Energy Policy 28 (2000) 1011}1021

The evolution of economic and environmental cost for crystalline

silicon photovoltaics
M. Oliver , T. Jackson
*
Ernst & Young, Broadwalk House, Southern Hay West, Exeter EX1 1LF, UK

Centre for Environmental Strategy, University of Surrey, Guildford GU2 5XH, UK
Received 24 May 2000

Abstract

Photovoltaics present a di$cult tradeo! to policy makers: on the one hand, they o!er clear resource and environmental advantages
over fossil-fuel-based electricity generation; on the other hand, they remain more expensive than conventional technology in most
grid-connected applications. However, the dynamics of this tradeo! are changing as the technology develops. This paper presents
a series of sensitivity analyses designed to illustrate the in#uence of various performance-related factors on both economic cost and
environmental performance of building integrated photovoltaics. The authors then discuss a range of factors that are likely to
stimulate further improvements and estimate the impact of these improvements over time on the combined carbon abatement cost of
photovoltaics. If these trends continue, and there is a number of reasons to suggest that they will, BiPV cladding systems could be
a cost e!ective means of abating CO emissions in European locations by 2010.  2000 Elsevier Science Ltd. All rights reserved.

Keywords: Photovoltaics; Economic analysis; Life-cycle inventory analysis; Carbon abatement

1. Introduction Towards the end of the 1990s costs lower than

The longer term viability of solar photovoltaics (PVs)
depends on a complex dynamic in which economic, en-
ergy-related and environmental aspects co-evolve as the
technology develops. At the present time, PVs o!er
certain environmental advantages over conventional
technologies * in particular where greenhouse gas emis-
sions are concerned * but these bene"ts are o!set by
considerable additional cost over conventional genera-
tion. However, both the economic cost and the environ-
mental performance of the technology are evolving.
For example, the economic viability of PVs has been
improving steadily since the technology was "rst applied
in the 1950s. Larger niche markets are continually emerg-
ing, fuelled by and fuelling further cost reductions. In the
1970s PV modules cost in the region of C15,000/kWp.
 The views expressed in this paper belong solely to the author in his
personal capacity and are not the views of Ernst & Young.
* Corresponding author.
E-mail address: t.jackson@surrey.ac.uk (T. Jackson).
 kWp"kilowatt peak and refers to the rated output of a module or
system as it would operate under standard test conditions (see Green,
1982).
C3,000/kWp were achievable, as the industry followed an
experience curve of around 80% (Shell, 1998; Oliver and
Jackson, 1999). Likewise, the energy return on invest-
ment has improved considerably in the last few decades.
Energy analysts in the 1970s found that PV systems
could not produce energy net of the energy embodied in
their manufacture. Some observers were therefore
tempted to dismiss PVs as &net energy sinks' which could
o!er no environmental bene"ts (Georgescu-Roegen,
1979). However, studies in the 1990s have found PVs to
be signi"cant net energy producers with energy payback
times of 5}7 years recorded (Oliver, 1999; Alsema and
Nieuwlaar, 2000). These improvements in energy viabil-
ity have implications in terms of improved environ-
mental performance.
Moreover, there are clearly some interdependencies
between economic cost reduction and resource or envir-
onmental e$ciency improvements. Some at least of the
cost reductions are related to rapid developments in the
performance of the technology, and these performance-
related developments also have implications for the re-
source and environmental viability of PVs.
The purpose of this paper is to analyse the compo-
nent factors in both economic and environmental

0301-4215/00/$ - see front matter  2000 Elsevier Science Ltd. All rights reserved.
PII: S 0 3 0 1 - 4 2 1 5 ( 0 0 ) 0 0 0 8 8 - 4
1012 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021
performance for a particular PV technology * crystal-
line silicon modules. Firstly, we establish the trade-o!
between economic cost and environmental bene"t (spe-
ci"cally carbon dioxide emissions) for PVs relative to
conventional electricity supply. This trade-o! is illus-
trated initially by comparing the economic costs and the
lifetime carbon dioxide emissions for a centralised PV
plant in the Swiss Java Alps against those for conven-
tional electricity generation from the average European
mix. Next, we broaden this analysis to include the eco-
nomic and environmental bene"ts associated with integ-
rating PVs into building structures. We then present
a sensitivity analysis designed to demonstrate the impact
of several factors which are critical to both economic cost
and environmental burden. These factors include the
module e$ciency, wafer thickness/kerf loss, system life-
time, siting and system performance factors. Finally, we
discuss the evolution of both economic costs and life-
cycle carbon dioxide burdens using marginal CO abate-

