the development of a tapelike film which can capture leaked lead in the event of cell damage could help alleviate the concerns surrounding lead-toxicity.
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.
BUDGET SPEECH 2022 | COMMENT ON THE CARBON TAX
“While it’s understandable that the state is increasing the carbon tax as it looks to achieve its climate goals, it's missing a bigger opportunity to reduce emissions,” says Hohm Energy’s Ryan Steytler.
“Eskom is one of the country’s largest polluters. By incentivising rooftop solar, especially at the residential home level, South Africa could dramatically reduce its dependency on dirty power and build a greener, stronger economy. Carbon tax will be used to financially disincentivise consumers from using carbon intensive energy sources, starting first with businesses.”
He adds: “Implementing solar systems will reduce consumers’ reliance on carbon-based energy sources, reducing the imminent and future impact of the carbon tax.”
