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Lower prices for PV installations will come from reducing ancillary costs, says MIT

Published on Sunday 3 September 2023 | Article n°455

The price of solar equipment has come down considerably, but the ancillary costs can be greatly reduced, according to MIT.

The costs of installing a photovoltaic system can be divided into hard costs and soft costs. Hard" costs include

inverters, switches, support racks, cabling and batteries/energy storage systems, as well as land. Ancillary" costs include those associated with planning, administrative approvals, connections, customer acquisition, insurance and labour for installation and interconnection. These costs vary considerably depending on the region, technology and market segment. They are strongly affected by local conditions and the regulatory environment.

Soft costs, i.e. the processes involved in designing and deploying a solar energy system, have contributed much less to the decline in the total cost of solar installations.

While the cost of installing a solar energy system has fallen by more than 90% since 1980, the ancillary costs involved in deploying a solar energy system have increased significantly.The ancillary costs involved in deploying a solar power plant have contributed only 10 to 15% of the fall in total costs. Ancillary costs are increasingly dominating the total costs of installing solar energy systems, and it's time to reduce them.

"Really understanding where the efficiencies and inefficiencies lie, and how to address those inefficiencies, is essential to support the transition to clean energy. We are investing a huge amount of public money in this area, and the ancillary approach will be absolutely essential to make that money count. "Indeed, the share of ancillary costs generally varies between 35% and 64%.

A more detailed analysis would clarify the extent to which the drop in system installation costs - an ancillary cost - is due to the standardised practices of certified installers. It would also show how this same ancillary cost is affected by the increased efficiency of the photovoltaic panel. The efficiency of photovoltaic panels doubled between 1980 and 2017, reducing overall system costs by 17%. But around 40% of this overall reduction could be attributed to reductions in ancillary costs associated with improved panel efficiency. While hardware technology tends to improve many cost components, accessory ecosystem features affect only a few.

The costs of a technology are a useful first step in identifying the levers for change.

Ancillary costs can vary considerably around the world. For example, the ancillary costs of solar energy in Germany are around 50% lower than in the United States. Soft technology innovations are not generally shared across borders. Countries that performed better in terms of ancillary costs 20 years ago are still performing better today,

To reduce soft costs, we could look at developing hardware improvements that make soft costs more dependent on hardware technology variables and less dependent on soft activity variables.

Tecsol of 27 August 2023

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