Solar PV – it’s cheaper than you think

POSTED May 17, 2012

Perhaps it’s time we should all stop kidding ourselves. So much of the political and economic debate around clean energy is framed through the idea that solar, in particular, is just too expensive, and will be for decades. But for the consumers who increasingly exercise the power of choice over the electricity they consume, this is just plain wrong.

The energy debate in Australia and overseas is framed around the wholesale cost of electricity – the price difference between cheap coal and new technologies such as solar, wind and geothermal. And even though coal and gas are unlikely to remain cheaper than solar or wind at utility scale in most markets beyond the end of the current decade, the point of choice is already made at the consumer level, where no one cares if it only costs Loy Yang A $2/MWh to produce electricity, they only worry about what’s on their bills. And at that level, solar on their rooftop is clearly a cheaper option.

This is one of the fundamental points made by a major new research paper released overnight by Bloomberg New Energy Finance. It said that solar PV is much closer to price competitiveness with fossil fuel-generated electricity than many decision makers and investors realise, and policies have yet to catch up with the dramatic improvements in the economics of solar power, which has seen its cost drop 75 per cent in the last four years, and 45 per cent in the last 12 months alone.

“The perception persists that PV is prohibitively expensive, and still has not reached “competitiveness,” it says. But it notes that the wrong metrics are used to compare the costs of different energy sources. The idea of the term “grid parity” is confusing and used to compare wholesale prices with retail, misleading and confusing not just consumers, but decision makers too, with major implications on policies. More accurate to reflect the market dynamics, at least in the retail market, would be a term such as socket parity.

“The PV industry has seen unprecedented declines in module prices since the second half of 2008, the paper notes. “Yet, awareness of the current economics of solar power lags among many commentators, policy makers, energy users and even utilities.” It cites a bunch of reasons, including the very rapid pace of PV price reductions, the persistence of out-of-date data in information still being disseminated (occasionally by those with an interest in clouding the discussion), and the misconceptions and ambiguity surrounding many of the metrics and concepts commonly used in the PV industry.

But before looking at that report in more detail, here are some graphs presented by one of the authors, Michael Liebreich, the CEO of BNEF, at the World Renewable Energy Forum in Denver overnight. Liebrich presented about a dozen graphs tacking the price parity of solar PV in key markets between 2010 and 2025. But here are the key ones – 2012, 2015, and 2025.

These graphs show the levellised cost of solar PV in the retail market, compared with the retail price of electricity, and ranks countries according to the amount of solar irradiation (right axis), size of PV market (circles). All countries above the blue line are at or better than price parity.

(The figures are based on 6 per cent cost of capital, 0.7 per cent a year module degradation, 1 per cent capex as O&M annually. $3.01/W capex assumed for 2012, $2.34 in 2015 $1.80/W in 2020 and $1.53/W in 2025.).

In 2010, only Hawaii was above the blue line, but in 2012, this is the situation, according to Liebriech.

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Giles Parkinson (, 17 May 2012)