Yesterday, I participated in a "webinar" sponsored by the Vote Solar Initiative, on a new, peer-reviewed study by Bloomberg New Energy Finance (BNEF) entitled, "Re-considering the Economics of Photovoltaic Power." Presenters included BNEF CEO Michael Liebreich and BNEF's Head of Solar Analysis, Jenny Chase. The main conclusion was as follows (bolding added for emphasis):
The PV industry has seen unprecedented declines in module prices since the second half of 2008. Yet, awareness of the current economics of solar power lags among many commentators, policy makers, energy users and even utilities. The reasons are numerous and include: the very rapid pace of PV price reductions, the persistence of out-of-date data in information still being disseminated (occasionally by those with an interest in clouding the discussion), the misconceptions and ambiguity surrounding many of the metrics and concepts commonly used in the PV industry, and ambiguities regarding underlying PV costs due to the numerous policy support measures that have been put in place over the last decade.
On the webinar, Mr. Liebreich added that he's often met with "incredulity" at the low cost of solar power, even though, as he points out, BNEF has the world's most up-to-date, detailed solar price database. This is part of the reason why Liebreich believed it was important to publish a peer-reviewed paper, written by some of the most well-qualified people in the world on this subject. With that, here are a few key points from the paper, as well as from the webinar (by Mr. Liebrich and Ms. Chase):
- "PV‟s competitiveness is changing rapidly," with "large drops in solar module prices hav[ing] helped spur record levels of deployment, which increased 54 percent over the previous year to 28.7 GW in 2011. This is ten times the new build level of 2007."
- "At least some of the confusion over the economics of PV has stemmed from the way PV costs (and prices) are generally analysed and presented." Among the common metrics used are "the price-per-watt (peak) capital cost of PV modules (typically expressed as $1/W), the levelized cost of electricity (LCOE) (typically expressed as $/kWh), and the concept of 'grid parity'."
- Currently, "there is at least 50 GW of cell and module capacity globally, and an estimated 26-35 GW of demand, for 2012. The implications for future PV pricing are potentially significant, as industry participants fail or consolidate."
- "For the first time, in late 2011, factory-gate prices for crystalline-silicon (c-Si) PV modules fell below the $1.00/W mark (Bloomberg, 2012); moving towards the benchmark of $1.00/W installed cost for PV systems, which is often regarded in the PV industry as marking the achievement of grid parity for PV."
- "Some have argued that prices are currently below sustainable levels and might even have to rise slightly as the industry consolidates and seeks to return to profitability... however technological advancements, process improvements, and changes in the structure of the industry suggest that further price reductions are likely to occur in coming years."
- "Contrary to the view that the arrival of grid parity is still decades away, numerous studies have concluded that solar PV grid parity has already been achieved in a number of countries/regions...countries with higher electricity prices, such as Germany, Denmark, Italy, Spain and parts of Australia have already reached socket parity, defined here as the point where a household can make 5% or more return on investment in a PV system just by using the energy generated to replace household energy consumption, while countries like Japan, France, Brazil or Turkey are expected to reach it by 2015."
- "Grid parity is now largely an outdated concept...Since it does not take into account the value of solar PV to the broader electrical industry, and is often used to compare a retail technology against a wholesale price, it implicitly provides a tool for proponents of other technologies to use against PV."
- A lot more solar companies are likely to go bankrupt - and/or consolidate, merge, work hard to reduce their costs - in the next few years, as there currently are far more companies out there than can be supported by the industry.
- Current, low natural gas prices (now heading back towards $3 per thousand cubic feet) are not sustainable, as break-even on shale gas is around $5 per thousand cubic feet. BNEF sees $5-$6 per thousand cubic feet gas in a few years, which will reduce competitive pressure against solar power.
- Germany is an interesting situation with regard to solar power; at a very large scale, they’re going to teach the world what to do when you have solar capacity that could more than meet daytime demand.
The bottom line is that these are exciting times in the solar industry, as the sector is developing rapidly, is demonstrating tremendous dynamism, and is rapidly moving towards competitiveness with fossil fuels - no matter how one measures it.