Solar energy emerging as cheapest power source, report finds
Solar is set to become the cheapest form of electricity production in many regions of the world following massive cost reductions.
That’s according to a new study published by Agora Energiewende, a leading German think-tank dedicated to the German energy transition. The report – Current and Future Cost of Photovoltaics – projects the costs of solar photovoltaic on a global scale from now to the year 2050. (Scroll down for full report).
According to the report, the cost of producing solar power in the UK will have declined to between 4.2 and 10.3p/kWh by 2025, and by 2050 to as low as 2.0 to 7.4p/kWh.
However, these reductions are highly reliant on financial and regulatory frameworks due to the high capital intensity of photovoltaic installations. Poor regulation could affect interest rates and raise the cost of solar plants by up to 50%, the report concludes.
It also says that most scenarios fundamentally underestimate the role of solar power in future energy systems by only foreseeing a small contribution from solar power. Agora says that a fundamental review of solar’s future role is necessary.
“The study shows that solar energy has become cheaper much more quickly than most experts had predicted and will continue to do so,” Agora Energiewende director Dr. Patrick Graichen said. “Governments that want to deliver lower cost energy for consumers should therefore reconsider their plans. Until now, most of them only anticipate a small share of solar power in the mix.
“In view of the extremely favourable costs, solar power will on the contrary play a prominent role. Favourable financing conditions and stable legal frameworks are vital conditions for cheap, clean solar electricity. It is up to policy makers to create and maintain these conditions.” Graichen added.
Commenting on the report, the Solar Trade Association‘s head of external affairs Leonie Greene told edie: “This report has a very timely lesson for UK policymakers; stable support makes for lower costs of finance, which makes for cheaper solar. Yet currently the solar industry is facing damaging uncertainty and potentially market contraction under both Contracts for Difference (CfD) and under the Feed-In Tariffs for larger roofs.”
“The next Government needs to act quickly to get the UK solar industry back on track to deliver its extraordinary cost reduction potential for the benefit of consumers. Solar is the most popular energy generation technology and potentially the first renewable to compete directly with fossil fuels without subsidy. It is therefore difficult to understand why solar is being discriminated against in the UK policy framework – after all, we are not asking for special treatment.” The STA added.
The Government will announce the winners of CfD contracts on Thursday this week following the first round of auctions held earlier this year. The STA wants to see changes to the allocation process ahead of the next auction round in October 2015, claiming the scheme is discriminating against the solar industry. The STA fears competing for CfDs could seriously hamper the development of the solar industry in the UK and prevent solar reaching competitiveness with fossil fuel generation as early as it could.
Large-scale solar is prevented from applying for a share of the Renewables Obligation fund – £3.1bn in 2014/15 – two years ahead of other technologies, and despite being established for just two years it must compete with technologies that have been supported for a decade.
Decc figures released in January show that UK solar generation almost doubled over the past year, with approximately 5GW of capacity installed by the end of 2014, compared to 2.8GW at the end of 2013.
Current and Future Cost of Photovoltaics
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