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Why Solar Panels Remain Expensive

The process of converting solar energy into power can be broken down into a “solar chain.” It begins with manufacturing and ends on the rooftop of a solar home.

With a nearly sixty-year history, you’re right in wondering why solar photovoltaic (PV) panels—those which convert solar energy directly to usable electricity—remain so cost-prohibitive? In fact, the rapid growth we’ve seen in recent years can be credited mostly to local, state and federal financial incentives; solar is still quite expensive for many homeowners, even when incentives are included.

So what’s the slowest, or most expensive, part of the solar chain? Well, all links in the chain are affected by each other, and arguments go back and forth regarding each.

Is it collection and conversion?

Many will posit that the relative inefficiency of solar panels is to blame—average conversion rate for traditional silicon solar panels is the highest to date. Lower conversion efficiency equals more solar panels to satisfy the average home’s electricity demands, which means more money up front.

As for collection, or solar absorption rates, these are increasing fast. And a panel that collects more sunlight can convert more photons into electricity, even at 15% conversion rates. Yet these arguments ignore why the panels are so expensive in the first place, which brings us to the heart of the matter:

Panel Manufacturing

The biggest cost behind a solar system is the cost to make the panel itself. The majority of solar panels in use today are made with crystalline silicon, which is extracted from raw silicon, an abundant natural resource.

Unfortunately, the process of drawing crystalline silicon from the raw material is a very slow and expensive one. Plus, there’s the fact that silicon is also used in electronic and computer chip industries, and competition between markets has led to a silicon shortage over recent years—a shortage that is fast fading as silicon manufacturers have ramped up production to meet an already high demand.

Despite increase in production, there is no denying that manufacture of silicon solar cells is the main driver behind high panel prices.

That fact has spawned a surge in second-generation, thin-film photovoltaics. These use amorphous silicon (a much smaller amount of raw material) or other semiconductor materials to make a smaller, more flexible product that is vastly cheaper to make. The only hitch is that these solar panels have much lower conversion efficiencies than traditional crystalline silicon panels, thus reducing the savings for the end user.

Waiting on the whole package

So the world waits for a solar panel with high efficiency and low manufacturing costs, and solar researchers and developers are racing to meet that demand. But in the meantime, high manufacturing costs for silicon panels and low efficiencies for thin-film products have left us a solar chain that is dependent on government subsidy.

On the bright side, solar panel prices continue to drop and will do so for the foreseeable future. A technological breakthrough may only be a matter of time as well. And while manufacturing may be hurdle number one at this time, any breakthrough at any point will likely have massive repercussions on the entire solar chain.

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