The latest McKinsey Quarterly has an interesting look at the economics and growth rates of solar PV production - The economics of solar power. Note the excellent graphic showing when PV will reach grid parity in different regions.

A new era for solar power is approaching. Long derided as uneconomic, it is gaining ground as technologies improve and the cost of traditional energy sources rises. Within three to seven years, unsubsidized solar power could cost no more to end customers in many markets, such as California and Italy, than electricity generated by fossil fuels or by renewable alternatives to solar. By 2020, global installed solar capacity could be 20 to 40 times its level today.

But make no mistake, the sector is still in its infancy. Even if all of the forecast growth occurs, solar energy will represent only about 3 to 6 percent of installed electricity generation capacity, or 1.5 to 3 percent of output in 2020. While solar power can certainly help to satisfy the desire for more electricity and lower carbon emissions, it is just one piece of the puzzle. ...

Even in the most favorable regions, solar power is still a few years away from true “grid parity”—the point when the price of solar electricity is on par with that of conventional sources of electricity on the power grid. The time frame is considerably longer in countries such as China and India, whose electricity needs will require large amounts of new generating capacity in the years ahead and whose cheap power from coal makes grid parity a more elusive goal. ...

Government subsidies have played a prominent role in the growth of solar power. Producers of renewable energy in the United States receive tax credits, for example, and Germany requires electricity distributors to pay above-market rates for electricity generated from renewable sources. Without such policies, the high cost of generating solar power would prevent it from competing with electricity from traditional fossil-fuel sources in most regions.

But the sector’s economics are changing. Over the last two decades, the cost of manufacturing and installing a photovoltaic solar-power system has decreased by about 20 percent with every doubling of installed capacity. The cost of generating electricity from conventional sources, by contrast, has been rising along with the price of natural gas, which heavily influences electricity prices in regions that have large numbers of gas-fired power plants. These regions include California, the Northeast, and Texas (in the United States), as well as Italy, Japan, and Spain.

As a result, solar power has been creeping toward cost competitiveness in some areas. California, for example, combines abundant sunshine with retail electricity prices that, partly as a result of the state’s policies, are among the highest in the United States—up to 36 cents per kilowatt-hour for residential users. Unsubsidized solar power costs 36 cents per kilowatt-hour. Support from the California Solar Initiative2 cuts the price customers pay to 27 cents. Rising natural-gas prices, state regulations aiming to limit greenhouse gas emissions, and the need to build more power plants to keep up with growing demand could push the cost of conventional electricity higher.

During the next three to seven years, solar energy’s unsubsidized cost to end customers should equal the cost of conventional electricity in parts of the United States (California and the Southwest) and in Italy, Japan, and Spain. These markets have in common relatively strong solar radiation (or insolation), high electricity prices, and supportive regulatory regimes that stimulate the solar-capacity growth needed to drive further cost reductions. These conditions set in motion a virtuous cycle: growing demand for solar power creates more opportunities for companies to reduce production costs by improving solar-cell designs and manufacturing processes, to introduce new solar technologies, and to enjoy lower prices from raw-material and component suppliers competing for market share.

Cleantech.com has a report on a massive expansion of silicon production by Hemlock Semiconductor.

In a $1.5 billion expansion, Hemlock says it will produce 46,000 metric tons by 2012. Hemlock, Mich.-based Hemlock Semiconductor today began production at its new polysilicon facility. The polycrystalline silicon producer says it expects to nearly double its output for both semiconductor and solar energy industries this year.

A joint venture of Dow Corning, Shin-Etsu Handotai Co. and Mitsubishi Materials Corporation, Hemlock already has claim as the world’s leading maker of silicon—the raw material of solar cells. By year end, the company says the site is expected to produce 9,000 metric tons of silicon, bringing the company’s annual capacity to approximately 19,000 metric tons, making the production facility the “largest single polysilicon facility in the world.”

An additional expansion with operations and supply will begin in 2010 and by the end of 2011, the Michigan-based company anticipates the facility will produce 36,000 tons annually.

In 2005, global silicon production was 26,000 metric tons and came from a small number of producers including Hemlock and MEMC of the U.S., REC and Elkem of Norway, Wacker of Germany and Tokuyama of Japan. ...

