Thursday, April 30, 2009

The REAL Story on Moore's Law for Solar

From Scitizen:
All new industries seem to think they deserve a Moore's Law. The photovoltaic solar really, really thinks it deserves one, since it kind of sort of looks like a semiconductor business...

Photovoltaic Moore's Law Will Make Solar Competitive by 2015,, Understanding MooreĆ¢€™s Law,, and Silicon Valley Starts to Turn Its Face to the Sun, NY Times.
However the nuances are mischevious. The cost implications of Moore's Law at heart are built around a constant rate of technology performance improvement (2x transistors every 2 years), implying certain cost improvements. PV's falling costs curves have had more variables at play. In fact, the real equivalent to Moore's Law in solar would be to say that cell efficiency or a similiar measure doubles every x years. Most people have tried to apply a Moore's Law like concept in solar directly to the cost curve, not the technology improvement curve. In fact, the solar costs "Moore's Law" that seemed the simplest was the idea that every doubling of industry size equaled 10% in cost reductions. But that is not a Moore's Law, that's mainly just a description of the supply curve shape and shift, it's a totally different animal.

I've been researching this topic for some time, trying to develop a simple conceptual model to understand falling solar cost curves and their impacts, and I update my cost analysis spreadsheets based on numerous inputs from energy companies, solar developers, solar integrators, as well as module manufacturers. I think I now have a simple, economically sound model with good explanatory power, that allows us to shed some light on why and how the cost curves fall.

We'll call it the Dikeman Solar Cost Model - DiSoCo Model, and it's somewhat simple and axiomatic: the value on the supply side = the value on the demand side, broken down into fixed, sticky, and variable components, by market segment.

Over the last couple of years, I'd argue that roughly half of the cost reduction in solar have come from massive increases in larger installations (primarily spreading NRE and installation cost across a larger projects at the installations, as well as dealing improved economics of scale in manufacturing), not really from solar costs themselves. And roughly the other half from actual technology cost reductions.

This is an important distinction as it means that arguably with say 2003 solar technology, if the subsidies and demand had been there to build a whole bunch of 10 MW PV farms, a similiar cost could have been achieved to today's costs, at least within striking distance (as opposed to a Moore's law industry where the fundamental technology performance curves would have been 8x better, with drastic cost improvements resulting). Technology costs haven't necessarily fallen as much as we think, so much as the scale has changed, making costs look like they've fallen a significant amount....MORE