Why The Cost Of Solar Has Declined For Decades

It is a commonly known fact by those in the renewable energy industry that the cost of solar has decreased dramatically over the years. In fact, its price reduced about 99 percent over the past 40 years.

However, the reasons for this decline are just now being revealed. In a recent article from MIT News, the exact reasons for this precipitous pricing drop are explained.

It turns out that government policy and investments helped spur the industry along at just about every stage. The article discussed two major categories concerning the the development of this industry; “low-level” factors and “high-level” factors.

Low level factors include everything to do with the beginning stages of making a solar cell, manufacturing processes, and the size of solar factories. For example, solar cell efficiency levels have increased quite a bit since the early years of cell production. High level factors are research and development, “learning-by-doing”, and economies of scale. Limiting defective cell production and gaining price advantages from larger factories (economies of scale) are two examples of high level factors.
solar cost reduction
Early on in the industry, cost savings were found in research and development and a declining cost of silicon and non-silicon materials. In 2001-2012, economies of scale became the main cost influencer. For the years that this study considered, 1980-2012, private R&D, learning-by-doing, and economies of scale combined accounted for about 60 percent of the total cost reduction. Research and development funded by the governments of nations around the world account for the other 40 percent.
solar cost reduction
The MIT study also mentions that solar photovoltaic research is ongoing and that further cost reductions are possible. Materials other than silicon are being studied as a possibly cheaper alternative. It should be noted that pricing indicators for utility scale solar and residential solar are often different.

Let’s now discuss the obvious “elephant in the room.” The idea that there are quite a few people who are against the use of renewable forms of energy like wind and solar power because they are subsidized by the government. They believe that these energy sources will fail without these subsidies. What they don’t realize or won’t admit, is the fact that the fossil fuel industries were subsidized in the same ways, in fact even more so.

There must be quite a few examples of consumer technology that gets used everyday that would not exist in the marketplace without early assistance from the government. Considering the fact that solar power is now not only an economic boon, but something that can have a major impact on improving our environment, its only detractors must simply be those that are currently employed by the fossil fuel industry.

The really good news is that solar power is now such a cheap form of energy. Therefore, fortunately, it does not have to be as reliant on potential future governmental assistance such as the highly discussed carbon tax. We can expect to see continued massive solar power implementation due to current price comparisons with alternatives alone.

To find out what the current cost of solar is at the residential scale, go to the cost of solar page.

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