Sorapro - The Solar Monitor
04
APR
2014

Can Solar Costs Compete with Traditional Sources of Energy?

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We are fast approaching the point where solar energy will shift from being an interesting alternative for traditional energy sources to a fully viable competitive option that can outdo coal, natural gas or petroleum in terms of price in addition to its other benefits.

Solar energy has long been hailed as a clean energy source. It is practically infinitely renewable, maintenance costs are negligible after the initial installation, there is none of the pollution associated with traditional power sources like coal and nuclear energy, and excess power can be funneled back into the grid to be stored for later. However, two primary obstacles have long stood in the way of adopting solar power as a primary energy source. The first obstacle is the cost and difficulty of installing solar panels and the second is the cost associated with switching to solar energy for a nation already adapted to other energy sources. It looks like both of those obstacles may be rendered irrelevant soon, because the money saved outweighs those additional costs.

According to a recent study by Eclareon, a European consulting firm focused on renewable energy and energy efficiency, several cities that have tested photovoltaic installations on a large scale have reached ‘PV Grid Parity’, which is the point at which the Levelized (adjusted for installation, location, depreciation, etc) Cost of Electricity (LCOE) becomes equal to the cost of retail electricity, assuming 100% immediate self-consumption of the electricity produced. In other words, this study has proven that given the right circumstance, a building can operate at exactly the same cost on solar power as it could on the primary retail energy source, even after factoring in the costs of installation and maintenance. Considering the many other added benefits of solar power, it allows installers to wholeheartedly promote solar solutions to individuals and businesses.

The Eclareon study was broken into two components- testing on residential systems (3 kilowatts of self-consumption) and testing on commercial systems (30 kilowatts) – and each test component was conducted in fourteen cities in seven different countries. The tests have shown a number of interesting results, vital to future plans to integrate photovoltaic systems in other cities. The first and most important finding was that in both residential and commercial sectors, several countries were able to reach grid parity easily, due to a combination of low installation costs, a low discount rate, and competitive traditional energy costs. This list includes Germany, Italy, and Spain, with Mexico not far behind. Germany in particular was able to generate over twenty-two gigawatts of energy, enough to meet half the nation’s power quota. However, the biggest factor in determining a location’s readiness for self-consumption was the level of government support for the photovoltaic system. In Spain, for instance, despite the ease of reaching grid parity, government regulations prohibiting self-consumption by the energy generator resulted in drastically increased costs, negating any benefits of solar energy. To reap the full benefits of photovoltaic systems, it is vital that governments allow the installation of monitoring systems, assign regulatory agencies to monitor the sales and storage of excess energy, and ensure that other energy sources remain at an internationally competitive price. Countries not ready for these infrastructure changes will not be able to reap the full benefits of solar paneling, and are not likely to offset the costs of installation. However, in the best case scenario, another recent study predicts that solar energy could power a third of the western United States, and the recent successes in Germany and Italy indicate that the time may be right for the United States to follow suit.

We are in exciting times for the solar industry and expect our customers, installers who often target small to medium sized projects, will benefits from the increases in market size and adoption rates in the following years.

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