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But while the abundance of PV modules is making life difficult for many manufacturers, project developers will benefit.

A shift in tender structures, especially in emerging-market regions, such as Latin America, Africa and the Middle East, has forced some of the big global developers, for example Mainstream Renwable Power, to expand their portfolios to include solar as well as wind, to be able to go into markets and put forward bids for the lowest-cost projects.

Bloomberg New Energy Finance (BNEF), which estimates levelised cost of energy (LCOE) for wind and solar every six months for clients, has streamlined data for “uåX˜äŠÊ˜·³Ç.

In the first half of 2016 for selected key countries — the US, Mexico, Germany, South Africa, India, China, Chile and Brazil — the gap between wind and solar LCOE is smallest in South Africa.

BNEF’s "mid-point" LCOE puts the price of wind at $93/MWh, with $95/MWh for solar PV.

"This would suggest that as PV module prices continue to fall, it would be South Africa where the LCOE for PV would be first to cross that for wind," says BNEF analyst Ethan Zindler.

Next is India, where the price of wind is $77/MWh, compared with $90/MWh for solar PV, a difference of less than $15/MWh.

Oversupply of PV modules is due to falling demand in China, the world’s largest PV market with more than 43GW installed. Chinese firms produce the majority of all PV modules globally. After 20GW was installed in the first half of 2016 before the feed-in tariff was cut in June, 10GW is expected to be installed in the second half of this year. Renewables analyst Bridge to India expects the oversupply situation to continue into 2017.

Various analyst predictions — including BNEF’s — are seeing average module prices entering the range of $400/kW or slightly less.

According to Bridge to India, landed PV modules prices in India have dropped by nearly 15% to $360/kW in just three months, whie average prices for a tier-one Chinese-produced multicrystalline PV module reached $570/kW by the end of 2015, based on a year-on-year 10% reduction, according to GTM Research.

Prices continued to fall in the first half of 2016. It is likely that prices in 2017 could reflect a reduction beyond the 10% annual average, as manufacturers drop prices further to shift inventory. Typically modules account for between a third and half of a ground-mounted, utility-scale solar PV project’s installation costs.   

Contributing factors

One of the biggest contributing factors to the growth of PV generation has been the sharp decline in the cost of crystalline-silicon PV modules, falling by more than 65% between 2011 and 2014 to below $1,000/kW.

A drop in prices for inverters – another critical hardware cost in any PV project – has also contributed to making solar PV electricity generation cheaper.

However, Zindler adds: "LCOE is a theoretical price at which an investor would have to earn a reasonable rate of return, around 10%, varying by country. In reality, we've seen developers bidding in at much lower prices to win contracts. Whether such projects will ever get built, or will ever produce a reasonable profit if they do get built, is very much an open question."

While PV panels still represent the biggest single cost of a PV system, followed by installation costs, PV modules’ share of the total cost is diminishing. Soft costs — for project aspects such as permitting, installation and financing, which differ in various markets due to factors like the price of labour — are equally as important for determining LCOE.