Solar costs 'to catch up with coal by 2010'

5 April 2007, source edie newsroom

High demand will keep prices up despite low production and installation costs, the study predicts

Solar electricity could reach the cost of electricity from coal in just under three years, but consumers may not see the difference for years to come, according to a new study.

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"The True Cost of Solar Power" suggests that PV companies will see this growth as an excellent opportunity to expand their earnings in the coming years.

The report takes a close look at each level in the PV value added chain, and its predictions suggest that by 2010 solar electricity will be produced for $0.12 per kilowatt-hour (kWh) in Spain, $0.18 in Southern Germany, and $0.13 in California.

It further predicts that industry leaders will even be able to produce solar electricity in Spain for as low as $0.10/kWh, which is equivalent to the delivered cost of electricity from a new coal power plant. These economics could quickly result in a very large market opportunity for solar energy.

Michael Rogol, one of the study's authors said: "Prices for solar electricity in 2004 have become disconnected from costs. Because the demand is much greater than the supply, a reduction in cost will not automatically trickle down to the consumer.

"This scenario will likely continue for several years, with solar prices remaining strong due to very large demand," he said.

Until now, solar electricity has had the reputation of being a very expensive energy source. But this view only takes into account prices for systems and the very high subsidies they receive.

For instance, in 2007, the price of solar electricity in Germany is roughly $0.50/ kWh, compared to residential grid-based electricity prices of under $0.20/kWh. Solar is only economic for installation on rooftops because of the feed-in tariffs for solar electricity of $0.60/kWh.

But when it comes to competitiveness, the decisive factor isn't the system's market price, or the feed-in tariffs, but rather the production and installation costs.

When looking at the cost side of the equation, by 2010 solar electricity will cost less than the residential electricity price for 50 percent of all residential consumers in the OECD - that would be an addressable market of at least 1,500 GW.

The results come from an international study by Photon Consulting, which took cost information from PV companies, added them together and then formed an average. The report's authors say the study's accuracy has been peer reviewed by executives from several large PV companies.

The report only examines costs structures for crystalline cells, with an examination of thin-film technologies to follow at a later time.

Dana Gornitzki