Solar energy is quietly starting to eat the lunch of fossil fuels. Across the world, solar energy prices are now becoming competitive with often cheaper coal and natural gas.
The first locations to reach grid parity are mostly sunny locations closer to the equator. India’s national solar program, according to a Deutsche Bank report, is now able to sell solar produced power for 12 cents per kilowatt — roughly equal to power provided by national coal plants. Deutsche bank also noted that solar developers were producing competitive, unsubsidized projects in southern Italy.
In Spain, CoEnergy, a solar power developer, has produced a project that profitably sells solar energy for 10 Eurocents per kilowatt hour. Conventional energy systems in the same region produce energy for 15-17 cents per kilowatt hour. In this case, CoEnergy outcompetes fossil fuels by 5-7 cents per kilowatt hour without any support via feed in tariffs (FITS).
Solar Power Cheaper Than Coal, Oil
In the US, Hawaii, which relies on costly oil for 80% of its electricity generation reached solar grid parity last year. Residents seeking to save money by installing solar panels, unfortunately, have run into a regulatory backlash imposed by utilities seeking to limit the number of solar installation. Nonetheless, legislators lifted the solar energy cap from 15% of all power generated to 25% and are under pressure to lift the cap still further. Arizona also saw a leap toward grid parity earlier this year. There, First Solar is currently installing a massive 50 MW solar power plant that will sell its energy for 5.8 cents per kilowatt hour undercutting local coal power by 5-8 cents. In total, more than 100 million US power customers are expected to see solar energy reach grid parity over the coming decade.
Even northern, cloudy Germany is pushing the grid parity envelope as it is estimated that solar power will be cheaper than standard power for a majority of German customers by 2014.
These developments, including a surge in solar energy development in China and the UK spurred Deutsche Bank to predict that 30 gigawatts of solar energy will be installed worldwide in 2013 and that installations will continue to grow by 20% year-on-year for at least the next three years. Futhermore, falling solar panel prices, increases in panel efficiency and lower installation costs are predicted to make solar energy less expensive than gas and coal by 2020. In fact, most major manufacturers see individual panel costs falling to 42-52 cents per watt by 2015 with efficiencies ramping higher and installation costs rapidly falling through 2020.
Such reductions will result in far less reliance on subsidy support by solar industry in the coming years and will, likely, make the 500+ billion dollar per year subsidy support received by fossil fuels more and more difficult to justify.