Cover Image
close this bookPhotovoltaic Household Electrification Programs - Best Practices (WB)
close this folderThe place for photovoltaics
View the document(introduction...)
View the documentThe solar home system
View the documentThe cost of solar home systems
View the documentThe solar home system niche
View the documentConsumer perceptions

The cost of solar home systems

2.4 The cost to consumers of solar home systems varies significantly from country to country (see Table 2-1). This is due to:

· The sophistication of the system;

· The number of systems purchased,

· Duties, taxes and subsidies;

· The scale of the manufacturing and assembly processes;

· The scale and cost of marketing and other services, including the number of "reseller" steps in the distribution chain;

· The degree of competition in the marketplace;

· Capacity utilization in manufacture, sales and servicing; and

· The cost of funds for working capital and capital investments.

Table 2-1. Solar Home System Prices in Selected Countries

Country

Year

Size (Wp)

Price ($)

Unit Price ($/Wp)

Kenya

1993

53

1,378

26.00

China

1994

10

93

9 33



20

160

8.00



20

280

14.00

Indonesia

1994

6

125

21.00



12

215

18.00



40

400

10.00



53

425-700

8.02-13.10



53

620a

11.68



100

715

7.15

Philippinesb

1993

48

640

13.33



53

900

16.98

Sri Lanka

1995

20

340

17.00



30

460

15.33



40

560

14.00



50

674

13.48

Brazil

1994

50

700

14.00



100

1,100

11.00

Dominican Republic

1993

25

450

18.00



35

575

16.42



48

700

14.58

Mexico

1994

50

700

14.00

USA





—Idaho Power Company

1994

1,000

10,000c

10 00

—Navajo Housing Services Dept.


90

1,500

16.67

(DC and AC output)





Note: All costs are in US dollar equivalents. Some programmatic costs, particularly for government or donor-assisted programs, may not be included.

a Government program sales.

b The private sector cost of a system in the Philippines is significantly higher than the cost of a system in the donor-assisted project because of taxes and duties.

c Present-value estimate including battery replacement and service), based on a 5 percent down payment, a monthly cost-recovery factor of 1.6 percent of net installed cost, and an expected minimum monthly charge of $150, as proposed by the utilities.

Sources: ASTAE Case Studies and field investigations in China, the Dominican Republic, Indonesia, the Philippines, and Sri Lanka; World Bank 1994a; US PV trade newsletters; Shepperd and Richard 1993; and Personal Communication, Chris Rovero, Meridian Corporation, Alexandria, VA, USA, 1996.

2.5 Figure 2-2 identifies some reasons for unit price ($US/Wp) variations in selected countries. The price of a solar home system in many parts of Indonesia is as low as $7.15/Wp for a 100Wp system. However, in some areas of Indonesia, where sales volumes are low and the population is more dispersed, manufacturers have to offer significantly higher margins to their retailers. This can add about $300 to the retail price (more than $5.00/Wp higher) of each system. As sales volumes increase, manufacturing and marketing infrastructure matures, and financial distortions are reduced, there is every reason to expect that prices in many countries will reach the low unit prices of solar home systems now generally available in Indonesia and China.


Figure 2-2. Some Reasons For Unit Cost Variations of Solar Home Systems

Note: Programmatic costs of government and donor-led efforts may not be fully reflected in the cost of PV systems. Cost per Wp is also affected by the size of the PV system, variations in the quality and features of systems and components, services provided by the seller or implementor, and input factor cost differences among countries.

Source: Table 2-1.

2.6 Table 2-2 compares unit costs for solar home systems by component in the Dominican Republic, Indonesia, and Kenya. There are significant opportunities for reducing costs through high-volume purchases of modules and other components; assembly line solar home system manufacture/integration; better utilization of production, sales and service capacities; reduced taxes and duties on PV panels and components; and larger sales volumes which would allow dealers to reduce their margins (see Box 2-1).

Table 2-2. Variations in PV Costs by Components in Selected Countries

Country

Dominican Republic

Indonesiab

Kenya

PV Module Size (Wp)

48

53

53

Battery Capacity (Ah)

90

70

100

Implementing Agency

Private business/NGOs

Private

Private

Component

Cost

Percent

Cost

Percent

Cost

Percent

—Module & Support

340

49

200

47

340

25

—Battery

70

10

40

9

115

8

—Controls

44

6

35

8

66

5

—Lamps, wiring, switches

47

7

35

8

138

10

—Deliver/lnstall/Retail Margins

129

18

75

18

456

33

Duties and Taxes

70a

10

40

10

263

19

Total Cost

700

100

425

100

1,378

100

Note:

a. Import duty only.

b. Based on annual sales of 5,000 systems per manufacturer and 200+ per dealer.

Sources: ASTAE Case Studies and field investigations, World Bank 1994a.

Box 2-1
Cost Reduction Opportunities for Solar Home Systems

Promising opportunities for reducing unit costs in the near future include the following:

Photovoltaic Modules. PV modules can be purchased in bulk at about $4/Wp (Indonesia). With smaller orders, unit prices can exceed $8/Wp (the Dominican Republic). For large procurements, some PV module suppliers are also offering interest-free supplier credit for six months.

Electronic Components. Evidence from China and Sri Lanka demonstrates that significant cost savings can be achieved by purchasing electronic components in bulk.

Batteries. While deep-cycle (marine-type) batteries are preferable for use in solar energy systems, they are relatively expensive and difficult to procure locally. For these reasons, automotive batteries are more commonly used. Should the demand for deep-cycle batteries increase, then lower-cost local manufacture of such batteries can help reduce life-cycle costs.

Economies of Scale in Production and Sales. Production costs depend heavily on volume. As demand increases, the costs of manufacturing solar home systems should fall. As more suppliers enter the market, competition should also drive prices down.

Support Service Costs. Support services costs will also fall as sales volume per dealer increases, spreading the fixed costs of sales and servicing over a larger number of units.

Local Manufacturing and Assembly. If there is a comparative local advantage in manufacturing and assembling the units, capability may be developed to realize cost savings, as long as quality is not compromised. On the other hand, import barriers to support domestic production will increase the prices and reduce demand. In Sri Lanka, tariff barriers to protect a local module encapsulation plant increased module costs by $2.50/Wp. Indonesia's low duties on PV module imports have resulted in relatively low unit costs.

Duties and Taxes. Duties and taxes significantly increase the cost of solar home systems. Reducing or eliminating these fees can help make systems more affordable.

2.7 At present, varying degrees of backward integration in solar home system production are occurring in developing countries. These range from the importation of complete systems to incountry production of all components, including the PV array. For example, as a direct result of its national industrial development policy, India produces single-crystal wafers as well as all system components. In other countries, only low-technology components, such as mounting poles, wires, light fixtures, and automotive batteries, are manufactured locally.