Cost of solar to see further decreases throughout EU

by James Martin II on September 22, 2011

The cost of solar power is coming down even more quickly than expected, according to new research by the EU Energy Institute. The fall is part of a global trend towards increasingly affordable solar power, which once had a reputation for being prohibitively expensive. According to the Institute, solar panels are also a ‘good investment’, and should be eligible for mortgages just as homes are.

Solar to start reaching grid price parity by 2020

Northern Europe may take longer, but Southern Europe likely to see grid parity in 2012

In what is likely music to the ears of the solar power industry, the independent EU Energy Institute’s optimistic predictions put the price of solar-generated electricity matching that of electricity from the grid for half the homes in Europe by 2020. The wave in affordability will ripple from the south to north of the continent even as government incentive schemes are scaled back. In fact, the Institute’s predictions do not factor in the financial benefits afforded by the current regime of incentive schemes across the EU, such as highly successful Feed-in Tariffs (FiTs). Solar power is expected be cost-competitive on its own two legs.

The Institute predicts that, for the warmer, sunnier, southern half of Europe, electricity generated by a solar power system will cost around as much as conventional electricity from fossil fuels as early as 2012. European member states in the medium latitudes should see grid parity by 2020, while the less sunny, northern half of the continent–including the UK–would see solar as a naturally cost-effective option in the same decade.  This information has implications for the future of renewable and solar policy mechanisms, whose purpose is accelerate adoption of and price decreases in solar power.

Falling cost of solar driven mainly by government incentives

In the meantime, however, the uptake of solar power is still mainly reliant on the vigorous incentive policies by EU member state governments. The aim of these incentives is to ‘artificially’ lower the price of solar power until the industry is able to thrive without government support. In particular, Germany, Spain, and Italy have implemented attractive solar feed-in tariffs (FiTs) to encourage installation of solar power systems and other renewable energy sources. The UK, in enacting its own FiT legislation, is not behind the curve.

Economies of scale within the solar power industry have been reached thanks to increased demand for solar and corresponding growth in solar system component manufacturing capacity world-wide–most notably in China. Additionally, China’s recent decision to implement a nation-wide feed-in tariff of its own promises to further underpin demand and therefore competition within the industry, forcing prices down even further. Solar is also set to grow significantly in the US and India.

The price per Watt of solar power has dropped drastically in the last half decade, with a particularly dramatic 30% drop in just the last year, thanks to increased production coupled with a drop in orders because of the recession.

Besides price, one of the biggest barriers for the future of solar will be the existing electrical grid infrastructure, which may not be able to accommodate the increase of electricity being fed in by small-scale generators distributed across the grid.

Solar system lifetime longer than expected, and mortgages on solar panels?

Recent research by the Institute, which included subjecting panels to extreme head, cold, and humidity to simulate the ageing process, concluded that most of the solar panels currently installed on buildings will last 30 years +, albeit with gradual reductions in efficiency. Panels are generally assumed to have a lifespan of 20 years. With the knowledge that solar panels will go on producing for three decades or more, the EU Energy Institute also sees good reason for banks to begin offering mortgages or similar financing options on solar power systems.

Written by James Martin

Analyst for Solar Selections

© 2011 Solar Selections Pty Ltd

Resources and links:

BBC.co.uk, “Solar Panel Costs ‘set to fall’”

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