solar panel prices


The cost of solar panels has fallen greatly in the past 15 years. Why?



From 2004 to 2008, people started slicing thinner silicon wafers, and the government of China increased subsidies for solar panel production.


Silicon wafers used to be sliced with a saw, but there's a limit to how thin saws can be. Eventually, people realized that they could cut silicon wafers with very thin wires instead. That lets you make thinner wafers and waste less silicon from cutting.


People used to add liquid containing tiny diamonds to make the wires cut through silicon better. Around 2010, people started switching to wire with tiny diamonds on it. That works even better.


The idea of using wire saws with cutting fluid to cut silicon was not new - see, for example, "Machine and method for cutting brittle materials using a reciprocating cutting wire" from 1974. That idea was just largely ignored until around 1998, when many patents started appearing. (Perhaps one advantage of Chinese solar panel makers was not having to worry about patents for wire saws.)



Polysilicon prices went from $40/kg in 2004 to $450/kg in 2008. This cancelled out the lower silicon costs from thinner wafers. Companies started making new polysilicon plants. (Normally, that doesn't happen, because companies usually communicate with their suppliers about their future needs, or buy commodity futures.)


A few years later, those new plants started coming online, and suddenly there was an oversupply. Polysilicon prices fell to $50/kg in 2010, and then to $17 in 2014. Polysilicon ended up being about half the cost it had been 15 years earlier, from a combination of lower profit margins, larger production volumes, and process improvements.


When the cost of silicon fell by a factor of 26 in 6 years, the price of solar panels also dropped steeply.







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