ment cost curves and explore some of the implications of
these results for policy-makers.
2. Methodologies and data sources
This paper uses a combination of (streamlined) life-
cycle inventory analysis and standard economic dis-
counted cash #ow analysis to illustrate the trade-o!s
between environmental and economic factors in PV tech-
nology.
Life-cycle inventory analysis is a method for quantify-
ing the energy and material #ows of a product or service
from their &cradle' (i.e. primary resources in the environ-
ment) to their &grave' (i.e. ultimate resting place) in the
environment as solid waste or dispersed emissions (Clift
and Longley, 1995). It is in many ways a descendant of
energy analysis and the development of the methodology
has been initiated by SETAC and ISO since the early
1990s. In this paper, carbon dioxide (CO ) emissions are

used as a representative sample of the environmental
burdens associated with the energy technologies con-
sidered.
Economic viability is determined by the pro"tability of
an investment decision or the cash #ow implications
of a project. Put another way, to be economically viable
an investment must promise a rate of return greater than
the cost of capital needed to "nance it. This involves
taking into account all costs and revenues of a project
and allowing for the di!erent timing of these #ows and
the potential interest charged on the funds involved (Pass
and Lowes, 1993).
 The Society for Environmental Toxicology and Chemistry.
 International Standards Organisation.
The economic viability of any electricity supply tech-
nology is determined by its ability to produce electricity
at a cost that can compete with other sources to make
adoption of the technology worthwhile. Electricity costs
are usually measured on a unit cost basis (p/kWh) and
are calculated using standard discounted cash #ow tech-
niques (see Oliver, 1999; Lumby, 1994). Equation (1) is
based on this technique and is the equation used for
economic unit electricity cost calculations in this paper:
P"(C (R/1!(1#R)\R)#AC)/Q , (1)
2 
Where P is the unit electricity cost, C the total capital
2
costs of the plant, R the discount rate, the lifetime of
the plant, AC the annual costs of operation and mainten-
ance and Q the annual output of the system.
In illustrating the trade-o!s between economic and
environmental cost, this paper uses the concept of in-
cremental abatement costs (UNEP, 1992; Jackson, 1991,
1995). In this method, the economic cost and environ-
mental emissions of the abatement technology * in this
case PVs * are compared against the costs and emis-
sions associated with a (counterfactual) baseline or refer-
ence technology. The &speci"c incremental cost' (SIC) of
the abatement technology per unit of environmental
abatement is calculated by deducting the cost of electric-
ity supplied by the baseline technology (C ) from the cost
of electricity supplied by the abatement technology (C ),
and dividing this by the amount of abatement (tonnes of
avoided emissions) that the new technology will provide
(Eq. (2)):
SIC"(C !C )/(E !E ), (2)
 
where E is the emissions per unit of electricity supplied
from the abatement technology and E the emissions per
unit of electricity supplied through the baseline. In this
case, the abatement technology is PVs, and the baseline
technology is taken to be conventional electricity supply
as this is the service that PVs would replace. The result of
the speci"c incremental cost calculation is usually ex-
pressed (for example) as pounds sterling per tonne of
carbon dioxide reduced (C/tCO ), and provides an in-

dication of the cost-e!ectiveness of a particular abate-
ment option.
The data used for the CO emissions results in this

paper is based on a life-cycle inventory database com-
piled by Frischknecht et al. (1994) from ETH Zurich and
the Paul Scherrer Institute.
The data used for the economic analysis results are
taken from a variety of sources (Bates and Munro, 1997;
NOVEM, 1997; Sick and Erge, 1996). A discount rate of
 For a fuller discussion of the construction of counterfactual base-
lines see Jackson et al. (2000). In this paper, we use the abatement cost
methodology in a purely illustrative fashion. A more detailed explora-
tion would require considerable attention to the uncertainties inherent
in baseline calculation.
 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021
8% is assumed for the economic calculations (Milborrow,
1995; NREL, 1998). All the data used have been updated
to account for technological advances in the industry so
that they are representative of recently installed systems.
The data presented for PVs is for poly-crystalline
silicon (p-Si) modules. Data for mono-crystalline mod-
ules were also available but the di!erence between the
technologies was negligible and within the range of un-
certainty in the results. This technology was chosen as
crystalline silicon technologies are the most widely used
for grid connected PV systems (EPIA, 1995). This paper
pays particular attention to building-integrated PV
(BiPV) systems which are currently one of the fastest
growing markets for grid connected PVs. In addition,
their application to commercial buildings (as cladding for
example) BiPVs are believed to be one of the most viable
applications of PV because the demand pro"le associated
with the 9-5 working day coincides well with the diurnal
electricity supply pro"le from a PV system.
The technology is assumed to be applied in a Euro-
pean location. The BiPV cladding systems are assumed
to produce 850 kWh/kWp/year which is an average of
a range of system outputs given for PV systems in central
and northern European locations (Steinhardt et al., 1998;
Nyman, 1998; Dietrich and Lopez, 1992). For compari-
son, a centralised PV plant is assumed to have an output
of 1200 kWh/kWp/year which is based on data from
a 500 kWp system in the Swiss Jura Alps and represents
an optimum location in Europe (Frischknecht et al.,
1994). The modules are assumed to be 12% e$cient and
produced in a production plant with annual production
of 2}5 MWp per annum (Frischknecht et al., 1994).
3. Current comparisons between PVs and
conventional electricity generation
One way of considering the viability of PVs, as a key
means of supplying electricity in Europe, is by comparing
it against conventional means of electricity supply. In this
section the economic costs and CO emissions of elec-
 system is placed either provides or avoids the need for
tricity supply from PV systems are compared with
electricity supply from the average European mix and
transmission and distribution system.
Fig. 1 presents graphically a comparison of electricity
supply to the point of use from a centralised PV system
and the average European electricity mix. It shows that
the centralised PV systems is currently over 10 times
more expensive, in economic terms, than conventional
sources of electricity supply to the point of use. However,
it also shows that the PV system has over 3 times fewer
CO emissions over its lifetime.
 ply of electricity from PV systems.
 The emissions associated with the electricity from the PV systems
come predominantly from the energy intensive materials and processes
involved in module manufacture (Oliver, 1999).
1013
Fig. 1. Comparing economic costs and CO emissions from electricity

