Solar giants predict grid parity in five years

Just days after a new study suggested solar panel prices will fall by more than a quarter this year, top execs at two of the world's largest solar manufacturers have this week predicted the sector will be able to compete on price with conventional power sources within five years.

Speaking as part of this week's Reuters Global Energy Summit, Steven Chan, chief strategy officer at Suntech Power, told the news agency that he expected silicon costs per watt to halve over the next five years to just $1 (61p), allowing solar panels to compete with other energy sources without relying on subsidies.

"We feel that in the next five years our product could survive without the need for government subsidies," he said.

His comments come just days after a study from research firm IC Insights predicted that a combination of falling demand and increased silicon supplies mean average solar panel prices will fall 28 per cent this year.

Chan said the company's recent investments in silicon providers, which have been coupled to supply deals, have allowed the company to cut silicon costs by at least 20 per cent. He added that the firm now expected average selling prices for its panels to fall 10 per cent this year and then continue to fall at seven per cent per year even as demand increases.

He also told Reuters that following its acquisition of German-based KSL-Kuttler Automation, a specialist in manufacturing equipment, the company was considering opening manufacturing facilities in the US and Europe.

"A big part of buying this German automation company is to automate our production lines in a way that we can set up production in high-labour-cost geographies and not really suffer a high cost structure," he said.

Chan's prediction was mirrored by Tom Werner, chief executive at rival solar manufacturer SunPower Corp, who told the Reuters conference that solar energy will reach grid parity by 2013 at the latest, making it cost competitive with conventional power from the grid.

He added that the company remained confident that delays to US tax incentives would not stop it meeting financial forecasts, arguing that it would stick by sales forecasts for this year and next, even if the planned Investment Tax Credit (ITC) for solar installations is not passed by Congress.

"We control our own destiny – we'll be able to enter other new markets rapidly, and we believe we can hold our guidance for '08 and '09, even if the ITC doesn't pass, by moving business elsewhere," he said.

He added that while any failure to deliver tax credits would affect demand from US commercial customers, the company expected its residential business to remain strong and predicted that expansion in international markets, such as Europe and Australia, could pick up any slack.