Why solar PV is unstoppable – and renewable targets will cost little

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Report finds solar will be cheaper than wholesale electricity prices across Europe by 2030, without any technology breakthroughs. The implications for fossil fuels are obvious – and mean high renewable targets might reduce the energy costs, rather than increase them.

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New report finds solar will be cheaper than wholesale electricity prices across Europe by 2030 – without the need for any technological breakthroughs. The implications for fossil fuels are obvious – and means high renewable targets might reduce the energy costs, rather than increasing them.

Solar generation costs are likely to fall below the average wholesale price of electricity across Europe by 2030, according to a new study, highlighting the potential of a solar revolution across the globe – not just in the household and commercial market, but also for utility-scale installations.

The study by the EU-sponsored European Photovoltaic Technology Platform, released this week, suggests that solar PV costs will fall by half over the next 15 years – after an 80 per cent fall over the last five years – even without any new technology breakthroughs.

This means that by 2030, the generation costs of solar PV – including grid integration costs of 2c/kWh– will be lower than the wholesale price of electricity in most of Europe. In southern European states, it already is cheaper, and by 2030 the cost of solar PV could be as low as €20-€25/MWh, depending on the cost of capital. Even in London, the cost of large-scale solar PV will be around €50/MWh – equal to the current wholesale price and way below the cost of nuclear, the current Tory government’s clean technology of choice.

“By 2030, large-scale PV would be competitive with the current wholesale electricity price almost all over Europe,” the EU report says. “It can be concluded that PV will probably be the cheapest form of electricity generation in most countries in the coming decades.”

solar growthThe report says that the cost cuts could be so dramatic that the capacity of solar PV could grow from around 170GW now to more than 3,000GW in 2030, and to 5,700GW by 2050, displacing an enormous mount of fossil fuels – coal-fired power stations in particular.

The report tells us what we already know about rooftop solar – that it is already cheaper than retail electricity prices across most of Europe, even in those countries with little sun, such as the UK and Sweden.

What we now know is that large-scale solar is also cheaper than wholesale electricity prices in southern Europe, and will be in the rest of Europe by 2030.

Screen Shot 2015-09-04 at 1.46.54 pm copyIn Spain, if the real cost of capital is around 5 per cent, a 50MWp solar PV system in Spain would produce electricity at around €45/MWh now. In Italy it is a little more, but in Italy the average spot market electricity price in 2014 was €52/MWh. By 2030, the cost of solar on 5 per cent cost of capital would be cheaper than that across Europe.

The predictions are significant on a number of levels. Firstly, it is already recognised that solar PV is cheaper than new-build fossil fuels in most countries, and solar is already competitive in those countries that need to build new capacity and have high wholesale electricity prices. In Chile and the Middle East, solar is being built without subsidies.

But solar was never expected to be able to compete with fully depreciated, already built coal-fired power stations in developed economies for a few decades hence.

The fall in the cost means that subsidies for solar will be able to be removed, sooner than many thought. US energy secretary Ernest Moniz said this week that this could happen within a few years. As we reported in June, UBS suggests that subsidies for solar will be completely removed over time, and it predicts that up to half of all capacity could be solar by 2050, in its “dream” scenario. (That article is worth re-reading but the EU forecasts are even higher in terms of capacity).

The second major element of the EU study is that these cost reductions will be achieved without any significant technological advances.

“Such results can be achieved without any technological breakthrough,” said Gaëtan Masson, a co-author of the report. “We simply assume that PV modules and other PV system components will become more efficient and less expensive and that operation and maintenance procedures will be optimised.”

This is a critical point, because many of the critics of renewable energy, particularly those in the nuclear-lobby, speak of the need for “next generation” solar technologies to make the big price breakthroughs.

But as the EUPVCC studies show, the current generation will do the job anyway, and it will become a pretty obvious choice for energy planners and investors which technology to choose, particularly as solar provides no fuel price cost, and therefore no fuel price risk for investors.

