Photovoltaic system costs have been dropping.
In fact, as has been highly publicized, solar panel prices have more than halved since 2009.
For developers and electricity purchasers, this is welcome news. Declining system costs should help solar projects compete with other types of power – something that has happened infrequently in the U.S. However, many in the solar industry appear to extrapolate from recent trends that solar project costs will continue to decline in the future. In anticipation of this brighter future, some industry participants are tempted to adjust PPA prices downward (many “winning” PPA prices are now in the $0.10/kWh range) or to delay constructing projects so as to hold out for higher returns.
While we at PowerFin share in the excitement surrounding the currently low system costs, and while we are hopeful about cost declines in the future, we caution against overzealous PPA pricing or delaying project construction based upon inferences drawn from the current industry cycle.