The solar industry is stuck in a cycle of overcapacity and low demand and needs to cut costs in order to conquer lower subsidies and regain profits, according to research.

A report by Lux Research, Module Cost Structure Update: Path to Profitability, says that although module prices have dropped over the past four years to a low of US$0.70/W, the cost of goods sold for the modules is yet to reach the same level. The discrepancy between the two figures has led to major losses for many module manufacturers.

The research organisation’s cost and sensitivity analysis found that copper indium gallium (di)selenide (CIGS) thin-film modules, could see the steepest decline rate between 2012 and 2017, dropping US$0.14/W and bring the cost to US$0.64/W.

“With pressure from competitors, customers, and policy-makers to drop prices even further, manufacturers need to drive costs down to survive and thrive during the coming years of growth in the demand market,” said Ed Cahill, Lux Research associate and the lead author of the report.

The report went on to find the cadmium telluride (CdTe) thin-film modules will likely continue to maintain their status of the cheapest solar option through 2017, at US$0.48/W, compared to the current US$0.67/W. However, Lux Research states that increasing module efficiencies will truly be the key factor in cutting costs across the industry. According to its research, by increasing module efficiencies, costs can be cut up to US$0.09/W for mc-Si and US$0.21/W for CIGS.