Last year Hemlock entered a 10-year silicon supply agreement with San Jose, Calif.-based SunPower, with deliveries from this deal slated to begin in 2010. According to last year’s deal, the silicon is expected support more than two gigawatts of solar cell production by SunPower.

Ecogeek has a post on a startup emerging from stealth mode called Sunrgi, which is selling Spectrolab's concentrating solar PV technology in units that may be able to generate power as cheap as coal. The units actually dump waste heat, so presumably they could be coupled with stirling engines or some sort of cogeneration style setup to generate more power (or at least some hot water or air).

Grid parity...it's what we're all hoping for. That magical moment when solar power (or other renewables for that matter) become available at the cost of current power sources. And, if Sunrgi's claims are to be believed, it could be only 15 months away.

Sunrgi's technology is fairly simple. Basically they use a magnifying glass to concentrate the power of the sun 1600 times onto a tiny square of the most efficient photovoltaic material on the planet. While others are concentrating on bringing the price of the panels down (along with efficiency), Sunrgi actually uses panels from Spectrolab, which are three times more efficient than the cheap panels being produced by NanoSolar.

The photovoltaic cells remain efficient even when collecting these huge amounts of light per square centemeter. However, they don't remain efficient at 3000 degrees F. In fact, if this much light were concentrated on the cells, and the cells were not cooled, they would melt. Sunrgi has developed a proprietary cooling system to keep the ultra-expensive cells at nominal temperatures even at the hottest part of the hottest day. You can see, in the render, that the bottom of the panels actually look like huge CPU heat sinks.

By using such a small amount of photovoltaic material, and such a large amount of cheap magnifying glasses, Sunrgi says that their system should be extremely inexpensive. In fact, they're saying that, in sunny climates, it will be sold for around $0.05 per kilowatt, about the cost of coal. They already have demonstration units running and hope to be selling their first units (to utilities and large businesses) in twelve to fifteen months.

Technology Review reports that the end of the silicon shortage is in sight, with capacity (and solar panel output) expected to increase sharply and prices expected to drop.

Solar electricity is about to get much cheaper, industry analysts predict, because a shortage of the silicon used in solar panels is almost over. That could lead to a sharp drop in prices over the next couple of years, making solar electricity comparable to power from the grid.

High demand generated by government subsidies worldwide and a shortage of processed silicon have kept prices for solar-generated power much higher than average electricity prices over the past few years. Solar power is more than three times the cost of electricity from conventional sources, according to figures from the industry tracking firm Solarbuzz and the United States' Energy Information Administration. Solar power cost about $4 a watt in the early 2000s, but silicon shortages, which began in 2005, have pushed up prices to more than $4.80 per watt, according to Solarbuzz.

Crystalline silicon has long been the staple of the semiconductor industry. But it's also the active material in the most common type of solar panel, and the increased use of solar power has led to the shortage of the material. Indeed, the growth in silicon production hasn't kept pace with the rise in solar power. "It takes about two or three years to add capacity," says Travis Bradford, an industry analyst for the Prometheus Institute. The shortage has been severe enough to drive up silicon prices to more than 10 times normal levels, to $450 a kilogram, adds Ted Sullivan, an analyst at Lux Research.

The added silicon production capacity is now starting to begin operations. While only 15,000 tons of silicon were available for use in solar cells in 2005, by 2010, this number could grow to 123,000 tons, Sullivan says. And that will allow existing and planned production of solar panels to ramp up, increasing supply. "What that means, practically, is that [solar] module prices are going to come down pretty dramatically in the next two or three years," Bradford says.

A report from Michael Rogol, an analyst at Photon Consulting, says that demand for solar panels will quickly rise in response to even slightly cheaper prices, holding the price drop between 2007 and 2010 to a mere 20 percent. But others think that the demand will have trouble responding quickly to lower prices. That's in part because the market for solar has been generated by government subsidies, especially in countries such as Germany and Spain, and there are limits to how fast these subsidized markets can grow.

Regardless of the growth in demand, Bradford predicts that over the next couple of years, production of solar panels will double each year.

In a recent presentation, Bradford said that prices for solar panels could drop by as much as 50 percent from 2006 to 2010. In areas that get a lot of sun, 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, will vastly increase the market, Bradford says. "You can't even begin to imagine the transformation that that's going to create."