Supply Chain

US Closing Gap on Solar Cell Manufacturing Costs, Study Finds

09 September 2013

A new study by researchers at MIT and the U.S. Department of Energy's National Renewable Energy Laboratory (NREL) suggests that the United States could once again become cost-competitive in photovoltaic (PV) manufacturing with China.

As of 2011, manufacturers in China accounted for 63 percent of all global solar-panel production. But a detailed analysis of all costs associated with PV production shows that the main contributors to that country's lower PV prices are economies of scale and well-developed supply chains—not cheap labor.

The new report, published in the journal Energy and Environmental Science, estimated detailed costs for virtually all the materials, labor, equipment and overhead involved in the PV manufacturing process.

The study found that because solar-panel manufacturing is highly automated, China's advantage in labor costs has relatively little impact on prices. The lower cost of labor in China provides an advantage of 7 cents per watt relative to a factory in the United States, but that amount is countered by other country-specific factors, such as higher inflation.

Today's regional price differences in making photovoltaic modules are "not inherent [and] not driven by country-specific advantages," said Tonio Buonassisi, an associate professor of mechanical engineering at MIT and a co-author of the new report. As a result, technological innovations could rapidly level the playing field.

A crucial parameter is something the researchers call the minimum sustainable price, or MSP, which represents a cost of manufacture plus a sustainable profit margin to companies. To arrive at the MSP, the report included indirect costs such as research and discount rates for the manufacturers.

Today, the average MSP is higher than the market price of solar panels, which is not sustainable long term. That's why improved technology is essential, according to Buonassisi.

In the long run, the greatest advantages may go to multinational companies that can harness regional advantages, according to Al Goodrich, a senior analyst at the NREL and lead author of the study.

The study was funded by the Department of Energy, the Department of Defense and the National Science Foundation supported the study.

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