The Cost Accounting Problem

In a sense, this project was a supply chain partnership, with multiple firms contributing their development skills to different components of solar cell systems. The program had a cost goal of 1 per peak watt of solar cell capacity. When the program started, solar cell systems were selling in the area of 10 to 20 a peak watt. This was intended to include a reasonable profit for solar cell producers. The goal centered on what was considered competitive with conventional generation. 

The evaluation became even more complex when two companies worked together on different parts of the production process. An example is one com- 

Because no production was in place that was suitable for mass markets, it was up to research contractors to estimate the cost of the production technologies they had developed. And, because they competed for research funding, they had incentives to put the best forward with the lowest estimates possible. Unfortunately, this situation forced JPL into the position of evaluating not only the underlying technology, but also the validity of corporate accounting systems and the estimates they produced. 

For example, a contractor such as General Electric might claim that its technology could produce cells for 1.30. Was that more cost effective than a rival s claim for 1.80 How were the numbers generated What were the assumptions Do the companies account for cost in the same way  

The evaluation became even more complex when two companies worked together on different parts of the production process. For example, one company made the silicon cells while its downstream partner encapsulated them into solar panels. Was the 2 consolidated figure produced by the team valid Should funding decisions be made on the basis of these numbers  

---