Friday, 24 June 2011

Is solar getting cheaper?

One of the questions I get most often from people is: “When is solar going to become more affordable?” This is typically followed by; “I was watching such and such a show last week and they were talking about this great new solar product….”. This is not an easy question to answer and I typically respond in two parts: Solar photovoltaics (electricity) has already decreased in price significantly in the past three years. How significant you ask? A system that may have cost $25,000 in 2009 can now be installed for around $15,000 or less. 

On the other hand I would say it costs more now to install a solar hot water than it did three years ago. Why is solar hot water more expensive? Well, solar hot water technology really hasn’t changed in the last thirty years so there haven’t been major improvements in the product. And we have found you get what you pay for, the lower cost systems are just not performing as well over time as the higher quality systems.   

As far as the next great product, well, price reductions to date have been almost entirely due to incremental improvements and volume (people putting systems on their home and utility scale installations), not a giant leap forward in technology. I would also point out that solar technology works very well today and in some cases can already compete on a cost basis with new fossil fuel electric generation. When we stop letting fossil fuel generation pollute the planet for free solar will clobber these other technologies on a cost basis but that is a different story... 

Is there a new technology out there that will leap frog the existing technology? Perhaps, I am no expert on all the different technologies out there but media hype associated with the next great thing is more often then not just that, hype, not substance. It is also worth mentioning when these ideas are first revealed to the media they are usually only a proof of concept which means they may have only been demonstrated in a lab which is a far cry from being able to build the product in a factory at a low enough cost, high enough quality and required reliability to make it viable. I remember when I was on Nortel's M&A team we purchased a company in Santa Clara where this scenario occurred. The company was bought because it had proved a concept in a lab environment but that product never made the jump from lab bench to the real world and in the end the product died.  

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