Balance of System to be the key to further reduction in solar development cost

Industry Insights
Typography

Year 2016 had  been a record breaking year for Solar PV industry globally.

More than 70GW of new solar PV installations have been added during the year at CAGR of 48% Y-o-Y. The main reason behind such rapid development was due to reduction in PV module prices, going down to 0.30 to 0.35USD/Wp. It is further expected that with increase in further installations, PV cost may reduce to 0.20USD/Wp by 2020.

In 2017, about 80 GW is expected to be added globally which will be higher than the previous year. India, planning to manage around 9GW of new solar installation. Rapid fall in module prices is helping solar to be the new source of power in most the developing countries.

However, in the coming years it will not be only modules (which will be stagnant of prices) but also other components under Balance of System (BOS) such as inverters, cables, design work, installation etc will be looked upon for being competitive. The ratio of BOS depends on the size of the project, but usually is around 40% for medium size ground mount installations at most of the places.

In USA, during 2010-11, 65% of an average project’s total cost was in the PV module, but today (H1 2017) it is seen that more than 65% of the project cost resides in BOS, which includes a variety of structural and electrical components, labor and soft costs.

According to reports. PV module costs between 2010 - 2016 decreased much faster than balance of system costs. While declining module costs remain important for the solar projects, however any major innovations in BOS as a whole was not seen to keep the prices controller and therefore reducing the system cost by keeping cost of BOS cheaper will now be the primary push toward more economically competitive solar in several countries.

It is expected that, BOS manufacturers especially electrical and structural components around the globe are being squeezed as the market landscape becomes more crowded with increasing demand of solar installations in all the sectors be it commercial, utility or residential. With continued focus, only 40% decline in costs will be expected by 2021 in USA.

While comparing the scenario of solar sector with India, PV module do remains the major contributor of the average utility scale project cost, but a steep decline in the project cost can been seen in the last 3 years due to reduction in prices of BOS.

Costs have declined by 75% while comparing the costs during 2010. This had resulted due to aggressive bidding process in the utility sector in the last 2 years followed by gigantic solar targets to achieve 100GW by 2020.

Table 2 shows reducing cost of projects especially due to BOS (apart from PV module cost) for a utility scale project installed at several locations in India.

Table 2: India utility scale solar pricing trend (%)

FY

Module % of total

Inverter & Skid % of total

EBOS % of total

SBOS % of total

Labor % of total

Non-Labor Soft costs % of total

Total Cost (USD/W)

2010-11

60%

12%

6%

5%

6%

11%

1.81

2011-12

58%

11%

6%

7%

7%

10%

1.70

2012-13

51%

10%

10%

10%

9%

8%

1.15

2013-14

44%

8%

13%

13%

12%

10%

0.94

2014-15

56%

8%

10%

7%

8%

10%

0.71

2015-16

57%

8%

9%

9%

9%

8%

0.69

2016-17

66%

7%

1%

11%

12%

3%

0.46

 

It is now important to understand that the future cost reductions are expected to be highly dependent on BOS (e.g. inverters, racking and mounting systems, civil works, etc.) rather than PV modules, despite continued cost reductions expected from modules through 2022. 

Although there is focus on innovations and development for different products based on the market requirements while keeping the cost of BOS competitive in India with cheap labor availability. Even though with the inflow of large solar projects is also keeping the market crunched for further developments in new products to reduce the costs.

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