Solar Grid Parity Inevitable. Who’ll be the Leader in this Disruptive Technology?
May 30, 2012
Remember back in the early 90s, when Rush Limbaugh and the right wing noise machine made relentless fun of “Al Gore and his Information Superhighway”? Remember how prescient that turned out to be? – as the internet went on to become a disruptive engine of prosperity, so much so, that its hard to remember what the world was like before there was one?
That’s sort of where we are with solar energy right now. Yesterday’s news about new solar records in Germany gives some indication of how this is going to play out in the near future.
..soon investing in solar energy will no longer be high-minded, it will just be economic common sense. By 2017, even if you don’t count all the damage hydrocarbons do to the atmosphere, solar power will reach grid parity with them. That is, it will be economically competitive to put in a solar plant instead of a coal one. (In some areas of the US, solar grid parity will be reached in 2014). Of course if you factor in the health and climate damage caused by CO2 and other dirty emissions, solar is already much cheaper than hydrocarbons.
In the US, solar PV technology is expected to reach grid parity for some PV projects in 2014, and by 2017 most regions in the country are expected to reach grid parity in alignment with average electricity prices in the residential sector. China is also due to witness similar developments, with grid parity for solar expected to reach in most regions by 2015-2016.
Levelized cost of electricity (LCOE) is the price at which electricity must be generated from a specific source to account for the cost of the energy-generating system. The LCOE for solar PV will continue to decrease due to declining capital costs and increasing capacity factor. These factors, combined with a lack of fuel costs, low operations and maintenance costs mean that the LCOE of solar PV technology is expected to be lower than average retail electricity prices from 2017 onwards.
Solar PV is a major renewable source of energy across the globe, accounting for around 14% of the global renewable capacity. It is also the fastest growing renewable power source in the world, having grown at a compound annual growth rate (CAGR) of 56.4% over the past five years. The global solar PV market witnessed high growth in 2010 and 2011, with 44.3 gigawatts (GW) of installed capacity coming online in these two years, in contrast to the 14.8 GW installed during 2008 and 2009.
With the UK taking another step towards supporting new nuclear power on Tuesday – at either no extra cost to the consumer if you believe ministers, or substantial cost if you believe most others – it’s worth taking a look at what actually happens when you phase out nuclear power in a large, industrial nation.
That is what Germany chose to do after the Fukushima nuclear disaster, closing eight plants immediately – 7GW – and another nine by 2022. The shrillest critics predicted blackouts, which was always daft and did not happen.
But more serious critics worried that the three things at the heart of the energy and climate change debate – carbon, cost and security of supply – would all head in the wrong direction. Here in Berlin, I have found they were wrong on every count.
On security of supply, critics predicted that Germany would have to import energy to make up that lost by the closure of the nuclear plants. It’s an important issue for a nation that imports 70% of its energy. But what actually happened is that Germany simply exported less in 2011: 7TWh instead of 70TWh. “We are still a net exporter,” says Franzjosef Schafhausen, a senior civil servant.
This was helped by a large decrease in energy consumption of 5.3% in 2011, delivered by big increases in energy efficiency in buildings, homes and industry, as well as in part a milder winter. Aha, I hear you say, but Germany’s economy must have shrunk as well: it grew by 3%, in rather stark contrast to double-dip Britain.
Cutting energy use naturally cuts the carbon dioxide emissions that drive climate change, as did the increased deployment of renewable energy. In 2011, Germany’s emissions fell by 2%, confounding those who predicted a rise if nuclear was replaced by coal. Some was, but 60% of the lost nuclear capacity was replaced by renewable energy in a single year. And remember, even if carbon emissions had risen a little in Germany, the total emissions in Europe – capped by the emissions trading scheme – would remain the same. Germany also remains well on track for its 40% emissions cut by 2020.
Below- in the Southeastern United States, an important step to grid parity:
A new report offers the latest evidence of solar energy-generated electricity’s approach to cost parity with other forms of generation that send power to the grid.
Two things make “Levelized Cost of Solar Photovoltaics in North Carolina,” from the North Carolina Sustainable Energy Association (NC SEA), an especially valuable contribution to the tracking of solar energy’s approach to grid parity. First, it is based on a substantial data set. Second, its methodology is comprehensive and transparent.
There were five key conclusions:
1. For many of the utilities, the LCOE of solar PV systems over 10 kilowatts (with federal and state tax credits) were at grid parity or cost-competitive with commercial retail electricity prices in North Carolina in 2011.
2. For all North Carolina electric utilities, solar PV systems greater than 500 kilowatts will achieve grid parity or become cost-competitive with commercial retail electricity prices in 2015 (with federal and state tax credits).
3. For all North Carolina electric utilities, solar PV systems from 10 kilowatts to 500 kilowatts will achieve grid parity or become cost-competitive with commercial retail electricity prices in 2018 (with federal and state tax credits).
4. For the majority of North Carolina electric utilities, solar PV systems smaller than 10 kilowatts (rooftop solar) will achieve grid parity or become cost-competitive with residential retail electricity prices in 2020 (with federal and state tax credits).
5. For many electric utilities, solar PV without federal and state tax credits will be at grid parity or cost-competitive with retail electricity prices in North Carolina in 2020.
Quinlan said the first conclusion is the most important. “In 2011, there will be a good number of places where utility-scale solar and even some small commercial solar is at grid parity with some of the commercial retail rates,” he said.
Many in North Carolina and other Southeastern states where the solar resource is comparable, Quinlan said, are unaware that the LCOE (even with Renewable Energy Credits and tax credits) has come down so far so soon.
This, Quinlan said, demonstrates that solar PV in the North Carolina is becoming quite competitive with grid-supplied electricity, in some places and cases even without incentives.
The Southeastern states could be “a massive emerging market for solar PV in the years to come,” Quinlan said, if supportive policies such as those instituted in North Carolina are undertaken to attract investors. And “over the long term, if the trends continue,” he added, “you could be having conversations about unsubsidized solar.”