Written by Dennis Markatos of SETenergy.org

Solar module prices are falling so fast that it may be able to compete with fossil fuels within a matter of months.

The latest bit of news confirming astounding price drops was fromChina’s LDK Solar. LDK produces the main component of solar modules(wafers). While their second quarter guidance showed a boost inshipments, it also lowered their revenue expectations, translating intoa cost per watt of ~$1.

Competing with Thin Film’s First Solar

The cost leader for solar has recently been First Solar, who loweredtheir production cost per watt to 93 cents during the first quarter.But the lower efficiency of First Solar’s modules (at ~10.9% vs. 14-22%for silicon-based cells) means that selling its modules at $1 per wattis equivalent to Yingli Green Energy, JA Solar or Sunpower selling itsmodules for $1.30-$2 per watt. I thought sub-$1.75 per watt wasunrealistic for crystalline silicon producers in 2009. But LDK’s revised second quarter guidance means that such prices are expected per silicon-based watt throughout the rest of the year.

Prices Less than Half 2nd Quarter 2008

Such a price translates into less than half the price of just a yearago. If installation costs can fall in a similar trajectory, relativeprices versus fossil fuels will be similar to last year at this time.And once economic recovery begins to lift the price of natural gas incoming months, solar will become competitive and demand will soar.

The Strong Will Thrive

Solar companies who are strong enough to weather the next few monthsby lowering their cost of production will emerge highly profitable asthe recession subsides. In the meantime, the second half of 2009 maywitness serious consolidation throughout the solar industry as impairedfinancial markets fail to provide enough capital for smaller players.But the stronger producers (such as First Solar, Sunpower, and Suntech)appear poised to thrive as solar becomes mainstream and grid parityexpands into several markets by 2010.

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