oil crisis

Photo: Chris Toe Pher/Flickr.

In 2014, record low prices for solar panels fueled a solar boom. The U.S. alone installed 30% more solar photovoltaic capacity than in 2013, making last year the biggest ever for solar PV, according to the 2014 Year-in-Review Solar Market Insight report from GTM Research and the Solar Energy Industries Association.

solar increase

Graphic: GTM Research.

Industry analyst Tam Hunt argues that in a few years, economics of energy alone will lead the world to achieve the “solar singularity”:

The “solar singularity” will, by my definition, occur when solar prices become so cheap that solar becomes the default power source based on cost alone. We aren’t there yet, but we’re probably just a few years away from that point, particularly since energy storage costs are already declining strongly.

Swanson's Law

Solar panel price downward trend since the 1990s. Image: Wikipedia. Click to enlarge.

The main reason why solar will become cheaper than other options for power? It’s the falling cost of solar panels, according to Hunt, following an established rate of decline. “Swanson’s law, named after the founder of SunPower, states that the price of solar panels generally drops by 20 percent with every doubling of shipped panels.”

Interestingly, Hunt notes that Swanson’s Law may not be 100% reliable if past performance is any guide. “From the mid-1990s until 2008, solar costs declined by relatively little, primarily due to stubbornly high silicon prices against a backdrop of increasing commodity prices across many markets, until the crash of 2008.”

Increasing commodity prices are usually connected to crude oil, the king of all commodities. And indeed, throughout the period when silicon prices were high, oil was high too.

Coincidence or causality?

The real question is, when oil prices rise in the future, bringing other commodities along for the ride, will silicon prices rise with them?

There seems to be very little discussion about what effect more expensive silicon could have on solar panel prices and on the cost of solar installations in general.

It stands to reason that more expensive silicon could slow or stall today’s solar boom, and again, as in 2008, breaking Swanson’s law.

But in recent years the industry has also made strides in sourcing more abundant sources of cheap silicon. Will only time tell whether it will be enough to keep solar panels cheap when crude oil no longer is?

– Erik Curren, Transition Voice