supply from a centralised PV system and conventional electricity
supply.
There is therefore currently a trade-o! between relative
environmental bene"ts and economic costs of using PVs
in place of conventional electricity supply. Whilst use of
PV systems for electricity supply provides recognisable
environmental bene"ts it does so at considerable eco-
nomic expense. Each kWh of electricity supplied by
BiPVs would save around 0.38 kg of CO emissions at an

additional cost of around C0.72. Given the formula pre-
sented in Eq. (2) this results in a CO abatement cost in

the region of C1900/t.
Consideration of the way PVs are applied is increas-
ingly being recognised as a factor in reducing the costs of
PVs. For example, applying PVs to buildings is widely
recognised as one of the most viable applications of
supplying electricity to the grid from PVs (IEA, 1996;
Sick and Erge, 1996). The advantages of building integra-
tion are illustrated below by comparing a BiPV cladding
system with a centralised PV plant.
There are three main bene"ts of integrating PV into
buildings. Firstly, PV systems integrated into or mounted
onto buildings can avoid the cost of land acquisition,
fencing, access roads and major support structures for
the modules. This is because the building on which the
these functions at no additional cost * it would have
been there in any case. A building is also likely to be close
to the electricity grid avoiding some cabling costs that
would be necessary at a remote PV site.
Secondly, PV systems on buildings produce electricity
at or near the point of use avoiding transmission and
distribution of electricity and the costs and losses asso-
ciated with this. This argument is particularly strong for
PV systems on commercial buildings where the demand
for electricity (9 a.m.}5 p.m.) typically coincides with sup-
Finally, in addition to supplying electricity that re-
places conventional sources of electricity, PV systems
that are integrated into the building structure can pro-
vide the function of protecting the building from the
1014 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021
Fig. 2. Comparing economic costs and CO emissions from electricity

supply from di!erent types of PV system and conventional electricity
supply.
weather, avoiding the use of other building materials.
The costs of the system can therefore be split between the
functions of electricity provision and weatherproo"ng
reducing the net cost of the former. For example, a BiPV
cladding system provides two functions: "rstly it pro-
duces electricity and secondly it performs weatherproof-
ing functions in the place of a conventional cladding
system. In comparing the costs of BiPV cladding systems
to alternative electricity sources, the function of both
weather protection and electricity provision should be
taken into account, the cost of the cladding function
should, arguably, be deducted as an avoided cost. This
theory of avoided costs applies equally well to economic
and environmental costs. In this section the cost, both
environmental and economic, of a conventional glass
cladding system are deducted as an avoided cost to
demonstrate this approach and its possible e!ect on the
viability of BiPV systems.
Fig. 2 shows unit electricity costs/burdens for three PV
systems, a centralised PV plant (central PV), a BiPV
cladding system (BiPV) and a BiPV cladding system net
of the costs/burdens of a conventional glass cladding
system (Net BiPV). These three systems are then com-
pared with electricity supply from the average European
mix.
Using average economic capital cost data of systems
installed in the United States cost estimates of
C8610/kWp for a central PV plant and C6160/kWp for
a BiPV cladding system are used for total system costs
(Bates and Munro, 1997). Whilst many systems have
been installed cheaper than this these estimates are with-
in the range of cost estimates found in the literature.
Conventional glass cladding systems cost in the range
of C350}500/m (Greenpeace, 1995; Bahaj and Foote,
1994; Nyman, 1998). At 12% module e$ciency each kWp
of PV system would be 8.33 m in size. Using a median
price of C425/m for a conventional glass cladding, each
kWp of PV would displace the need for around C3540
worth of conventional glass cladding. This means that
the net cost of a BiPV cladding system is assumed to be
C3240 in this analysis.
Fig. 2 shows that despite having a superior perfor-
mance, the central PV plant has higher unit electricity
costs than the BiPV systems due to the higher capital
costs. If the costs of a median priced conventional glass
cladding are deducted from the capital costs of a BiPV
cladding system the capital costs of the latter are halved
and so are the unit electricity costs. The CO emission

