The Economics of Solar Photovoltaic Power

Globally, the U.S. is the fourth largest market for solar photovoltaic (PV) installed capacity behind world leaders Germany, Japan and Spain.

The European Photovoltaic Industry Association (EPIA) reports that 40,000 MW of solar PV capacity have been installed in the world and predicts that by 2015, between 131 and 196 gigawatts (GW) of photovoltaic systems could be installed world wide.

The German solar PV industry has resulted in over 10,000 jobs in production, distribution and installation, while the U.S. solar industry (including PV and thermal) employs more than 100,000.

In the late 1950s, solar PV cells were being used in a variety of small-scale scientific and commercial applications. Greater interest in using solar PV to generate electricity for grid supply began in the 1970s, but the prohibitive cost (nearly 30 times higher than current) prevented large scale implementation. Research and development, increasing production, and decreasing costs in the following years have made solar PV more economically feasible as a power generation source. The cost of solar PV has dropped dramatically as the industry has scaled up manufacturing and incrementally improved the technology with new materials. Installation costs have come down too with more experienced and trained installers.

The greatest challenge to more widespread adoption of solar PV is scaling up production and distribution of solar energy technology to drive the price down to be on par with traditional fossil fuel sources.

PV installations can operate for many years with little maintenance or intervention after their initial set-up, so after the initial capital cost of building any solar power plant, operating costs are extremely low compared to other existing power technologies.

Because solar energy varies throughout the day and seasonally, other forms of electricity production must be included to ensure a constant supply of electricity at all times. While solar PV production may be difficult to predict over short time periods (days), it is stable and predictable over longer periods (a year).

As fuel prices rise and the cost of generating conventional electricity rises with it, solar PV power generation is becoming a competitive alternative to conventional forms of electricity generation. In California, solar PV generated electricity can be delivered to the grid at prices below the cost of other sources of electricity during periods of peak demand. The EPIA suggests that solar PV will become competitive to the cost of grid supplied electricity by 2013 in some European countries. Solar PV energy will become even more attractive as older facilities using other energy sources come to the end of their useful lives over the next 10 to 20 years.

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