Economics of Solar Generation

This chapter discusses the comparative economics for off‐grid and grid‐linked applications. It then looks at the factors that drive solar system costs, and shows how prices developed after the heady $100+/W level inherited from the space industry. The measure used in the chapter, dollars per watt, is obtained simply by dividing the price1 in US dollars by the nominal output under standard test conditions in watts peak (W
_p
) of the solar cell, module, or system. To derive the total system cost, one can simply add the balance‐of‐system costs to the module. To obtain a target for the required cost of PV, people need to do is define the electricity price they have to compete with, and run this calculation backward to find the acceptable capital cost. The MUSIC FM study conducted for the European Commission in 1996 identified how solar module costs equivalent to about $0.70/W could be achieved.