Solar industry predicts panel prices to fall from end of the year

End to silicon supply bottlenecks promises steady decline in solar costs

The cost of photovoltaic (PV) solar panels should begin to fall before the end of this year as new silicon manufacturing capacity comes online and long-standing supply bottlenecks are addressed, according to leading industry figures.

Speaking to BusinessGreen.com, Miles Schofield, solar product manager for electronics giant Sharp in the UK, said that industry forecasts pointed to a significant increase in silicon supplies from later this year, which should have a knock on impact on raw material costs for solar panel manufacturers.

"Prices should begin to come down this year," he said. "There have been bottlenecks in the supply of silicon that have offset the gains that should have come with improved economies of scale, but those bottlenecks are due to ease at the end of the year."

Schofield predicted that silicon costs will fall by around a third by 2012, adding that while the price of solar panels will not fall by the same proportion, due to the impact of increased demand and other raw material costs, the reduction in the cost of silicon should trigger a "gradual downward trend" for the price of solar panels.

"The price forecasts from the European PV Industry Association claim that we'll be down from $3 per watt now to $2 per watt by 2012 and then $1 per watt by 2020," he said.

Seb Berry, head of public affairs at UK solar specialist Solar Century agreed the cost of silicon is set to fall from later this year, but warned that increased demand for PV cells globally could offset any reduction in manufacturing costs. "If demand continues to grow at over 40 per cent a year globally, then it is unclear if any drop in the price of silicon will filter through to the end product," he said. "It could go either way – if we were to get a feed in tariff in the UK for example, the increased demand could force prices back up again."

However, Schofield remained confident that the burgeoning solar industry is well positioned to meet booming global demand for new panels. "Sharp currently has 720MW of [solar manufacturing] capacity across five facilities globally," he said. "We have set a target of 6GW of capacity, including an additional European facility. That is an eightfold increase in capacity in the foreseeable future."