Forecast: PVs Falling 15% Annually

The cost-decline of solar PhotoVoltaic (PV) has surprised most, even the optimists within the solar industry. Economy of scale and oversupply has been factors, but there is another underlying trend.

Solar power is free. Conversion, distribution and storage are the costs. Since 1955, the cost of PV conversion has been trending downward, year-after-year, with no sign of slowing down. There is a common understanding between PVs and computers. Our understanding of the molecular, atomic and even quantum relationships is the common understanding. Knowledge of the small.

Assuming this underlying trend forecasting is matter of “fitting a curve” on historical data points. In product development, curve fitting is common for strategic planning. See the accompanying image. The semi-logarithmic graph straightens the curve. By drawing the line through historical points (watts/cost) it is easy to identify the rule of the curve and forecast future data points.

The resulting w/$ rule shows PV-watts double every five years. Inversely ($/w), the cost drops by a factor of ten, every twenty years. The twenty-year, factor-of-ten forecast is remarkable. Solstin’s Law has been fairly consistent since 1955.

For a good round number, PV modules cost about $1.00 per watt in 2012. So in twenty-years, Solstin’s Law predicts the average PV module will be about ten-cents-per-watt in year 2032, excluding installation cost. Installation cost will also decline. PVs will be built into products rather than retrofitted. The same improvement in the knowledge of small will help improve power storage and this too will raise PV value.

At ten-cents-per-watt, Solar PVs will offer low-cost, climate benign, power generation. Coordinating solar power conversion, storage and distribution will require strategic planning, and Solstin’s Law will help policy makers understand the logarithmic-exponential rule for PV forecasting. Calculating the cost of miscalculation should be investigated. For environment and economy, the numbers will be large.

Knowing present value and future value, it is straightforward to calculate the annual percentage drop using the compound interest formula:

PV x (1+r)n = FV
PV = Present Value
r    = interest
n = number of periods
FV = Future Value

The following formula solves for interest:
r = (FV/PV)1/n – 1
r = (2/1)1/5– 1
r = (2)0.2 – 1
r = .149

Solstin’s Law predicts an average of 15% cost-decline in solar PV modules per year.

In 1965, Gordon Moore (Moore’s Law) predicted components would double every two years. Intel used Moore’s Law for strategic planning, and created a self-fulfilling prophecy. No law is more powerful in Silicon Valley than Moore’s Law. Solstin’s Law replicates Intel’s simplified forecasting tool. Knowing that PV-power doubles every five years, electrification policy (#electro-infrastructure) should better align: conversion, distribution and storage for sustained displacement of the oil-based infrastructure.