Despite the prevailing global trend of inflation, there is an anomaly worth noting: the declining prices of solar modules. According to PV Europe Magazine, these prices have plummeted by a remarkable 42% since 2020, hitting a historic low of $150 per kW in December last year. A similar trend is observable with solar inverters. What is driving this trend and what are the implications for the energy market ?
What is driving the trend?
This downward price trajectory can be attributed to two main factors (although many more are applying):
- Supply-Demand Dynamics: The fundamental principle of supply and demand is at play here. Global production, particularly in China, has outpaced global demand. While the supply chain is robust, the adoption of solar-produced electricity in emerging and developed countries remains relatively low, especially in commercial installations.
- Technological Advancements: Solar cell technology, dating back to as long as 1839, is still relatively new and continues to evolve rapidly. Ongoing improvements in efficiency and production processes drive down costs, making solar energy increasingly competitive.
What are the Implications for the Market:
While prices falling sounds like a good news in a world where everything is becoming increasingly expensive, this trend carries both positive and cautionary implications.
- Positive Impact on End-Buyers: Lower prices for higher efficiency could catalyze widespread adoption of solar energy production. As energy costs become an increasingly pressing concern, reduced entry costs may incentivize many to transition to greener energy alternatives.
- Uncertain Future Trajectory: While prices are currently on a downward trajectory due to surplus supply, future demand potential is enormous. Regulatory measures and governmental initiatives worldwide are pushing for green transitions, such as the EU's mandate for rooftop solar systems on large public and commercial buildings by 2027. This could rapidly increase demand, thus stopping the current trend.
- Maximizing Efficiency: Lastly, as technological advancements approach their peak, the downward pressure on prices may eventually plateau with a potential for trend reversing.
Key Insights:
In spite of the current trend and market conjuncture, it is hard to predict where the price will go from now on. Two certainties emerge however:
- Solar Energy IS the Future of Green Energy: According to the Internationl Energy Agency, in 2023, 375 GW of solar capacity was added globally, accounting for 75% of total added renewable energy production. Solar energy is sure to play a pivotal role in the global transition to green energy.
- Rising Overall System Costs: While module prices decline, overall system costs are rising due to increasing installation, battery, and logistics costs. This underscores the urgency for residential and commercial adoption of solar energy before cost escalations accelerate. It's essential for consumers to compare prices in the market and prioritize a balance between quality, efficiency, and cost. Expensive doesn't always equate to better; the right choice should align with specific energy needs.
At Tecophase, we're committed to helping you navigate the complexities of solar energy. Our team can tailor All-in-One solutions to fit your budget while optimizing energy efficiency and cost savings. Contact our sales team for personalized assistance.
Sources: PV Magazine Europe, International Energy Agency, pvXchange, European Parliament, InfoLink Consulting