"gures show a similar comparison with the central PV
plant being the worst and the Net BiPV system being the
best.
What Fig. 2 illustrates therefore is that in supplying
electricity to the point of use BiPV cladding systems have
signi"cantly lower economic costs and environmental
burdens than a central PV plant. If the costs/burdens
associated with construction of a conventional glass clad-
ding system are deducted as an avoided cost then the
economic and environmental advantages of building in-
tegration are further increased.
Fig. 2 also shows that accounting for the cost of a con-
ventional cladding system improves the trade-o! that
currently exists between relative environmental bene"ts
and economic costs of using BiPVs in place of conven-
tional electricity supply. Each kWh of electricity supplied
by a BiPV cladding system net of a conventional glass
cladding system would save around 0.46 kg of CO emis-

sions at an additional cost of around 27 pence. Given the
formula presented in equation (1) this results in an in-
cremental CO abatement cost in the region of C600/t,

a signi"cant improvement on the C1,900/t for a central-
ised PV systems described earlier.
By way of comparison, it is worth pointing out here
that many CO abatement measures * such as fuel

switching, improved appliance e$ciency, combined heat
and power, energy e$cient lighting, service space heating
e$ciency improvements and combined cycle gas turbines
have negative incremental abatement costs (Jackson,
1995, e.g.). Some renewable technologies have abatement
costs as low and even less than C20/t.
It is logical to expect policy makers to pursue environ-
mental strategy in the most cost-e!ective manner by
implementing the most cost-e!ective means of reducing
emissions "rst. Considering that many options for CO

abatement have a negative cost, PVs do not currently
represent cost-e!ective CO abatement technology when

applied in central and northern European locations.
4. Sensitivity of economic and environmental costs
of PVs to critical factors
The PV technology is a rapidly changing one, even
relative to other renewable energy technologies. Thus,
results such as those detailed above (and the assumptions
on which they are based) must be considered to represent
 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021
only a &snap shot' of the technology at a particular
point in time * probably yesterday rather than today!
Nieuwlaar (1997) warns that studies based on data from
up-and-running facilities are at best re#ecting current
state-of-the-art production processes and are more than
likely to be outdated already to some extent. The data for
developing technologies like PV power systems rapidly
becomes obsolete. The rapid developments in the PV
industry has meant that their costs are falling dramati-
cally compared to more conventional electricity sources.
In the light of the speed of these developments it is
certainly worth investigating the potential for future cost
reductions in the industry. In the following subsections
we examine brie#y some of the key factors on which both
economic and environmental costs depend.
4.1. Module ezciency
One of the key technological improvements of PVs in
the past few decades has been the increase in module
e$ciency. Improving the e$ciency of PV modules results
in cost savings. The more e$cient modules are, the small-
er the area required to produce a given amount of elec-
tricity and hence the system will cost less per kWp in
economic and environmental terms. For example at 10%
e$ciency, only half as many modules will be needed to
produce the same amount of power as modules with 5%
e$ciency, less materials and manufacturing is needed
and costs per watt drop sharply. In addition, given that
many of the balance of system (BOS) costs of a PV
system are area-related, a reduction in the area of mod-
ules required will also reduce the BOS costs per kWp of
system.
Fig. 3 illustrates the likely impact (in terms of CO

emissions and economic costs) that module e$ciency has
when calculating the unit cost/burden of electricity sup-
ply from PV systems. If all other factors are held constant
and only the module e$ciency varies, the system costs
follow an inverse function. The "gure shows that the
dependence of costs/burdens on e$ciency is very strong,
a "nding which is supported by Nowlan et al. (1995). It
also shows that e$ciency improvements have been an
important factor in reducing the costs/burdens of PV
systems, as commercial module e$ciencies have in-
creased from a few % in the early 1970s to around
12}16% today.
However, clearly the most notable cost reductions
from module e$ciency increases have taken place
already. In addition, the fact that future increases in
e$ciency will be increasingly hard to achieve also reduc-
es the e!ect that increasing e$ciency will have on costs.
This is not to say that further improvements are imposs-
 Balance of system refers to all the components of a PV system apart
from the modules.
1015
Fig. 3. The sensitivity of unit economic costs and CO emissions to

