Rooftop solar PV will soon be cheaper than coal

A new study suggests that wind and solar plants are already competing with fossil fuel costs in Europe. Soon, even household rooftop solar PV systems will generate electricity cheaper than coal. And it won’t have the delivery costs.

The study from Germany’s Fraunhofer Institute for Solar Energy Systems says the cost of rooftop solar in the southern parts of Germany is already as cheap as €0.08c/kWh ($A12c/kWh). Even in northern Germany, where there is little sun, solar can be generated at €0.14c/kWh, half the cost of grid-based electricity.

By 2030, the study says, the levellised cost of energy (LCOE) from rooftop solar PV will have fallen to around €0.06c/kWh. In sunnier countries, such as Australia, the Middle East, southern Europe and western US, not to mention Africa and Latin America, the cost of solar will be lower still, at around €0.043c/kWh.

It says onshore wind in Germany  already between €0.05c/kWh and €0.11ckWh, although this is unlikely to achieve significant further cost reductions. Fuel costs for fossil fuel plants, however, are likely to rise.

“Even small roof-installed PV systems will be able to compete with onshore wind and also with the higher generation costs in the future from brown coal, hard coal and combined cycle gas power plants,” Fraunhofer ISE director, professor Eicke Weber said in the report

He says it is clear that wind and solar will “win the race towards cost leadership” with coal and gas. Although offshore wind has higher costs, it also has more hours at full load operation. The higher costs for biomass systems are balanced by its controllability.

The implications of this are obvious. Having households able to produce electricity at the same cost of coal – not including the network, distribution, and retail costs that are added to centralised generation – is likely to dramatically change the business metrics of the utilities industry.

Fraunhofer says the availability of wind and sunshine is not the only variable in the costs of energy – financing costs and risk premiums for new power plants can also affect the results substantially.

“Only by including these factors in our study are we able to realistically compare the levellised cost of electricity from the different technologies and thus convincingly present the cost-competitiveness of renewables,” it says.

That means that project risk and financing costs may cause solar projects in African countries, for instance, higher than elsewhere. The US and Australia, however, will be able to combine excellent solar resources and low financing costs.

The study found that even small roof-installed solar PV systems in northern Germany produce electricity today for less than €0.14/kWh, and therefore lie well below the average electricity price of €0.29kWh for households.

It said the current LCOE from onshore wind ranges between €0.05 and €0.11/kWh, putting it below hard coal and gas. Offshore wind, on the other hand, has much higher electricity generation costs of €0.12 to €0.19kWh, despite the fact that it has more full-load operating hours.

The study said offshore wind technology still shows a large potential for cost reductions, whereas onshore wind has nearly reached its limit. Levellised electricity generation costs from biogas, widely deployed in Germany, is dependent on load and fuel type, and ranges from €0.14 to €0.22/kWh.

It estimates the levelled cost of electricity from brown coal presently extends up to €0.053/kWh, from hard coal up to €0.08/kWh and from combined cycle gas power plants up to €0.098/kWh respectively.

In the Middle East, considered to be the next big market in solar, oil-fired power plants show generation costs in the range of €0.13 – €0.17/kWh compared to PV with an LCOE of around €0.08/kWh.

It also noted that the costs of concentrated solar power plants (CSP, also known as solar thermal) are also falling quickly. CSP plants with 8 hours storage current cost , but will likely fall to €0.097 to €0.135/kWh by 2030. Importantly, these plants will be able to dispatch electricity on demand.

It also said cost of concentrating solar PV technology, where mirrors are used to concentrate solar power onto a powerful receiver, such as in the Mildura demonstration plant currently under construction from Silex, could fall to between  €0.045 and  €0.075/kWh by 2030, from around  €0.082 to  €0.148/kWh in 2013.