There is about to be a drop in the price of solar electricity according to industry insiders. This is so because there is no longer a shortage of the silicon used to make solar panels. That could lead to a sharp drop in prices over the next couple of years, making solar electricity comparable to power from the grid.

Over the past few years, prices for solar power have been higher than average electricity prices because of the high demand generated by government subsidies worldwide and a shortage of processed silicon. Solar power is more than three times the cost of electricity from conventional sources, according to figures from the industry tracking firm Solarbuzz. Solar power cost about US$4 a watt at the turnof the century, but silicon shortages, which began in 2005, have pushed up prices to more than US$4.80 per watt, according to Solarbuzz.

Crystalline silicon, the active material in the most common type of solar panel, is also the main ingredient of the semiconductor industry and the increased demand for solar-generated power has led to a shortage of the material.  The extent of the shortage was enought to push prices upward to more than 10 times normal levels, to US$450 a kilogram, says Ted Sullivan, an analyst at Lux Research. 

It takes about two and a half years to add crystalline silicon production capacity and that added silicon production capacity is now starting to begin operations. 

Sullivan added that while only 15,000 tons of silicon were available for use in solar cells in 2005, by 2010, this number could possibly rise to 123,000 tons.  This increased production in silicon will more than likely cause a boost in production of solar panels which will ultimately drive down prices in the next two or three years.  It is estimated that over the next couple of years, production of solar panels will double each year.

Recently at a presentation, Travis Bradford, an industry analyst for the Prometheus Institute, said that prices for solar panels could ddecrease by as much as 50 percent between 2006 and 2010. In areas with a lot of sunshine, that will translate to solar electricity costs of about 10 cents per kilowatt hour, matching the average price of electricity in the United States. That will make solar affordable and, eventually, vastly increase the market. "You can't even begin to imagine the transformation that that's going to create."