changes in module e$ciency.
ible. Derrick et al. (1995) expect further improvements in
e$ciencies of crystalline silicon modules rising steadily
upwards to around 18% by 2005 which will contribute to
future cost/burden reductions in the industry.
4.2. Wafer thickness and kerf loss
The thickness of silicon wafers, which make the cells
from which modules are made, has steadily decreased.
Ten years ago cells of 400}500 lm thickness were widely
used, cut with 300 lm wire saws, resulting in the use of
700}800 lm of silicon ingot per wafer manufactured (as-
suming 300 lm kerf losses). Recent developments have
allowed wafers of 200}350 lm thickness to be cut with
150 lm thick wire saws giving 1.5}2 times as many wafers
per ingot (Phylipsen and Alsema, 1995; ETSU, 1996).
Reductions in wafer thickness and kerf loss are often
cited as an example of improvements in the PV techno-
logy that reduce the economic costs of modules (Remy
and Durand, 1992; EPIA, 1995; Munzer and Holder-
mann, 1998). The assumption used in the analysis in the
previous section was that wafers are typically cut at
a thickness of around 350 lm with saws that are around
180 lm thick. This results in kerf (saw-dust) losses of
around 200 lm of the ingot so that for each wafer sliced,
around 550 lm of ingot (silicon bar) is used.
Obviously, thinner wafers will lead to reduced costs if
yields remain the same as less of the expensive puri"ed
silicon will be used. Wire saws can cut wafers as thin as
100 lm but problems arise in that handling becomes
more di$cult reducing process yields. In addition, solar
radiation is not completely absorbed at thicknesses be-
low 200 lm (requiring the addition of light trapping
components). The optimum thickness is therefore likely
to be 200 lm (Booth, 1998; Remy and Durand, 1992).
Using data for the various stages of module manufac-
ture (EPIA, 1995; Frischknecht et al., 1994) a sensitivity
 Sawdust losses.
1016 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021
Fig. 4. The sensitivity of unit economic costs and CO emissions to
 lifetime of the system.
changes in wafer thickness and kerf loss.
analysis of the economic and environmental unit electric-
ity costs to improvements in the wafer thickness and kerf
loss has been performed. The results are shown in Fig. 4.
The assumption made in the analysis is that the cost of
the wafer manufacturing stage remains unchanged. How-
ever, due to the savings made in ingot material, the costs
of the processes up to the wafer manufacturing stage are
reduced proportionally to the reduction in wafer thick-
ness and kerf loss. For example, if the wafer thickness and
kerf loss combined falls from 500 to 450 then costs up to
(but not including) the wafer manufacturing stage will be
cut by 10% due to a 10% reduction in the use of the
silicon ingot. It is assumed that the process yields remain
the same.
The e!ect of reducing wafer thickness and kerf loss on
economic costs is not dramatic. This is because the cost
of the processes up to and including ingot manufacture
only account for around 11% of total system costs. The
e!ect is greater in terms of reducing the CO emissions

associated with each kWh produced by the PV system.
This is because the processes up to and including the
ingot manufacturing stage account for 65% of the energy
(and therefore a similarly high proportion of CO emis-

sions) embodied in complete systems for p-Si BiPV clad-
ding systems (signi"cantly higher proportions than for
the economic costs mentioned above).
Again it is likely that the greatest reductions in costs
and burdens from reducing wafer thickness and kerf loss
have already taken place. Further improvements will be
increasingly hard to attain, but there is nonetheless
still room for improvement and this factor is likely to
play a role in reducing the cost of electricity from this
technology.
4.3. System lifetime
The lifetime of the system is also an important factor in
determining the cost of the energy produced. A system
that is given 30 years to produce electricity will, ceteris
Fig. 5. The sensitivity of unit economic costs and CO emissions to the