The lack of fuel price risk helps reduce the cost of capital, which means that the savings on solar can be even greater. And so, with battery storage costs also falling heavily, and already delivering savings at a network level by deferring or avoiding expensive grid upgrades, and with the ability of batteries to provide load shifting into the peaks, storage for night-time, and frequency and other ancillary services, then the prospect for even higher renewable penetration becomes quite compelling.

The findings are important for Australia too, for the obvious reason that Australia has much better solar resources than Europe, and needs to replace a higher proportion of coal-fired capacity.

Aspirational targets like the 50 per cent renewable targets set by the Labor state government in Queensland and by federal Labor for the whole of Australia are dismissed by the Coalition, who drum up numbers such as the $85 billion used to quantify the cost of Labor’s federal target.


But like the Coalition’s emission abatement cost estimates, this uses very high estimates of solar technology costs, and doesn’t allow for any reduction between now and 2030.

Large-scale solar costs in Australia are comparatively high, but that is only because little in the way of large-scale solar plants has been built. As more is built, through tenders such as those planned by the Australian Renewable Energy Agency, the ACT government and the Queensland government, then costs will fall rapidly.

Some expect a 50 per cent cost reduction by 2020, and more after that. Large-scale solar is looking particularly attractive in Queensland, and is expected to account for a large part of the 5,000MW to 6,000MW needed to meet the 2020 renewable energy target, say both Bloomberg New Energy Finance and Origin Energy.

Rooftop solar costs in Australia, which boasts the highest highest penetration of rooftop solar in the world, are among the cheapest – mostly through efficiencies in installation and maintenance costs driven by the thriving market.

olar lcoe 2050

The EU study says the outlook beyond 2030 is even more attractive. Again, eschewing any major technology breakthroughs, and just relying on a modest 0.4 percentage point increase in module efficiency per year, the cost of  a 1MW ground mounted system – even on a 5 per cent WACC – would fall to just €20/MWh in Malaga by 2050. This assumes a module efficiency of 30 per cent and system prices around one-third of what they are now.

“Parity with wholesale market electricity will be reached by 2030 almost everywhere. There is every reason to believe that this development will continue after 2030 because there is still a huge improvement potential in various PV technologies,” the report says.

Even in London, the cost could be below €40/MWh. To put that into context, the Hinkley nuclear plant, due to start in 2026 if financing is ever obtained, will cost €92.50/MWh and will then rise with inflation. By 2050, it will be paid more than €200/MWh for its output. By 2058, probably more than €300/MWh.

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26 Comments
  1. Reality Bites 3 years ago

    Giles that is great however you only quickly mentioned storage and did not factor in any grid scale storage costs. Sure solar will be competitive, when it is generating, but by the time you also store it how much will that be?

    • Mike Dill 3 years ago

      Utility sized storage is about 12 to 20 cents per KWh now. Redflow and others are projecting that storage will be about 3 cents per KWh in 2030, so the average cost, if you store half of what you generate, will be about 5 cents per KWh.

      • Jacob 3 years ago

        2030?

        I bet Red Flow would be surpassed by an American battery firm.

    • john 3 years ago

      Renewables are going to replace the present technology because of pure economics it is that simple.

    • Rikaishi Rikashi 3 years ago

      As mentioned, storage makes the grid upgrades (and maintenance) cheaper. It will be added even if variable renewable generation was not a thing.

      If you are going to bundle the cost of batteries in with renewables then you should also bundle the cost of a thick grid in with centralized generation. This is because centralized generation requires its grid to take the maximum possible electricity load, whereas distributed generation + storage only requires a thin national grid which balances charge levels.

      A fair comparison between solar+storage and coal+copper wires has the former option coming out way ahead, because thick grids are incredibly expensive and inefficient.

  2. Mike Dill 3 years ago

    This report looks great, but completely misses the fact that wind is also getting cheaper, and that the two will cause some competition to happen.

  3. john 3 years ago

    As I see it nothing can compete with zero input energy cost as the cost of installation is falling all the time; wind and solar have a huge advantage in this area and wave has not even been looked at let alone any thermal to any big degree between the 4 there is absolutely no reason to consider any other form of energy build.
    Perhaps a look at this USA information for those in doubt.
    http://www.resource-media.org/energy-trend-tracker/

  4. Jacob 3 years ago

    Giles, it would be easier if you could state the price in kWh rather than MWh.

