The falling price of PV, and the effect thereof on society

Photovoltaic (PV) generating technology takes the most basic and abundant resource available to humans – the sun – and converts it directly into electrical energy in a clean and simple way. Semiconductors, the drivers of this conversion process from sun to electricity, are similar in nature to those used in computer microchips and are manufactured, essentially, from purified sand. So why are there not more PV panels on residential and commercial rooftops, or an abundance of solar PV farms feeding electricity into the national grid?

 What detracts from this almost ideal picture is the price of produced energy when compared to alternative methods of generation.

But investors and researchers over the past 20 years have not been blind to the fact that 70% of that price could be influenced by economies of scale and technological advancements – both of which were on a massive trend of improvement.

The investors and researchers imagined a day when PV modules would be mass-produced in gigantic factories and would be as common in every household and business as walls, roofs, telephones and televisions. That day is fast approaching, and the dawn of the PV era may be rising faster than anyone predicted.

The last five years have seen an explosion in the global installed capacity of PV, where between 2006 and 2011 the figure has risen from seven gigawatts to approximately 40GW, largely fuelled by a global trend toward cleaner carbon-free energy and a reduction in the module price.

In South Africa, three years ago, you would have paid around R40 per watt for an ordinary PV panel. Nowadays, the price is close to R12/w – and it is still dropping.

Mega-factories in China, able to manufacture 2 000MW of high-quality and efficient PV modules per year, are becoming something of the norm; and the global supply of panels in 2011 is predicted to outstrip demand by almost 15GW.

But what effect does this have on us? More specifically, what effect does it have on business, job creation, the ordinary man in the street, and rural communities that still do not have access to electricity?

The social effect

Although the costs of energy generated from PV are falling, they are still above the retail price of electricity in countries such as South Africa where energy costs have been unrealistically low.

The government, in an attempt to stimulate the local market and bring down the price further, has created subsidies for the large-scale generation of PV power in the form of a feed-in-tariff.

Power producers that are awarded contracts to produce and sell PV energy must comply with strict local economic development requirements such as local content, local job creation and socio-economic development.

Further subsidies are on the horizon for smaller scale PV installations for commercial and residential rooftops, with the aim of creating more jobs and opportunity for
enterprise development.

For the man in the street buying electricity from a national grid, the adoption of PV energy requires a financial calculation and an investment, with the returns depending on the amount of sunshine available and the price of the panels.

Sunshine is not a problem in South Africa, and the above discussion speaks more to the price of panels.

The tipping point of that decision, however, requires a view on where household electricity prices are heading; and for many, the decision to install PV on their rooftops would already be obvious – were it not for cumbersome laws still in place that prevent end users from feeding self-generated energy into the grid easily.

The greatest impact of this technology’s future may be in bringing electricity to those who still do not have access thereto. Africa’s electrification rate (at 38%, or 500 million people without access) is 30% lower than the average for the world’s developing countries; and expanding existing electrical networks to reach this population is simply not economically viable in many instances.

On the other hand, although a compact and affordable solar home electrification system may not provide these users with all the comforts and benefits of a modern-day electrical home, it could provide non-flammable light under which to read, and charge for devices such as cellphones, radios and televisions. These improvements, although seemingly trivial, can have significant effects on the ability of these communities to bring themselves out of poverty.

The solar PV revolution is upon us and, like with any big-wave building momentum, we need to make sure we are ready to ride it.

Chris Haw

Chairperson: South African Photovoltaic Industry Association