paribus, produce twice as much electricity as a system
that is only given 15 years. Physical lifetimes in excess of
30 years are expected to be reached for PV systems,
though there is little experience in the industry of the end
of life of systems yet. The lifetime of modules is a!ected
predominantly by encapsulation failure. Under acceler-
ated life testing they have lasted 25 years. BP Solar is
con"dent that estimates of 25-year lifetimes are conserva-
tive as silicon itself is very stable.
In terms of investment appraisal project lifetimes may
be shorter than the physical life of the system. Investors
in BiPV systems may want the system to pay for itself in
much shorter time periods to avoid risks of system relia-
bility later in its life. For private "nancing, even 10-year
terms of depreciation may be di$cult to obtain until
reliability can be assured. For example, for wind energy,
the third round of the UK Non Fossil Fuel Obligation
(NFFO) gave projects 15-year contracts for their electric-
ity at premium prices. However, according to Milborrow
(1995) bank loans for the projects seldom exceeded 10}12
years, which kept the cost of electricity from wind higher
than it would otherwise have been. Milborrow (1995)
also claims that investments in gas turbines are typically
given 15 years to pay for themselves whereas nuclear
generators consider the lifetime of the plant as the
payback time.
Fig. 5 shows that the unit electricity costs/burdens of
BiPV facades are very sensitive to the lifetime of the
investment. From this "gure it can be seen that it is
crucial that PV systems are given as long as possible to
pay back the investment in them. It also shows that
extending investment lifetimes beyond 25}30 years will
not contribute signi"cantly to further cost reductions.
Modules typically come with warranties of around 10
years according to Carlson (1992) and hence the failure of
a module after this time must be considered plausible. It
is however more likely for a system lifetime to be short
for economic reasons, to pay back a loan for example,
and that the output of the system after this required
 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021
pay-back time will still be used but be considered to be
free.
4.4. Siting and performance ratio
The unit electricity cost from PVs in economic and
environmental terms is obviously a!ected by the actual
output of the systems. System output in turn is a!ected
by two important factors: the amount of solar radiation
available at the site (where the system is located) and the
performance ratio of the system (how good it is at using
the available resource).
Variance in insolation is perhaps the most important
factor in determining the output of a system. The amount
of energy produced by a given system will obviously
depend on its location and the insolation received there.
Sick and Erge (1996) show the variation in the solar
resource by listing various sites around the world, their
latitude and the solar radiation typically received there in
a year (supported by data from DG XVII, 1993; Green,
1982). Generally, sites closer to the equator have higher
solar resources than those further from the equator.
Weather patterns, local air quality and other factors
make this relationship less than perfect.
Countries such as Iceland receive around
800 kWh/m/year of solar radiation compared with parts
of California and some desert regions that receive up to
2500 kWh/m/year. The level of solar resource has an
impact on the unit electricity costs associated with a PV
system * for example to provide a certain amount of
electricity will require more solar panels in a region
further from the equator.
To make the best use of the solar resource received at
a site, PV systems have to be well-designed, sited and
installed. There are many factors other than the level of
solar radiation which reduce a system's output in a given
location. These factors include temperature, mismatch in
cells and modules, resistance in cables, fouling of mod-
ules, angle of tilt, system availability, inverter e$ciency
and shading. Such factors can notably reduce a system's
output. This is especially true for systems being applied
to buildings which may not be optimally orientated to
face due south or have walls and roofs tilted to face the
sun. For example, according to Greenpeace (1995) a ver-
tical solar facade facing due East or West would generate
about 50% of the output of a facade facing due South.
The productivity of a system relative to the solar
resource it receives is measured by the performance ratio.
The performance ratio of systems is typically in the range
of 60}85% (Menna, 1996; Nyman, 1998; Pearsall, 1996).
This means around 15}40% of the energy the system
would have produced, had it been optimally orientated
and tilted and operating perfectly, is lost.
The overall system output is calculated by multiplying
the solar resource received by a system by the e$ciency
of the modules and then multiplying this by the perfor-
1017
Fig. 6. The sensitivity of unit economic costs and CO emissions to the

output of a PV system.
mance ratio. Using a performance ratio of 55% for sys-
tems with low output for their location and performance
ratios of 85% for systems with high outputs for their
location, the likely range of system outputs for given
solar resources can be calculated. System outputs can
range from around 500 kWh/kWp in locations such as
Iceland to around 2000 kWh/kWp for systems with good
performance ratios in the sunniest locations on the planet
such as parts of California. This range of outputs is
supported by actual recordings of system outputs (Die-
trich and Lopez, 1992).
Fig. 6 shows the sensitivity of the unit electricity costs
from BiPV facades, in economic and environmental
terms, to di!erences in system output. Clearly where the
system is located and how well it is sited and installed
a!ects the cost of electricity it can produce. The "gure
shows that in regions which have less favourable weather
conditions it is important for system designers to take
special care to site systems in order to get a reasonable
output from the system.
Clearly, well sited systems in sunny locations will be
more viable than poorly sited systems in less sunny
regions. The impact this has on marginal CO abatement

costs is obvious and is shown in Fig. 7. It shows that
systems in desert regions are considerably more cost
e!ective at reducing CO emissions than systems in cen-

tral and northern European locations. However, in turn,
systems in European locations are more viable than
those sited in areas such as Iceland.
The bene"ts of building integration, illustrated in
Fig. 2, have an impact on the CO abatement curve

presented in Fig. 7. The lower line in Fig. 7 shows the
CO abatement cost curve for BiPV systems net of

the avoided costs/burdens of a conventional glass cladd-
ing system. It shows that the BiPV systems are a much
more viable method of reducing CO emission if only the

