MIT Research: Driven by Government Policies, Solar Module Prices Fell by 99% in 4 Decades

The paper looked at the technology-level factors that have affected the cost


There has been a drastic fall in the cost of solar photovoltaic (PV) modules in the past four decades, with the reduction in prices nearing 99 percent. Recently, in a paper titled “Evaluating the Causes of Cost Reduction in Photovoltaic Modules” published the journal Energy Policy, Massachusetts Institute of Technology’s (MIT) associate professor Jessika Trancik, postdoctoral Goksin Kavlak, and research scientist James McNerney tried to ascertain the reasons behind the humongous fall recorded over a span of forty years.

The team studied multiple areas analysing what caused the savings, such as policies and technology changes. It found that government policies played a critical role in reduction of technological cost across markets.

The paper looked at the technology-level factors that have affected cost by changing the modules and manufacturing process. Solar cell technology has improved greatly with increase in conversion efficiency, making the cells much more efficient at converting sunlight to electricity.

The paper also estimated the cost impact of research and development, and economies of scale. It found that improved production processes have cut the number of defective cells produced and thus improving yields, and the much larger factories have led to significant economies of scale.

The study accounted for years between 1980 to 2012, during which module costs fell by 97 percent. According to the paper, there were six low-level factors that accounted for more than 10 percent each of the overall drop in costs, and four of those factors accounted for at least 15 percent each.

The relative importance of the factors has changed over time. In the past, research and development was the dominant cost-reducing high-level factor, through improvements to the devices and manufacturing process. However, the largest single high-level factor in the continuing cost decline in the last decade has been economies of scale, as solar-cell and module manufacturing plants have become ever larger.

This has intrigued Professor Jessika Trancik to wonder which factors can help continue the reduction in cost and what are the limits to the size of the manufacturing plants?

She says that government policies that stimulated market growth account for about 60 percent of the overall cost decline. Some of these policies are renewable portfolio standards, feed-in tariffs, and a variety of subsidies.  In India, the Ministry of Power has set solar renewable purchase obligation (RPO) for financial year (FY) 2019-2020 at 7.25 percent. The non-solar RPO for FY 2019-2020 has been set at 10.25 percent. To ensure these obligations are met, it has created a compliance cell for RPOs. The cell will coordinate with states, the central electricity regulatory commission (CERC) and state electricity regulatory commissions (SERCs) to ensure RPO compliance. The cell will work with these institutions to make monthly reports on RPO compliance.

She added, “Government-funded research and development in various nations accounted for the other 40 percent — although public R&D played a larger part in the earlier years. For a long time there has been a debate about whether these policies work — were they really driving technological improvement? Now, we can not only answer that question, we can say by how much.”

The paper used the ‘modeling device-level mechanism’ methodology for the research and found a strong evidence of a “virtuous cycle” that can be created between technology innovation and policies to reduce emissions. As emissions policies are implemented, low-carbon technology markets grow, technologies improve, and the costs of future emissions reductions can decline.

Gregory Nemet, a professor of public affairs at the University of Wisconsin at Madison, who was not involved in the study, said, “Their model is simple and general, which could make it useful for designing policies for other technologies that will be needed to address climate change and other energy-related problems.”

Earlier, Mercom reported that a team of researchers at the MIT working in the field of solar energy have suggested a four-junction tandem cell has the best potential use for residential rooftop systems, regardless of different climate conditions and its high cost.