Aug 2, 2011 - Balance of system (BOS) cost reductions seem to be the next step of the solar photovoltaic (PV) industry in its efforts to further cut total PV system costs and achieve grid parity.
By Yurkie Ali
Solar system BOS costs include expenses for mounting structures such as racking and tracking systems, for electronic components such as inverters and maximum power point tracking devices, for services including engineering and design works and workforce for installation, and soft costs including permitting and financing.
BOS components and services have so far been beyond the scope of the solar industry’s PV cost reduction initiatives, which mainly focused on PV cells and modules.
However, GTM Research, the market research and consulting arm of green technology industry portal Greentech Media, recently forecast in its Solar PV Balance of System (BOS): Technologies and Markets report that in a typical, utility-scale crystalline silicon (c-Si) project, BOS costs will account for 50.6% of the project’s total costs per watt in 2012, increasing from 44.8% in 2010.
The report expects that modules will remain the most expensive single part of a PV system but will become cheaper than the collective costs of BOS. And this will direct the cost cutting efforts towards the BOS components and services.
“We expect to see BOS consolidation, integrated business models and increased supplier competition in the coming years as more companies see the BOS as a major revenue opportunity in the PV market”, Shayle Kann, head of GTM Research’s solar practice said.
According to the report, mounting structures are “an access point for both BOS cost reductions and business opportunity”, as its author Manhal Aboudi says. The report names mounting structures as the BOS components with the largest cost, USD 0.23 (EUR 0.162) per watt, for typical c-Si projects.
Rooftop mounting structures had the largest share of 83% of the global BOS market in 2010. However, as the report notes, the share of rooftop mounting structures will drop to 66% by 2015 with the increasing demand for ground-mounted fixed and tracking structures, which will reach a share of 27% and 7% respectively by that time.
This tendency reflects the slowdown in the European solar market, due to the incentive reduction policies provided by many European countries, and the growing utility solar markets in North America and Asia.
The US market, which is expected to expand considerably in the next few years, is already taking steps towards soft BOS costs reduction. DOE’s recent Sunshot initiative, which targets to cut solar costs by 75% by 2020, as much as USD 12.5 million has been allocated to stimulate local governments to streamline permitting.
The rise in demand for ground-mounted solar systems will in turn drive cost reduction efforts among producers of fixed and tracking structures as project developers seek to cut total project costs.
GTM Research expects a number of factors to lead to considerable decline in BOS costs in the next few years. These factors include economies of scale of manufacturing driven by the growing utility-scale segment along with markets in North America and Asia; production integration; user-friendly designs; improved cost of foundations, which can be achieved through the use of composite materials and the design of easy-to-install structures; improvements in component technology and field architecture; and improved solar module technology that will lead to higher module efficiency and decrease labour and BOS component costs.
A similar report by RMI, a not-for-profit organisation that conducts research to develop and promote renewable energy sources, named Achieving Low-Cost Solar PV: Industry Workshop Recommendations for Near-Term Balance of System Cost Reductions and released in September 2010, also finds that BOS account for almost half of the total costs for a solar power system. The report considers the reduction in BOS costs as the most effective way to cut total solar system costs. RMI suggests seeking improvements in the physical system design, to streamline business processes, to identify available synergies in order to achieve cumulative reduction in BOS costs.
While GTM Research projects BOS costs to decrease an average of USD 0.29 per watt from 2010 to 2013 in its report, RMT expects that with the available technologies and practices, the industry can cut hardware costs to USD 0.60-0.90 per watt for a utility-scale system in the next five years.
To sum it up, it is evident that we will see considerable activity in the solar BOS sector in the near term, as the solar power industry is struggling to further reduce costs to become competitive with other sources of energy.
(USD 1 = EUR 0.703)
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