Solar needs cost reductions

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The solar industry needs cost reductions in order to overcome diminished subsidies and regain profitability, and these reductions could be closer than we think, according to Lux Research.

With overcapacity and supply outstripping demand by 2:1, there is good news. Module prices have fallen over the past four years to a low of $0.70/W. The bad news is that the cost of goods sold (COGS) for modules has not reached this level, resulting in massive losses for many module manufacturers.

Lux Research examined the impacts of drivers like low-cost manufacturing locations, high efficiency, increased capacity utilization, and higher production yields on module COGS and found that CIGS has the greatest potential to cut cost, causing COGS to fall across the board between 2012 and 2017. The decline rate will be the steepest for copper indium gallium (di)selenide (CIGS) thin-film modules, which can shave $0.14/W off the cost to $0.64/W. Cadmium telluride (CdTe) remains the low cost leader at $0.48/W in 2017, down from the current $0.67/W.

Efficiencies are key. Manufacturing location has the greatest potential influence on COGS but overcapacity makes opening new facilities in low-cost countries unlikely, according to Lux.

"With pressure from competitors, customers, and policy-makers to drop prices even further, manufacturers need to drive costs down to survive and thrive during the coming years of growth in the demand market," said Ed Cahill, Lux research associate.

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