    • sean 3 years ago

      you have issues dividing by 1000?

      • Jacob 3 years ago

        No but then a lot of voters do not know the difference between kW and kWh.

        We have a standard metric – kWh – use it.

        • JeffJL 3 years ago

          MWh is also standard metric nomenclature.

          So saying I would like prices in kWh as well so I can compare my power bills. Of course that is comparing retail to wholesale.

        • Horst 3 years ago

          It is actually standard to use MWh for the wholesale price. I think it is actually a very useful reminder that you are talking about the wholesale and no the retail price.

          • Jacob 3 years ago

            But then the solar power auctions in USA, KSA, India, Brazil, etc state the price in kWh.

  5. Math Geurts 3 years ago

    In 2014 there was 37 GW PV installed in Germany, which produced 32.8 TWh or 1.4% of Germany’s final energy consumption. Fraunhofer ISE’s Eicke Weber hopes that there will be installed 140 GW PV in Germany (in 2050!). http://www.solarserver.de/solar-magazin/nachrichten/aktuelles/2015/kw35/prof-eicke-r-weber-solarenergie-als-schluesselpfeiler-der-energiewende-begreifen.html

    This means that solar power production around noon on working days in the summer would be double of actual demand but still hardly anything, even around noon, on some winter days, when demand is even higher. The integration of such an amount of PV will not be cheap. However, with today’s efficiency and actual German energy demand it would be just 5.6% of Germany’s yearly final energy demand.

    But who’s cares about Eicke Weber if a guru like Giles Parkinson speaks.

    • Rikaishi Rikashi 3 years ago

      That’s quite the set of horse-blinkers you have on if you are forgetting that batteries will be cheap and plentiful in 2050.

      Grid integration is one of those problems that has never actually been proven to be a problem in the real world. All indications and studies on the subject have shown that it’s not a problem. Even if it were, cheap storage is expected to completely re-shape the structure of national grids in a way which favors distributed solar above other forms of generation.

      The article you linked is promoting an 80% share for renewable generation and doesn’t mention your 5.6% figure. I think Eicke Weber would take great offense at the way you’re lying about his work.

      • Math Geurts 3 years ago

        Could you explain the audience where I lie about Eicke Weber’s work?

        No doubt that Eicke Weber is fully aware of the developments in the field of batteries: without a lot of batteries 150 GW PV would not be possible. The problem is that even150 GW PV deliveres not more than 5,6% of the actual yearly German energy demand.

        The source of the data is table 6.4 of “Auswertungstabellen zur Energiebilanz Deutschland” at http://www.ag-energiebilanzen.de/ and https://www.ise.fraunhofer.de/de/downloads/pdf-files/data-nivc-/stromproduktion-aus-solar-und-windenergie-2014.pdf

        • Tim Buckley 3 years ago

          The link you provide is in German, but it is an excellent reference and shows that solar generated 33TWh of electricity over the 2014 year out of 522TWh, which represents 6.3% of German electricity production. Given Germany is a net exporter of electricity, solar was more as a % of net electricity consumption. So with the 38GW of solar installed last year in Germany, solar was a major contributor to the system, as was hydro, biomass and wind. Increasing solar capacity fourfold to 150GW would see a fourfold increase in solar electricity generation.

    • onesecond 3 years ago

      Final energy consumption includes the unbeliviably wasteful transportation sector with only a ridiculous 20% energy efficiency and the totally ridiculous ineffecent heating sector. Switching to electric cars, heating pumps and passive houses will slash that enourmously. Storage will be available too (batteries, power to gas) as well as wind and biomass. But of course you are right, if we stay this stupid and make a lot of mistakes then it will be no good. Congratulations on your deep insight. Noone should ever do anything, because if he does it in a very moronic way it will be not good.

