Drop In Solar Costs Put At 3% by IRENA for 2021-22 Period

Drivers behind Falling Costs

Noting that the cost of crystalline solar PV modules sold in Europe fell by 91% between 2009 and 2022, the average cost of installing projects in 2022 was also 4% lower than in 2021 and 83% lower than in 2010.

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The drop in costs was as unexpected as it was needed, as steady cost drops between 2010 to 2020 had come to an abrupt halt during and after the pandemic. Average prices had increased by 4-6% between 2020 and 2021, reversing the long term trend. That had left many EPCs and other solar installers stuck with fixed price contracts they struggled to fulfill at the same cost profitably. Many firms shut down, and many, notably, Sterling and Wilson Renewable Energy suffered a deep contraction in orders, besides mounting losses, as they tried to extricate themselves from these contracts.

Driven initially by high freight costs, the price increases were subsequently driven by a spike in polysilicon prices.

The reversal however has led to a sharp rebound in developed markets, especially Europe, the US and now, even emerging markets like  Latin America. In the US, the operation and maintenance costs of a 3.9GW facility fell by 58% between 2011 and 2021, to a low of US$13/kW per year. This is comparable to operation and maintenance costs of US$10/kW per year in Europe, going as low as US$9/kW per year in Germany in 2017.

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Installation Cost Drops Not Evenly Spread

The report points out that there is strong regional variation within this trend of dropping costs. The fall in cost installation has been pronounced in the Americas and the Middle East, while inflation in Asia and Europe prevented any drop in installation costs.

Higher volumes meant that the UAE saw the greatest drop in the cost of solar installation, with spending on new solar capacity per kW falling by 62% between 2021 and 2022. This was followed by a 35% fall in Saudi Arabia and a 22% decline in Chile. Asian and European countries, meanwhile, saw average installation prices increase, led by a 51% increase in Greece over the same time period, a 36% increase in Denmark and a 34% increase in both France and Germany.

Surprisingly, the cost of solar installation rose in China too, by 6% between 2021 and 2022. Considering the high Chinese dominance of the sector, the risk of higher costs spreading out is much more.

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Solar Dominates Renewables Now

The world must add 1,000 GW of renewable power annually on average every year until 2030 to keep 1.5°C within reach, more than three times 2022 levels,” said IRENA director-general Francesco La Camera, highlighting how falling installation and operation costs could help the world meet its long-term climate goals more broadly.

IRENA’s report notes that between 2010 and 2022, the cost of generating electricity from natural gas increased by three times, compared to the 89% decrease in the LCOE of solar. This compares to a 69% decline in the cost of producing electricity from onshore wind, and a 59% decline in the LCOE of offshore wind.

While the cost of installing new solar capacity fell by 83% between 2010 and 2022, the fall in cost of installing other forms of renewable power generation was also striking. The price of installing onshore and offshore wind fell by 42% and 34%, respectively, and only geothermal and hydropower facilities saw an increase in their costs of installation.

What all this means is the case for renewable is more compelling than before, and rising demand is unlikely to lead to significantly higher prices, thanks to a furious build up of manufacturing capacities in solar especially.