The future of affordable electricity lies in renewables–particularly rooftop solar: JRC

Solar PV to see continuing price declines

by James Martin II on September 25, 2012

Although it’s becoming common knowledge that the cost of solar photovoltaics (PV) and other renewable energy sources is coming down, what boosts their competitiveness even further is the fact that the price of generation from conventional forms of electricity–fossil fuels and nuclear–are steadily on the rise. This phenomenon is picked up by the European Commission’s Joint Research Centre (JRC), which in a recent report found that only renewable energy sources will continue to undergo price reductions into the future.

The JRC report also notes that solar PV is the “key” to decarbonising the EU economy, thanks to the abundance of sunshine as a resource and its ability to be dispatched throughout the electricity grid. Additionally, unlike conventional fossil fuel sources, monopolisation of power generation from solar PV, whose electricity is produced and used locally, is virtually impossible.

The author of the report, Arnulf Jäger-Waldau, said, “Regardless for what reasons, and how fast the oil price and energy prices increase in the future, photovoltaics and other renewable energies are the only ones to offer a reduction of prices, rather than an increase in the future.”

However, the report also highlights the fact that fossil fuels still receive strong financial incentivisation from governments worldwide, and that this is the main factor underlying the apparent cost-competitiveness of these conventional power generation methods. Such subsidies result in in ‘artificially low’ prices for fossil fuel power, and are counterproductive for nations endeavouring to transition away from these CO2-intensive generators.

Figures from the International Energy Agency (IEA) estimate that USD $409 billion (approx. £250 billion) went to fossil fuel subsidies globally in 2010, as opposed to only $66 billion (approx. £40) for renewable energy. This does not include subsidies and tax breaks going towards supporting end users of electricity. Jäger-Waldau notes that the $409 billion figure would have been enough to install 610 gigawatts (GW) of solar PV at the current price of approximately $3 (£1.40) per watt. For comparison, a typical coal-fired power plant’s capacity is around 2GW.

Nevertheless, investment in renewables remains at an all time high. Of the USD $263 billion was invested in the sector in 2011, only 15% was from government and research organisations. The other 85% of investment capital came from private sources, testament to the industry’s growing economic clout and market credibility. Close to half of the investment–$128 billion–went to solar power, with distributed rooftop solar PV projects seeing the greatest rate of growth.

The trend of rapid expansion of the solar industry can be observed even in the UK, whose solar resource is relatively small but whose rooftop solar industry has grown in leaps and bounds since the introduction of its Solar Feed-in Tariff, which provides strong financial incentives for homes to install systems. Large-scale projects such as solar farms have also proliferated thanks to government support, accompanied by the falling price of solar PV technology.

Although the medium- and long-term future of the industry are bright, the short-term will see a trend towards market consolidation, especially among component manufacturers, according to the report.  (Stabilisation will begin to occur in 2013, according to NPD Solarbuzz.) Jäger-Waldau goes on to say:

“If the new large solar cell companies use their cost advantages to offer lower-priced products, customers will buy more solar systems and it is expected that the PV market will show an accelerated growth rate. However, this development will influence the competitiveness of small and medium companies as well.

“To survive the price pressure of the very competitive commodity mass market, and to compensate the advantage of the big companies made possible by economies of scale that come with large production volumes, they have to specialise in niche markets with high value added in their products. … The other possibility is to offer technologically more advanced and cheaper solar cell concepts.”

Source: PV Magazine

© 2012 Solar Selections Ltd

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