Economical aspects

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Last updated: 6 February 2002

How much does it cost to install a photovoltaic power system?
Typically the cost of installing a photovoltaic system having a power of one kilowatt (1 kW) ranges from 5 000 USD to 7 000 USD (2000). Although there would be variations from case to case, about half of this investment would be for the PV modules, and the inverter, PV array support structures, electrical cabling, equipment and installation would account for the rest. It should be noted that at today's prices for photovoltaic electricity compared to electricity produced by traditional fossil fuels, installing a grid-connected photovoltaic system (even with a significant subsidy) will not provide a commercial return, and this is not likely to change in the near-term.
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Why use and install a photovoltaic power system?
Using the sun's energy to produce electricity avoids the environmental problems associated with fossil fuel power stations such as greenhouse gas emissions, local air pollution and acid gases. Also, in contrast to other environmentally friendly renewable energy options such as wind power and hydropower, photovoltaic power electricity is readily applicable right where people live and work. Contrary to earlier opinions, recent studies have shown that the time taken for photovoltaic modules to produce the amount of energy consumed during their manufacture is considerably less than their operating lifetime.
There are many reasons to install a photovoltaic power system:

It is the most practical and economically viable option for many applications in remote areas away from the electricity grid;
It is completely pollution free. Installing a small domestic photovoltaic power system of around 1,5 kW would provide around 1 500 kWh of electricity every year, this would avoid around half a tonne of CO2 annually;
Photovoltaic modules can be integrated into the fabric of a building;
Electricity can be supplied at the point of use;
The photovoltaic power system will run silently;
There is very little maintenance required for a photovoltaic system. After the initial installation costs, there are no further fuel costs;
Photovoltaic power systems are modular, and can be added to at any time.

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How much would it cost to have a photovoltaic power system on one's roof? Is it viable?
The demonstration programmes for the promotion of photovoltaics in Japan, the USA, or the European Union have fixed a target price of installed systems of 5 000 EUR per kilowatt. The economic viability of such an investment will depend upon the price the electricity company will pay for electricity produced by the photovoltaic power system.
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Buy-back rates for grid-connected photovoltaic power systems

What is the price paid for photovoltaic electricity by electricity utilities?
Countries and companies have different policies. In Germany it is fixed by law at 0,51 EUR per kWh. In other countries like Japan, the Netherlands, France, etc. the payback rate is equivalent to net metering (that is to say a situation where the electric meter would run backwards). The economic viability of the photovoltaic power system depends upon the initial investment and the utility's payback rate.
For more information about buy-back rates see IEA PVPS report Buy-back rates for grid-connected photovoltaic power systems, November 1997.
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Is the price of electricity produced by a photovoltaic power system competitive with conventional sources?
Today photovoltaic electricity is not competitive with conventional sources of energy. Nevertheless, in places where the electricity grid is not available, stand-alone (off-grid) photovoltaic power systems are cost competitive. These photovoltaic systems provide a new energy service other sources cannot meet.
The production cost in a centralized power production like the Erga 3,3 MW photovoltaic plant in Italy is around 0,40 EUR per kWh. Increasing the size of the plant, and using less costly materials in future will improve the situation but it will take time to become competitive with fossil fuels.

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