net cost of electricity supply is considered.
1018 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021
Fig. 7. CO abatement costs for PV systems sited in di!erent locations.
 vironmental burdens already. Any future cost/burden
Other bene"ts of BiPVs are also being investigated.
For example, it is well known that the electrical conver-
sion of PV cells drops as the temperature of the cell
increases. Unfortunately, modules heat up when exposed
to sunlight due to the photon energy from the radiation
that is not converted into electricity being absorbed by
the modules. This results in energy building up as heat.
Heat generation within the PV modules has therefore
been considered as a problem and the incorporation of
ventilated gaps behind the panels has become a common
design feature to help air circulating behind the modules
to cool them.
It is being increasingly recognised that if this waste
heat could be harnessed the e$ciency of PV systems use
of solar radiation could be enhanced (McNelis, 1996;
IEA, 1998; Brown, 1998). For building integrated sys-
tems, if the heat can be used for space or water heating
within the building overall e$ciencies (electrical and
thermal combined) are estimated to be around 30}40%
with e$ciencies of 70% being theoretically achievable
(IEA, 1998).
A few demonstration projects have already used this
concept. These include the Mataro Library in Spain
which has a 53 kWp ventilated fac7 ade system with heat
recovery. Heat is collected and used in winter for heating
purposes (McNelis, 1996).
Ove Arup and Partners are researching what they
consider to be a &more holistic application of PV facades'
involving the use of excess heat for redistribution
through the building or to assist the convection
&buoyancy' e!ects of heated air in naturally ventilated
buildings. An application of this was the BP Showcase
Pavilion that is a temporary demonstration construction.
The south facing wall of this building is curved to opti-
mise absorption of solar energy and maintain a near
constant electrical output whilst also shading the east
and west vertical walls to protect them against excessive
solar gain. The heat from panels is blown down the ducts
from where it can be used to heat the building when
necessary (Brown, 1998).
BiPV systems also have value in demonstrating the
good environmental responsibility of the occupier of the
building on which they are placed, an attribute that has
value and which could a!ect consideration of the viabil-
ity of applying such a technology. Evaluation of these
additional bene"ts is beyond the scope of this article.
5. The Evolution of CO2 abatement costs
Many of the developments that have taken place, in-
cluding those presented in the "gures above, have had
their greatest e!ect on reducing economic costs and en-
reductions from these factors will be increasingly hard to
attain. Having said that there is a range of factors that
have yet to have an e!ect on reducing the costs of PVs.
For example, economies of scale are a factor widely
cited for its expected e!ect of signi"cantly reducing the
cost of PVs (Edelson, 1992; Hoagland, 1995; Remy and
Durand, 1992; Kelly, 1993; Bruton et al., 1997; Nowlan
et al., 1995). Scale economies could improve the viability
of PVs in a number of ways:
E by enabling batch manufacturing processes for mod-
ules to become continuous processes allowing higher
utilisation of capital;
E at higher production volumes automation, including
for example, robotics, could be incorporated into some
of the processes that are currently labour intensive;
E allowing economies of specialisation: for example,
companies specialising in the manufacture of solar
grade silicon for use as a feedstock are anticipated to
emerge once the industry grows large enough to war-
rant such specialisation;
E lower material costs due to advantages from buying in
bulk and the wider scope for recycling and material
recovery in larger volumes.
The gradual exploitation of these economies of scale is
widely believed to be a signi"cant factor in allowing
future economic costs of PV to fall signi"cantly. It is also
likely that they will also have an e!ect of reducing the
environmental burdens of systems, not least by reducing
the energy intensity of manufacture per unit output.
The historical fall in the economic costs of PVs is
widely documented (Shell, 1994; Sick and Erge, 1996;
Zweibel, 1996). Such cost reductions are explained by
experience curve theory which has been used to under-
stand, account for and describe the widely observed phe-
nomenon of new processes becoming signi"cantly
cheaper through increased deployment (see Gruber,
1994; Shell, 1998). For PVs an experience curve of 80%
has been observed (Shell, 1998). If this experience curve
continues and the market for PVs continues to grow at
an average of 21% per annum (the average growth of the
 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021 1019

Fig. 8. Experienced and expected cost reductions for PV electricity. Fig. 9. Experienced and expected marginal CO abatement cost reduc-

tions for PVs.

