How to Reduce the Electricity Cost of Solar Power Systems

1st Dec 18

Written by James Doyle

Photovoltaic technology is becoming more affordable each year, thanks to economies of scale and innovation in manufacturing processes. This leads to a continuous reduction in generation costs, to the point that solar systems can now achieve lower kilowatt-hour prices than conventional power stations fired by natural gas or coal.

Solar power installers and end users have no control over technology costs, but the resulting kilowatt-hour price from a photovoltaic array can be reduced with smart decisions during project planning and design. If you have been following solar industry news, perhaps you have read about the price records achieved recently – in many parts of the world, solar contracts have been signed for less than 20 USD/MWh (less than 2 cents/kWh).

There are two complementary strategies that can help solar power developers achieve lower costs per kWh:

  • Maximise the energy output achieved by each solar panel over its entire service life.
  • Minimise the total cost of owning the photovoltaic array.

In both cases, the end result is the same: the solar power system yields more kilowatt-hours for every dollar invested.

Strategy #1 – Maximise Energy Output per Solar Panel

To get a higher electricity output from a solar panel, you have to increase the amount of sunlight reaching its surface. There are many key decisions during project planning and design that influence its productivity.

Project site selection has a significant influence on the productivity of a solar power system. Geographic features such as hills and mountain ranges can block a considerable portion of sunlight, especially early in the morning and late in the afternoon. The sun’s position in the sky is closer to the horizon at these times of the day, and a large mountain can completely block it off from the project site.

Note than man-made structures can also reduce the amount of sunlight reaching a site. For example, high-rise constructions and unipole signs cast large shadows due to their height. If a shadow of this size is cast on a photovoltaic array, productivity is reduced drastically.

The orientation of photovoltaic panels is also very important. Consider that the sun’s position in the sky changes depending on the hour and season, and solar modules should ideally have an orientation that maximises the sunlight reaching them.

  • Australia is a southern hemisphere country, and more sunlight comes from the northern portion of the sky throughout the year.
  • If you install two identical solar panels, where one is tilted north and the other is tilted south, the north-facing panel will produce more kilowatt-hours during a given time period.

Solar tracking mechanisms can adjust the position of solar panels in real time, keeping them with the optimal orientation and tilt angle to maximise productivity throughout the year. However, a feasibility analysis is needed to determine if solar trackers make sense financially. In many cases, increasing the size of a solar array is more cost-effective than adding tracking mechanisms.

Another important requirement is keeping the surface of solar panels clean. Unless you use solar trackers, photovoltaic modules do not have moving elements subject to mechanical wear, achieving a very long service life as a result. However, if you allow the buildup of dust on the surface of solar modules, their productivity is reduced drastically.

With the combination of a good project site, optimal solar panel positioning and a reliable maintenance program, you can maximise the energy delivered by each solar module during its service life. Once you have optimised design conditions, the next step is cutting down costs.

Strategy #2 – Minimise Ownership Costs

As previously mentioned, end users and solar installers have little control over technology costs. However, there are many ways to reduce the total ownership cost of a solar system throughout its service life.

Solar power systems experience economies of scale, which means you can get a lower installation cost per kilowatt of capacity if the array is larger. However, this does not mean you should oversize your PV system – a qualified solar power company can calculate the optimal capacity according to the needs of your property and its electricity demand profile.

Another way to reduce costs is by taking advantage of incentive programs. Australia has two types of subsidies for solar systems: Small-scale Technology Certificates (STC) apply for installations up to 100 kW, and Large-scale Generation Certificates (LGC) are available for larger systems. If you are considering solar power, make sure you meet the requirements for these incentive programs, since they offset a significant portion of your ownership costs.

Having access to low-interest financing also reduces the total ownership cost of solar arrays, for the simple reason that interest payments are lower. Solar developers normally use loans for their projects, since assuming the upfront cost at once can cause a significant dent in their cash flow. Thankfully, Australia has some of the lowest interest rates in the world.

Of course, getting quotes from multiple technology providers is strongly recommended. This does not mean you should go for the cheapest products available, since they can end up being more expensive due to poor quality and limited warranty. The leading solar manufacturers normally offer a 10-year warranty against manufacturing defects, and a 25-year warranty for energy output. Conducting a quick background check of manufacturers is also strongly recommended, since a warranty becomes meaningless if the company goes bankrupt!

The ownership cost of  solar array is optimised if you use the highest installed capacity that makes sense for your property, while taking advantage of incentives and low-interest financing. Solid warranties also reduce ownership costs because you don’t have to assume the cost of part replacements, in case they are needed.


Solar power systems can achieve lower kilowatt-hour costs with smart decisions, and this applies for both technical and financial aspects. Photovoltaic technology has become much more affordable in recent years, but this does not mean it can be deployed recklessly. Planning and design decisions influence project performance during its entire service life – you should aim for maximum productivity and cost optimisation.


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