Photovoltaic Technology: Cost Analysis

Conner Crane
November 30, 2015

Submitted as coursework for PH240, Stanford University, Fall 2015


Fig. 1: Photovoltaic System at US Naval Base in Coronado, California. (Source: Wikimedia Commons)

Photovoltaic technology takes sunlight and converts it directly into electricity. Photovoltaic technology was discovered when Bell Telephone scientists discovered that silicon produced an electric charge when exposed to sunlight. There are many advantages of using photovoltaic technology as a renewable energy source: environmentally friendly, low maintenance costs, high reliability, and long effective life. [1] The International Energy Agency estimates that the total global capacity for photovoltaic electricity production reached 150 gigawatts in 2014. [2] The industry also accounts for a total of 1.4 million full time jobs on the global scale. Additionally, the IEA forecasts that photovoltaic technology will account for 16% of the world's total electricity share by 2050. [2] In this paper, I will first outline the technological advancements in photovoltaic technology in recent years, discuss the cost effectiveness and efficiency of these technologies, and finally address the problems with photovoltaic technology expansion moving towards the future.

Technological Advancements

The PV cells are composed of highly purified silicon slices. These cells undergo a manufacturing process that induces a "charges separating junction, deposits passivation layers and an anti-reflective coating, and adds metal contacts." [2] These individual cells are then weather-proofed and grouped into modules that can be expanded into larger systems and arrays. PV technology can be used to create as little as 1 watt of electricity and up to 1 gigawatt of electricity when utilized in more capacious systems. In grid-connected systems, inverters are necessary for transforming direct current (DC) to alternate current (AC) to employ more intricate circuits. [2] An example of a larger PV system can be seen in Fig. 1. Alternate PV technologies, such as thin films, have grabbed just over 10% of the total market share. The thin film technology allows for the processing and complete production of modules without the compilation of individual cells. The most notable improvements have occurred on the production side of the process where the materials, energy, and labor of producing the technology have been significantly reduced.


As the technology for producing and implementing PV technology have improved so has the efficiency of the technology. This efficiency percentage reached 16% in 2013 for commercial silicon modules. [2] The majority of modules guarantee an output of at least 80% of the maximum capacity for 25 years and 70% for 30 years.

Cost Analysis

Traditionally, when determining the costs of electricity systems, a levelized cost formula is used to represent the a "constant cost per unit of generation computed to compare one unit's generation costs with other resources over similar periods." [3] This method is used because the costs and generation capabilities differ immensely on a yearly basis making momentary analysis troublesome.

To determine the net economic benefit of PV technology, one must subtract the levelized cost from the levelized avoided costs of the technology. When the levelized avoided costs outweigh the levelized costs then the technology will bring a positive net value to society. [4] Though 2020 projections point towards a negative difference between levelized avoided costs and levelized costs (-33.9 $/KWh), there are regions where this difference results in a positive gain heading towards 2040. [4] The U.S. Energy Information Administration accredits this shift to the from higher general energy costs and a greater need for new capacity. [4] One way to further reduce the costs of PV technology is through tax breaks and government subsidies. Due to a strong environmental push, these incentives for production will likely increase, but one cannot be certain due to the overall lack of transparency in the political landscape.

It is important to note that many scholars have argued against the use of the levelized cost system for evaluating energy technologies. There is the argument that putting single numbers into the levelized cost formula to receive a single number outcome is inconsistent with reality as this neglects the uncertainty at work. To mitigate this, scientists advocate for the use of levelized costs distributions that will better represent the uncertainty and fluctuation in this equations. [5]


Solar photovoltaic technology is a promising and environmentally safe renewable energy source moving towards the future. PV technology seems to be best suited for low scale power generation, such as homes, since the "efficiency and manufacturing costs have not reached the point that photovoltaic power generation can replace conventional coal-, gas-, and nuclear-powered generating facilities." [1] We should continue looking seeking technological advancements and calling for government policies that will help drive the costs of the technology to a level that makes it economically efficient to replace exhaustible fuel sources.

© Conner Crane. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.


[1] G. K. Singh, "Solar Power Generation By PV (Photovoltaic) Technology: A Review," Energy 53, 1 (2013).

[2] "Technology Roadmap: Solar Photovoltaic Technology" International Energy Agency, 2014

[3] "Comparative Costs of California Central Station Electricity Generation," California Energy Commission, CEC-200-2009-07SF, January 2010.

[4] "Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2015," U.S. Energy Information Administration, June 2015.

[5] S. B. Darling et al., "Assumptions and the Levelized Cost of Energy For Photovoltaics," Energy Environ. Sci. 4, 3133 (2011).