According to this news report, in 2011, prices for crystalline silicon modules prices fell by no less than 50%, from $1.80 per watt to $0.90. The reason has been substantial oversupply on the market, which may lead to a further drop to $0.70 per watt.
For most of the past decade, polysilicon manufacturing was a near oligopoly, and growth in solar-end market demand allowed the incumbents to earn healthy and consistent EBITDA margins greater than 40 percent. In 2008, a shortage of polysilicon pushed prices to outrageously high levels (greater than $400 per kilogram in the spot market), and with those high prices came eye-popping 70 percent margins that enticed existing players as well as new entrants to embark on plant construction/expansion plans. These massive new plants and expansions made their presence felt in 2011, with a supply/demand imbalance pushing silicon prices to record-low levels, below even the cash costs of many manufacturers. (…)
In 2011, in the polysilicon industry — and the solar supply chain in general — manufacturing outpaced end-use. After a half-decade of silicon demand outstripping supply, the aggressive expansion plans finally overshot. This supply/demand imbalance will push producers to lower contract prices closer to the level of manufacturing costs at $20 per kilogram, and will force higher-cost manufacturers to exit the industry. While the solar market will continue to grow at a 10 percent to 20 percent pace in the coming years, reductions in the amount of silicon used in each module means that end demand for polysilicon will grow at a slower pace.
Solar PV is hence becoming ever more competitive with conventional energy sources. According to the New Scientist, the costs of solar in India have fallen to 8.78 rupees per kilowatt-hour, compared with 17 rupees for diesel. As I noted in a previous post, some analysts even think that solar PV will soon even be able to outcompete coal. These developments ought to turn the UN climate process on its head. So far, all the major players in the UN climate negotiations were working from the assumption that reducing emissions is a burden, so everyone did their best to shift as much as possible of this burden on to others.
But now it increasingly turns out that going low-emission is actually a win-win for both the environment and the economy. So the problem is not the macroeconomic outlook, the problem is that at the micro level there will of course be losers as well as winners. The losers will be the old incumbent industries whose business models rely on emitting CO2, and unfortunately they have so far been able to set the terms of the debate. Here’s to hoping that the ongoing solar revolution will soon also change policy-makers’ political calculus.