    • JeffJL 3 years ago

      So glad you decided to compare the PV installation against ‘final energy consumption’. Your choice of comparing Pink Ladies’ to Granny Smiths’ reeks of Denier tactics and cherry picking data.

      Your second paragraph does highlight an issue that will have to be handled if the world is to decarbonise rapidly to have a better than 50% chance of avoiding a 2C rise. That of storage. Still people are working on it. As is pointed out by RR batteries are developing quickly. Germany also has good terrain for pumped hydro storage. (I assume that when you talk about actual demand in the first sentence of the second paragraph you have changed to electricity demand and no longer ‘final energy’. Changing you reference point for comparison; another Denier tactic.)

      Yes it will cost money. But not as much as the cost of dealing with global warming as predicted by the people studying the science.

    • Ian 3 years ago

      Seriously, you’ve set the cat amongst the pigeons with your comment! Solar is not Germany’s big thing ,wind is. They have huge battery banks just across the Baltic in Scandinavia called lakes and hydro. Their biggest problem from what I can gather is wind power is produced mostly in the north and needed mostly in the south, unsightly power lines are needed to transmit the power from where it is produced to where it is consumed. Germans sort of care about the environment but I suspect their energiewende is more about getting rid of nuclear power stations and having energy security, given that most of Europe’s fossil fuel comes from the Russians , or Arabs or even the Americans all of whom like to extract their pound of flesh. Australia’s problem is different, we have so much coal and gas that we cannot even give it away, we have more fully functioning fossil power plants than twice our population could use. We have very little industry to speak of. Our constraints are finding customers for energy. The Mom’s and Dad’s are the major revenue stream for the fossilised generators. With the right political climate we could decarbonise our electricity system in a flash and a blur, all it would take is saying no to fossil power and yes to renewables. The cost is not building renewable power generation plant but turning off existing fossil generation. Just how do you send a Dear John letter to such powerful interests as the networks, saying their services are no longer required.

      • Rockne O'Bannon 3 years ago

        I think the Dear John letter is not very palatable to international environmentalist types, but it comes down to building up renewable at home and selling fossil fuels abroad. Let the market sort it out.

        It is basically the strategy being used by the US, Canada, Saudi Arabia, UAE, and I suspect China (China will be exporting coal rather than burning it in the not too distant future),

        Oz has a comparative advantage in fossil fuels, so exporting them instead of using them makes sense. Keep your sunshine and let Japan have your coal and gas.

  6. George Michaelson 3 years ago

    I stress that I am not in favour of continued coal/CSG generation, but would point out that the owners of rights to extract this stuff, have dug massive capital investment holes in the ground (sorry) and if the world price on them drops because of (in part) load shifting to PV, then their desperation to secure an ROI will be extreme. Bingo! the domestic customer looms.. the price of coal delivered to a consumer willing to take it, especially one who is motivated to take a french metric gigatonne of it on a long contract, will be low. Because there is nobody else. Buyers market.

    From that conclusion the price per MW of coalgen electricity in a regime of Abbott’s construction without mitigation costs, will be less too: the coal will be cheaper delivered to the door, because the buggers will fire-sale price it to get their capital investment back.

    • JeffJL 3 years ago

      First law in sales. If you sell for less than it cost you, you will go broke. There is a floor price to coal (from which companies can make a profit) and with the losses made by giants like Peabody you would have to assume we are quite close to it. The only way these companies will be able to improve their ROI will be with massive government hand outs in either cash or regulations.

      • Rockne O'Bannon 3 years ago

        First law of business. You can’t go broke if you have cash. Never assume that somebody will not sell something below average cost. Variable cost is usually the lower limit. And for companies with a lot of sunk capital, that can be a very low limit indeed. If they need cash, they will sell whatever at whatever price to get the cash.

  7. Math Geurts 3 years ago

    The decline of rooftop solar in Germany is unstoppable. See (bis 10 kW) in the last table: http://www.pv-magazine.de/index.php?id=9&tx_ttnews%5Btt_news%5D=20484&noMobile=1&cHash=81c352661951b1e9172ec59b15a936e4

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