industry between 1982 and 1997) then costs could con-

tinue to fall dramatically (Oliver and Jackson, 1999).
Fig. 8 shows the cost curve for PVs following an 80%
experience curve. It illustrates the dramatic fall in the unit
electricity price of PVs that has been experienced, driven
by factors such as those illustrated above, and also shows
the likely continued fall in the future. Unit electricity
costs calculated using recent quoted costs for actual
systems have also been included in this "gure. If any-
thing, the quoted costs (shown by the crosses) illustrate
an even steeper experience curve than the accepted 80%
curve (shown by the solid line).
As the analysis above has shown, the environmental
burdens associated with PVs have fallen signi"cantly and
could continue to fall in the future fuelled by the same Fig. 10. Comparison of expected marginal CO abatement cost reduc-
factors that will enable economic costs to continue to fall. 
tions for PVs and BiPV cladding systems.
This double-dividend e!ect of reduced economic costs
and environmental burdens will reduce the abatement
costs associated with PVs.
Fig. 9 illustrates this double-dividend e!ect by showing and environmental performance and in a sense demon-
the marginal abatement cost curve for PVs over time. In strates the internalisation of the environmental improve-
the analysis that this "gure represents it is assumed that ments of the technology into economic decision making.
both the environmental burdens and the economic costs Previous sections have demonstrated the bene"ts of
associated with the PV technology follow an 80% experi- integrating PVs into buildings using the example of BiPV
ence curve. This assumption is supported by the analysis cladding systems. The impact that this bene"t has on the
presented earlier in this paper. In addition authors such future marginal CO emission abatement costs of PVs is

as Georgescu-Roegen (1979), in the 1970s, found that illustrated in Fig. 10. Fig. 10 shows that by as soon as
solar PV systems were not net energy producing systems 2010, BiPV cladding systems could save CO emissions

at all but in fact consumed more energy in their manufac- at a minimal or negative cost, in central to northern
ture than they ever produced. When compared to the European locations, when compared to conventional
"ndings of more recent energy analysis studies (see, for electricity supply and median priced conventional clad-
example, Alsema and Nieuwlaar, 2000) it is clear that ding systems if current trends continue. This implies that
a signi"cant energy input reduction has occurred on PVs could soon become a cost-e!ective method of CO

a level similar to the 80% experience curve that economic abatement.
costs have &experienced'. The graph begins at 1980 as in
the early 1970s PV systems were not net energy pro-
ducers and hence provided no environmental bene"t. 6. Summary discussion and conclusions
The fall in the marginal CO abatement costs for PV

systems is much more dramatic than the fall in economic In strict economic terms, PVs are not viable in that
costs in Fig. 8. This di!erence illustrates the impact of the they cannot compete with conventional electricity sour-
double dividend e!ect (improvements in both economic ces on a unit cost basis. Having said that they are viable
1020 M. Oliver, T. Jackson / Energy Policy 28 (2000) 1011}1021
in the sense that they provide signi"cant environmental
bene"ts over conventional electricity sources. This
trade-o! between economic costs and environmental
bene"ts provides justi"cation for policy support for
PVs on the grounds that adoption of the technology
will have social bene"ts outside the sphere of monetary
evaluation.
It is logical to expect policy makers to pursue environ-
mental strategy in the most cost-e!ective manner by
implementing the most cost-e!ective means of reducing
emissions "rst. Calculating the marginal CO abatement

cost for PVs in European locations revealed that, consid-
ering that many options for CO abatement have a
 B., Teale, L., Alonso, J., Ugalde, U., Declerq, K., Nijs, J., Szlufcik,
negative cost the current cost of CO abatement, BiPV
 Rauber A., Wettling, W., Vallera, A., 1997. A study of the manufac-
systems in Central to Northern European locations are
too expensive at present.
So why have major support programmes for PVs
emerged in recent years? One of the reasons is likely to be
the future prospects of the technology. As some of the
results above showed, the costs of PVs in economic and
environmental terms have fallen dramatically in com-
parison to other technologies. This trend is likely to
continue due to factors such as economies of scale which
have not yet had a signi"cant impact on reducing costs.
Support for PVs and its emerging industry is therefore
likely to be, at least in part, due to the anticipation of its
viability in the future.
PVs will become viable in the sunniest locations "rst as
the solar resource is a signi"cant factor in determining
the viability of a system. Having said that the solar
resource is much more evenly spread across the globe
than wind energy and fossil or nuclear fuels. It is there-
fore understandable that even countries that are not
within the sunniest regions of the World are still able to
justify signi"cant support for PVs. The support of an
industry via a token home market can have signi"cant
rewards in a sector with large export potential.
Integrating PVs into buildings signi"cantly improves
the viability of the technology in both economic and
environmental terms. It is therefore not surprising to "nd
PV applications in buildings to be a focus for policy
support as this enables such support to be given in the
most cost-e!ective manner.
If the trends of reduced economic and environmental
costs continues, and there are a range of factors
which suggest that they will, BiPV cladding systems
could be a cost e!ective means of abating CO emissions
 Jackson, T., 1995. Joint implementation and cost-e!ectiveness under
by 2010.
From the results presented above, the recent emerg-
ence of large-scale support programmes for the installa-
tion of PV systems can be explained by trends in the
industry which indicate signi"cant cost reductions in the
future. In addition the recent emergence of the applica-
tion of PV in buildings provides a much more cost
e!ective means of applying PVs even in less sunny loca-
tions of the Earth.
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