By Fitch Solutions
- Advancements in solar power technologies will yield further cost declines in solar power projects over the coming decade, making solar power increasingly cost-competitive globally.
- Improvements to technologies in the solar sector, including solar modules, tracking components, and digitisation technologies, will reduce project costs and improve the overall efficiency of solar power projects.
- Soft costs will also continue to decline over the coming decade in markets across the world, both as a result of the technology improvements as well as increasing government support for the sector.
- In addition, ongoing advancements in solar cell technologies, particularly perovskite solar cells, present the potential for additional significant improvements in conversion efficiencies and sizeable cost declines by the middle to end of the coming decade.
We expect continued advancements in solar power technologies will yield further cost declines in solar power projects over the coming decade. 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 USD378/MWh 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. We expect that solar power will 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. 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.
Improvements to the technology of solar project components will reduce project costs and improve the overall efficiency of solar power projects. Among anticipated technology advancements, we highlight:
- More powerful and efficient modules: Solar module manufacturers will continue to make technological advancements towards more powerful and more highly efficient models. In regards to power output, we have previously highlighted the industry’s advancement towards 600W+ modules, with several manufacturers working towards 700W+. The more power modules also coincide with improvements in overall efficiency, with manufacturers working towards efficiencies upwards of 23-25%. We expect that developers who utilise these 600W to 700W+ modules will be able to use fewer modules in order to hit their desired capacity targets. 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 (BOS) components, labour hours, shipping and in some cases even the amount 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 becoming increasingly adopted by solar developers. Tracking manufacturers are now increasingly focusing on creating products which expand the suitability range and ease of installation for solar PV projects on traditionally difficult and high-cost terrains, including steep slopes, landfills, or hilly landscapes. In addition, we anticipate 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. We expect 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 O&M costs. For example, using AI 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 – which are 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.
Soft costs will also continue to decline over the coming decade in markets across the world, both as a result 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 money, soft costs accounted for a respective 35%, 55%, and 64% of the cost of utility-scale, commercial and residential solar projects 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, we expect governments around the world will continue to work towards streamlining permitting and financing processes and improving policy in order 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 (CNE) 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. Additionally, as previously mentioned, the US government recently launched its SolarApp+ software in order to reduce solar permitting costs over the long-term.
We highlight that 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 tape-like film which can capture leaked lead in the event of cell damage could help alleviate the concerns surrounding lead-toxicity.
This article has been sourced from Fitch Solutions and can be accessed here