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As Solar Panel Efficiencies Keep Improving, It’s Time To Adopt Some New Metrics

A lot of attention has been paid to the declining costs of installed solar panels in the past few years, and the increasingly feasible drive towards grid parity in the United States. Recent numbers from the Solar Energy Industry Association indicate that the average cost of an installed watt has fallen by 24.4 percent since just last year.

I have noted in previous posts that this has largely been a consequence of falling ‘hard’ costs – that is, costs associated primarily with the panels, racks and inverters (largely a consequence of relatively low-cost photovoltaic panels imported from China).

Soft costs are starting to fall as well. Such costs involve financing, customer acquisition, and permitting. Financial engineering – specifically third party ownership, has increased the efficiency of financing and helped to lower costs there. Customer acquisition costs will be the next frontier as online processes for on-site design, selection of vendors, and determination of financing mechanisms are made simpler and easier for customers. Permitting may eventually be streamlined as well, so that it becomes less of a walk through the former Yugoslavia for vendors attempting to sell into various markets.

But there is another piece of the equation that is improving the economics of the solar industry and that is the steady and relentless increase in panel efficiencies themselves. In other words, how well the PV cells convert sunlight into electric power. Since the average conventional panel currently possesses a conversion efficiency rate of between 15% and 16%, a very small improvement in that number can represent a significant increase in total output.

Image: SunPower Corporation

A while ago, I was able to briefly interview Dave DeGraaff, SunPower’s general manager in the module products group about the progress being made with respect to growing panel efficiencies. SunPower knows a good deal about such matters, since they have some of the most efficient panels in the industry and keep pushing the envelope. Their E Series panels currently enjoy one of the highest conversion rates, at over 20.5%. Their new X Series panel currently stands at 21.5%, and it’s projected to increase to 23% by 2015. SunPower’s Efficiency Roadmap shows an overall absolute efficiency improvement of 6% over the eight-year period from 2007 to 2015 (from 17 to 23%). This is a big selling point for the company, since you can get 60% more energy from the same space.

Source: Photon International, February 2013

DeGraaff noted that not all modules are the same, but by and large, there is a steady momentum towards increasing conversion rates across the industry. His observation is buttressed by the work of GTM Research. GTM – a respected source of information in the field – indicates that the average increase in efficiency of conventional panels is likely to improve by approximately 2% over 7 years, or an average of about 0.3% annually. This is consistent with information presented at Photon International 2013, illustrating an improvement of about 4% since the year 2000. This doesn’t seem like much at first glance, but an increase of an additional 2% from 16% to 18%, is a large relative increase, boosting overall electricity output by about 12.5% relative to the initial baseline. This will further improve the value of solar investments, since one will get that much more output from the same panel.

It also raises an interesting question. If the average watt of solar installed in 2000 yielded a conversion efficiency of just over 11% and a watt today boasts 15 to 20%, and if various panels produce different levels of energy under varying conditions, when do we stop referring to PVs in terms of watts installed and begin to focus on the real value, which is the lifetime cost per kilowatt-hour produced. And since Solar Renewable Energy Certificates (additional subsidies provided in some markets) are denominated in kilowatt-hours, it would seem high time to change the metric to reflect cost per kilowatt-hour generated. While not perfect (panel output varies as a consequence of location, ambient heat, and other factors), this would start to help facilitate an apples-to-apples comparison and take this dynamic of ever increasing conversion efficiencies into account. These technological improvements are too big to ignore.\


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