The cost of solar panels continues to drop

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Solar companies are installing panels for far less than they used to. That’s because the cost of solar power has dropped dramatically in recent decades: Between 1975 and 2015, the cost of photovoltaic solar modules declined by roughly 99 percent.

In a recent study, researchers at the Massachusetts Institute of Technology set out to understand how that happened. They found that there wasn’t one big breakthrough that cut the cost of solar panels, but rather, several small improvements added up over time.

The first thing to highlight is the improved efficiency of the panels themselves. Solar factories got progressively larger over the past few decades, cutting costs and improving production techniques that allow them to use less silicon per panel.

Behind the consolidation of solar factories and the corresponding increase in panel efficiency, the researchers point to policies in countries like Japan and Germany, then later the United States and China. These countries subsidized solar early on, back when solar panels where relatively expensive. As production ramped up, costs fell when solar companies got bigger and more skilled.

The researchers conclude that policies, such as tax credits or mandates for renewable energy, drove about 60 percent of the decline in solar costs, in part by spurring private investment. Publicly funded research also played an important role, especially in the early years.

One lesson here? If countries want cheaper new sources of clean energy, they should continue funding early-stage research and development. But just as importantly, they also need to take technologies that are close to commercialization and help create larger markets for them, which can push down prices.

Bill Hoelzer