ENERGY ACT FOR UKRAINE FOUNDATION
Prices for photovoltaic modules are constantly falling
Solar energy is becoming more and more affordable for a wide range of consumers, and one of the main reasons for this is the steady decline in the price of photovoltaic modules. This process has several key factors that together contribute to the reduction in the cost and popularisation of solar energy in the world.
Increased competitiveness
Solar and wind energy are becoming more competitive and efficient every year. According to the International Renewable Energy Agency (IRENA), from December 2009 to December 2022, prices for crystalline silicon modules fell by 88% to 94%.
Technological innovations, such as improved PV cell efficiency, lower material and manufacturing costs, and automation of production processes, are driving further cost reductions. Improvements in energy management systems and integration with other renewable energy sources are also increasing the overall efficiency and profitability of solar installations.
Capacity growth in China
China is the world leader in the production of solar PV modules. In 2023, China produced more than 80% of all photovoltaic modules in the world. During 2023-2028, China's renewable energy capacity is expected to grow by more than 2,000 GW. This is three times the growth over the past five years, and most of this growth will come from solar PV.
The growth of production capacity in China is creating an oversupply on the market, which is helping to drive prices down. China is also actively investing in the research and development of new technologies, which helps to increase efficiency and reduce the cost of producing photovoltaic modules. According to BloombergNEF, in 2023, the average price of lithium-ion batteries fell by 14% year-on-year, thanks to increased production capacity and improved technology.
By 2025, India is forecast to overtake Southeast Asia as the second largest module production region, driven by strong PLI incentives in India.
Excess production capacity
Growing global production capacity is leading to oversupply in the solar module market. According to a Wood Mackenzie study, China's solar energy and storage exports reached record growth with a surge of more than 40%. Also, according to the report, a module made in China is 50% cheaper than one made in Europe and 65% cheaper than one made in the US. As you can see, this helps to reduce prices as manufacturers are forced to compete for the market. So over the past decade, the cost of solar photovoltaic energy has fallen by 90%, onshore wind energy by 70%, and batteries by more than 90%. These technologies follow a ‘learning curve’ called Wright's Law. It states that the cost of a technology consistently falls as the aggregate production of that technology increases.
In addition, lower interest rates from January 2023 make solar power more competitive with traditional sources such as coal-fired generation.
Economic benefits
The production cost of new solar photovoltaic and onshore wind systems is lower than that of coal-fired systems, which helps to achieve lower electricity prices. According to Lazard's Levelised Cost of Energy Analysis, the average cost of generating electricity from solar PV systems in 2023 was $60 per MWh, while for new coal-fired power plants this cost was $88 per MWh.
This reduction in the cost of electricity generation helps to reduce the overall cost of electricity for end users. In addition, the increased use of solar energy helps to reduce dependence on imported energy, which has a positive impact on the energy security of countries.
Market reforms and green certificates
Electricity market reforms and green certificate systems allow solar and wind developers to obtain better electricity prices. In the European Union, for example, the EU Emissions Trading System (EU ETS) helps to reduce CO2 emissions by encouraging investment in renewable energy sources. Under this system, companies that produce electricity from renewable sources can sell green certificates on the market, generating additional revenue.
In China, electricity market reforms are also contributing to the development of renewable energy sources. Since 2023, China has introduced a national emissions trading system covering more than 2,200 companies and about 4 billion tonnes of CO2 emissions.
Ukraine has a feed-in tariff system that supports the development of renewable energy sources. According to the State Agency on Energy Efficiency and Energy Saving, in 2023, the average feed-in tariff for solar power plants was about UAH 4.9 per kWh. This encourages investors to invest in the construction of new solar power plants and promotes the development of renewable energy in the country.
Support for solar initiatives
Financial support for small home solar systems and rising retail prices are driving the commercial and industrial deployment of solar installations. Many countries have subsidy and tax incentive programmes for the installation of solar systems. For example, the US has a federal Investment Tax Credit (ITC) that covers up to 30% of the cost of installing a solar system.
Europe also has financial support programmes for the installation of solar systems. For example, in Germany, the KfW Renewable Energy Programme provides soft loans for the installation of solar systems, which reduces the initial costs for consumers.
In Ukraine, for example, the State Energy Efficiency Fund provides grants and soft loans for the installation of solar systems in private homes and businesses. According to the fund, in 2023, more than UAH 500 million was allocated to support the installation of solar systems.
Technological advances
Technological advances are helping to reduce the cost of producing photovoltaic modules and increase their efficiency. For example, the transition from traditional silicon photovoltaic cells to perovskite-based technologies reduces production costs and increases module efficiency.
For example, the efficiency of commercial silicon photovoltaic cells is about 22%, while the efficiency of perovskite cells can reach 25%. In addition, the use of bifacial modules, which can absorb light from both sides, can increase the overall system performance by 10-20%.
Impact on Ukraine
For Ukraine, the decline in prices for photovoltaic modules opens up excellent prospects for the development of solar energy. This not only reduces dependence on traditional power plants that are harmful to the environment, but also contributes to the country's sustainable development. Green energy helps fight climate change, creates new jobs and ensures a clean and healthy environment for future generations. The use of renewable energy sources also contributes to the decentralisation of the energy system, which is extremely important in today's environment of frequent power outages.
Thanks to the steady decline in the price of photovoltaic modules, solar power plants are becoming more affordable for both large industrial facilities and individual consumers. This opens up new opportunities for economic growth, ensures energy security and contributes to the country's sustainable development.