Many have predicted that the current glut in solar cells will affect the price of photovoltaic panels. In order to move their inventories, factories are indeed dropping prices. According to Ernst & Young, prices for installing a solar panel have dropped from $2.00/unit of generating capacity in 2009 to $1.50 today. It is expected that the drop will increase to $1.00 by 2013. This trend is verified by Solarbuzz®, which is graphed on the chart below.

The black line shows the price of the photovoltaic (PV) component that goes into making a solar panel. The blue lines illustrate the entire cost of a solar system (inverters, batteries, etc). These prices do not include installation costs. The chart shows the monthly change in price, so a falling line reveals an acceleration in the rate of price reductions. This drop in pricing has hurt manufacturers, none worse than Solyndra, Inc., which will be filing for bankruptcy.

Solar developers, however, have benefited greatly from the drop in prices. In the U.S. alone, Solarbuzz® reports that in just 2 months utility-scale solar projects have increased 41% to 24 gigawatts. In addition to these U.S. projects, there have been numerous large-scale developments announced abroad, including projects in Bangladesh, China, Italy, Germany and Peru.

So while solar manufacturers have been negatively affected in the short term, the solar industry as a whole is taking advantage of these price drops to move the project pipeline forward. This trend, which is likely to continue through this decade, bodes well for long-term investors in alternative energy companies.

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