Solar costs set to halve this year

The cost of solar electricity will drop by half this year compared with 2008, thanks to a drop in solar panel prices, according to a report from analyst firm New Energy Finance.

The report, which analysed pricing before government subsidies, focused on levelised costs. These are costs that include the entire lifecycle of a solar project installation, from facility construction to operation.

Pricing of crystalline silicon PV modules fell dramatically over the past year, as the recession bit into investment in the capital-intensive clean tech industry, leaving solar projects fighting for funding.

Consequently, the supply of solar panels has outstripped demand and has left a glut of the material on the market.

Thin-film solar material is already cheaper than crystalline solar panels, making it even more attractive for solar project owners.

The predicted cost reduction may be dramatic, but it continues a broad trend in forwarding levelised costs.

A recent report from Lawrence Livermore National Laboratory called Chasing the Sun II shows a gradually falling cost for solar systems over time.

The cost of solar installations dropped by 30 per cent in the past decade, the report said.

In 1998, the average cost was $10.80 (£6.60) per watt. This rested at $7.50 per watt in 2008, although prices levelled out after 2004 as the demand for solar modules increased.

"Preliminary evidence and industry expectations suggest that module price will continue to fall through 2009," the Livermore report agreed.