July/August 2008

Solar Costs Heading Down

Silicon shortages drove up prices, but supplies are now increasing.

By Kevin Bullis

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Solar commodity: Most silicon solar cells use polysilicon, shown here. Credit: Courtesy of Wacker Chemie Ag

In 2003, the spot-market price of a kilogram of silicon used for solar cells was $24.

But by 2007, it was $400.

Silicon, which is derived from quartz, has accounted for up to one-third the cost of a solar panel since a boom in solar power drove up the price of raw materials. But an expected jump in silicon production should improve solar power's economics.

Cost of silicon as a percentage of a solar panel's production cost (below left). Silicon prices (solar-panel makers pay mostly contract prices, below right).

Annual shipments of solar panels (most are silicon-based, below left). Silicon available for solar-panel manufacturing (below right).

The Price of Solar
With silicon supplies tight, the price per watt of solar panels (below) started rising in 2003, ending more than two decades of steady declines (in 1980, the price was $30 per watt in today's dollars). Most observers agree that solar-power prices will now drop.