Unit Costs of Solar Electricty Power Generation

The unit cost of PV Electricity is affected by several important components including module cost, balance ofsystem ( BOS ) costs, usefull life time, minimum attractive rate of return, operating and maintenance (O & M) costs, capacity utilization factor (CUF), and other factors such as taxes subsidies and other incentives, insurance costs and salvage values.

The PV module cost depends on the cost of the materials making up the module, and the specific technique used to manufacture the module and the market size. The cost per peak watt, Cpw, of the PV system basically depends on the per peak watt costs of the PV module and the balance of system. The cost of PV module has decreased from about USD 300 per peak watt (1990 prices) in the early seventies to somewhere between USD 4 to USD 11 per peak watt in 1992 (1990 prices). Projections for future reductions in the cost of PV modules indicate that the cost may eventually drop to USD 1 to USD 2 per peak watt by 2010 . Moreover, a further decrease may be expected with time. These reductions are primarily achieved as a result of a steady improvement in the efficiency of solar PV cells and modules, and increase in scale of manufacturing accompanied by changes in cell design and manufacturing technologies. The module costs vary with the total quantity required, with larger quantities the modules are cheaper, besides because of economies of scale, larger systems can cost less per watt than small systems. Work on the cost reduction of PV systems has been primary focused on the PV module cost.

Components of BOS could be land, support structure of the system, power conditioning and interface units,control system, energy storages (battery) systems, inverter or converter systems, etc. The BOS costs of a PV system can account for approximately 40 to 60 per cent of the total capital cost (as indicated in the literature). These costs depends on kind of PV applications, locations ( as the component parts are obtained locally ), and land & labour costs.The BOS costs are expected to reduce significantly in future, primarily as a result of (i) improvement in module efficiency as it leads to reduced requirement of area and (ii) economics of scale with an increase in market size.

Operating and Maintenance (O & M) Costs for a PV system can be associated with the regular inspections and repairing, modules cleaning, and replacement of components such us battery and inverter. In comparison to other distributed energy technologies, operation and maintenance costs of PV systems are relatively low. Operating and Maintenance costs of PV plants have gradually come down in recent years and are reported to vary between 0.50 and 2 cents/kWh or varies from 1 to 4 per cent of the total capital cost.

Manufacturers earlier gave guarantees for a period of 10 years only. However, the present generation solar module panels are expected to operate satisfactorily, for more than 20 years. The useful life of PV module as quoted in literature, varies between 10 and 30 years

The choice of a minimum attractive rate of return of the investor is affected by a variety of factors. There are a variety of minimum attractive rates of return available to lower the costs of investments in PV systems. The literatures indicated that values are commonly ranging between 5 to 15 per cent

The CUF is one of the most important factors that affect the cost of PV electricity. The CUF of a PV system can be defined as the ratio of annually energy generated by the system to the energy that would be generated if the output were constant at its peak value. The unit of energy generated is usually counted in kWh. The factors which affecting the CUF of a PV system are the insulation characteristic of the site, operating conditions and the dependence of cell efficiency on operating temperature. Installing a system at the optimal orientation and tilt will also maximize system production that affects CUF.

Other factors such as taxes subsidies and other incentives, insurance costs and salvage values of the system at the end of its useful life would also affects the unit cost of photovoltaic