Why Solar Power is so Expensive

The unfortunate reality confronting any push for alternative, renewable energy is cost. Solar power can provide a great way to get energy independent, but until it is cheap, it won't happen any time soon.

In the Wall Street Journal, they take a look at the falling costs of thin-film solar products, like what First Solar manufactures. Even with declining costs using solar power still costs nearly twice what coal or natural gas cost.

WSJ : Currently, it can cost 20 cents or more to produce a kilowatt-hour of electricity from a solar-power system, depending on where the system is located and the level of incentives offered. By contrast, generating electricity from coal or natural gas costs between 2 and 10 cents a kilowatt-hour, depending on the fuel and age of the power plant, while utility power in the U.S. averages about 8.9 cents, according to the U.S. Energy Information Administration.

What's worse, particularly for First Solar, is that the panels the company manufactures are less efficient at converting sunlight into electricity than its rivals. First Solar competes on price by making cheaper panels.

The problem with thin film is its efficiency. First Solar's panels, made from cadmium telluride, convert 10.5% of the sunlight they receive into electricity, while San Jose, Calif.-based Nanosolar Inc. makes thin-film panels from copper indium gallium selenide, or CIGS, that are 14% efficient. That's still below the 19% efficiency of silicon panels made by Sunpower Corp. of San Jose. In addition, CIGS makers have yet to figure out how to produce their more efficient thin-film panels on a large commercial scale at a competitive cost.

As an industry leader, this places First Solar in a tenuous position. It is developing CIGS technology, but if rivals can cut costs, then First Solar's lead evaporates. For this reason First Solar might want to acquire a smaller solar company that makes CIGS panels.