Grid Parity for Solar Energy

Hans De Keulenaer

Fernando Nuno

Is Grid Parity for Solar Photovoltaics Imminent?

WebmeetingMarch 7, 2008

www.leonardo-energy.org

Experience curves for energy technologies

Energy technologies reduce 15-20% in cost for each when cumulative sales double

The cost to make a technology market competitive is the learning investment– Carried by government subsidies and early user’s ‘willingness to

pay’

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Product Life Cycles

Classic Gartner Hype Cycle

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Relative price trend of modules and systems

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Price trend of modules and systems in US$

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Small systems are relatively more expensiveGrid connection less expensive than off-grid

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Annualisation Factors for various interest rates and lifetime

0%

5%

10%

15%

20%

25%

30%

35%

0 5 10 15 20 25 30 35 40 45

Lifetime (years)

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Annual yield per 1 kWp

Output

Location Global horizontal irradiation

Roof-topkWh/kWp

FaçadekWh/kWp

Perth 1,941 kWh/m2/yr 1,587 932

Brussels 946 kWh/m2/yr 788 539

Washington 1,487 kWh/m2/yr 1,249 814

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Does solar electricity need to compete with wholesale or retail electricity prices?

Is solar electricity a comparable commodity to bulk electricity?

Is it justified to waiver the taxes and surcharges for solar electricity?

Does solar electricity make more or less use of the grid?

Does PV electricity lower peak demand from the grid?

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Grid parity

PV’s cost per kWh– The numerator

• Capital cost

– Learning curve– Size of system– Grid connection– Market variation

• Interest rate & lifetime• Component replacement

(inverter)

– The denominator• Annual output• Long-term performance

Grid cost per kWh– Electricity cost

• Level of competition• Generation system• T&D system• Cost of carbon fuel• Other taxes & incentives

– Pricing of externalities• Carbon• Network use

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Example

Target electricity price: 20 c/kWh– 1000 kWh/kWp– 5%; 25 years

(annualisation factor 7%)

PV cost target = 0.20 * 1,000 / 0.07 = 2,857 euro/kWp

With a 20% learning factor: – factor 2 cost reduction requires 0.8^3 or a factor 8

increase in cumulative installed base– factor 4 means a 64-fold increase

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Market considerations : cost evolutionS

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Generation costs have reduced by a factor 2 during the past 10 years

Before 2020 PV generation cost will match peak power generation cost, and this without any subsidy

Currently PV is widely supported by national subsidies (most of EU countries…)

European Technology Platform has

ambitious objectives for 2030 :

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Market considerations : volume evolutionS

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Cumulative capacity increased by 35% during the last years

What about the future? European Photovoltaic Industry Association makes several

scenarios, which lead to a PV contribution to electricity consumption between 1% and 9% by 2030

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Efficiency trends

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PV, and its solar alternatives

Typical feedin tariffs

PV @ 300 €/MWh

CPV

CSP @ 200 €/MWh

Wind @ 80 €/MWh

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Conclusions

‘Grid parity’ presently the exception but not exceptional– Number of installations at grid parity should increase

steadily– EPIA expects parity with peak electricity by 2015 in

Southern Europe

Grid parity may not be a genuine issue Without a step improvement, cost reductions

through learning investment may not suffice