Economic History Perspective Is It Competitive

In talking about the cost competitiveness of solar, it makes sense to focus on the solar photovoltaic module. Of all the components in the solar system, solar modules have been and continue to be the highest-cost component and have shown the greatest potential for dramatic cost reductions.21

A typical solar module is made up of what are called PV cells - these individual cells are connected together in series and laminated and encased in a solar module. The earliest PV cells were made in the 1870s with selenium and were able to convert light to electricity at 1-2 per cent efficiency.22 But by 1954, Bell laboratories had built the first silicon-based PV cell, which converted 4 per cent of the sun's rays into electricity and which was adopted by the US space programme for generating power in space.

The impetus from the space programme subsequently reduced the cost of PV cells by 90 per cent. But it was only with the oil crises in the 1970s and a push from governments to displace oil that PV prices really started to drop and early terrestrial applications for such things as telecommunication repeater stations and remote research facilities started to emerge. In the early 1970s the cost of PV power was $600 per watt, meaning that the average 50-watt module cost US$30,000! But by 1980 the cost had fallen to around $20-25 per watt, and it continued to fall to $6 per watt by 1990 and approximately $4.5 per watt by the mid 1990s. It is no wonder that around this time, energy analysts proclaimed that the 'development of photovoltaics has been nothing short of remarkable'.23

Some still felt that the time was not right for solar in emerging markets -they felt that more time should be given for the costs of the solar module to fall further: 'The economics of PV applications are unlikely to allow for an unsub-sidized widespread adoption of this technology in the near future.'24 But others came to a very different conclusion. The World Bank, for example, concluded as early as 1994 that PV technology was competitive for rural electrification:

For many purposes they are already the least-cost option. Costs and performance compare well with diesel generation, for example, and sometimes with grid supplied electricity in rural areas, depending on the community's distance from the grid.25

A further World Bank study confirmed in 1996 that for areas of low population density, low initial electricity demand and long distances from the grid, PV was already competitive with the grid from a purely economic point of view.26 Of course, customers in emerging markets, particularly in rural areas, have not tended to pay the full cost of electricity from the grid (see Table 3.2):

Table 3.2 Costs and rural retail tariffs for grid electricity in selected emerging markets

(US cents per kWh)

Table 3.2 Costs and rural retail tariffs for grid electricity in selected emerging markets

(US cents per kWh)



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