By Gerard Wynn
LONDON May 16 Solar panels were cheaper than
wind turbines for the first time last year in certain markets,
per unit of capacity, and are rapidly closing a remaining gap in
the full cost of power generation.
Until now, wind power has been the leading low-carbon
alternative to oil, coal and gas, outside large niche markets
such as Germany, which has seen a huge ramp-up in installed
But that could change, with deep implications for the health
of both industries if one substitutes the other.
As soon as this year, solar could for the first time surpass
wind in annual global installed capacity, given an expected
contraction in the wind market.
The full costs of wind power generation remain less than
solar because of higher productivity and lower installation
costs, but those advantages are eroding rapidly given current
trends in equipment prices, with a glut of Chinese-made solar
panels sending prices tumbling.
Both sectors have struggled to shake off over-capacity, but
in different ways, and with different outcomes for prices.
In solar power, over-capacity is largely a result of global
commoditisation of the finished modules and the influx of cheap
Chinese producers, which now dominate the market. (See Chart 1)
The result has been bankruptcies and continuing, sharp falls
in solar panel, or module, prices.
In wind, over-capacity is a result of subsidy cuts and lower
energy demand in western markets following the financial crisis,
coupled with competition from low gas prices in the United
States and a stagnating Chinese market.
But wind turbines are heavy, complicated pieces of moving
machinery in which sales depend on local servicing.
They have not become commoditised, and three western
producers lead the world market: Vestas, GE and
Siemens. (See Chart 2)
The result of over-capacity has instead been a variety of
cost-cutting strategies, including idled production, while
prices have remained stable.
Recent manufacturing data show that average selling prices
for solar panels, or modules, are now lower than wind turbines
per watt in some markets.
For example, one of the world's leading turbine makers,
Denmark's Vestas, reports average selling prices for the first
quarter of this year at 1.04 euros ($1.34) per watt.
That compares with solar module prices among leading
manufacturers at $0.7-$0.8 per watt last year.
The pace of module price falls means that these will also
rival wind turbines in lower-priced Chinese markets this year.
(See Chart 3)
The short-term price trajectory for each suggests that solar
modules will continue to fall, although much more slowly than
previously, while wind turbines remain flat.
Because of their far bigger size, wind turbines are still
cheaper to install per watt.
The installed cost of wind is around 1.25 euros ($1.61) per
watt, according to a recent report by the trade body the Global
Wind Energy Council.
Data for the installed cost for utility scale solar is hard
to glean; Britain's Department of Energy and Climate Change
reported a total installed cost for solar PV projects over 250
kilowatts as low as 1.2 pounds ($1.83) per watt as of March last
Full energy costs, per generated kilowatt hour, depend on
performance and capacity factor as much as equipment and
Again wind is cheaper but solar PV is catching up, with wide
ranges depending on location.
Wind turbine manufacturers are targeting both incremental
technology development in existing platforms as well as more
fundamental advances, in particular towards bigger turbines for
the offshore market.
Linear growth is expected in the market share for turbines
larger than 3 MW, reaching half the global market by 2020,
according to Madrid-based turbine maker Gamesa.
In the case of solar module makers, the technology focus has
been steady improvements in the efficiency of conversion of
sunlight into electricity.
It is plausible that the annual solar market (meaning new
installed capacity) this year will leapfrog wind for the first
Wind turbine makers report a global market of around 48
gigawatts installed last year, but expect that to drop following
a slump in orders in 2012.
Vestas new orders halved last year compared with 2011.
Vestas quoted a forecast by independent research company
Emerging Energy Research for a steep decline in the global
turbine market to 39 GW in 2013. Gamesa has forecast a shallower
decline, to 42 GW.
Meanwhile, the European solar trade body, the European
Photovoltaic Industry Association, estimated last year's solar
market at 31.1 GW.
It forecasts the market this year at 28-47 GW, a wide range
which especially reflects some uncertainty over the level of
European solar subsidies.
Either way, the solar market will probably pass wind this
That has implications for the speed of growth for each and
the fortunes of equipment manufacturers, as well as for the cost
of low carbon power.