Solar power needs a more ambitious cost target RSS Feed

Solar power needs a more ambitious cost target

Solar power is increasingly economical, but its value to the grid decreases as its penetration grows, and existing technologies may not remain competitive. We propose a mid-century cost target of US$0.25 perW and encourage the industry to invest in new technologies and deployment models to meet it.

A chasm separates academia and industry in solar photovoltaics (PV). Scientists herald a fundamental technology revolution underway in universities and research laboratories, promising new, commercially viable solar materials within years1–3. In contrast, most industry executives assume that commercially available solar materials— mostly silicon and inorganic thin films — will continue to dominate the market, and they are much more excited about ongoing financing and manufacturing advances that are making solar competitive with fossil fuels.

So far, the industry seems to be right and the academics out of touch with reality, as the cost of solar plummets around the world. In 2011, the US Department of Energy set an ambitious 2020 cost target of US$1.00 per W for large-scale solar — around US$0.06 per kWh — for solar to compete, without subsidies, with natural gas, coal, wind and other technologies4. That target, once aspirational, is now within reach. First Solar, a leading manufacturer of thin-film panels, predicts a fully installed cost for some US systems below US$1.00 per W by 2017, and other prominent developers using silicon panels expect to reach that cost target later in this decade5.

Although solar only accounts for 1% of global electricity generation6, its newfound cost-competitiveness invites remarkable growth projections. Diverse sources, including the International Energy Agency7, the International Renewable Energy Agency8, and market analysts9 predict that solar could generate 20–30% of global electricity by 2050. The evidence is compelling: solar PV is one of the cheapest low-carbon power sources10, it offers the highest technical potential among renewable energy sources, and it could substantially displace fossil fuels and curb climate change by powering nearly a third of global electricity demand.

However, cost-competitiveness for solar is a moving target. As solar’s share of the electricity mix increases, the cost of each new solar project must fall to compete. This ‘value deflation’ effect of solar at higher penetrations is a well-known theoretical concept but is rarely discussed as a matter of practice in the solar industry.

This raises two questions. First, how cheap does solar PV really need to be to reach 30% penetration by 2050? And second, will incremental technological progress suffice to reach that goal, or will fundamentally new technologies be required?

Research on the value deflation effect may vindicate the long-term vision of academics, because an ambitious but appropriate long-term target for large-scale solar PV is US$0.25 per W installed (in 2016 dollars) by 2050. Depending on the level of insolation, financial cost of capital and type of installation, this target for the up-front cost of solar translates to a levelized cost between US$0.01–0.02 per kWh (ref. 11). Such a target is attractive for its resilience to regulatory and political uncertainty over solar’s future compensation, incentives and role in the generation mix. And although solar has a clear path towards competitiveness with existing technology over at least the next decade, this long-term goal should guide proactive investment in advanced materials along with new deployment models for installing solar systems.

A moving target

As solar penetration grows, its value to the electricity system decreases. One way to see this is by observing the wholesale market price of electricity when solar generation is highest. The more solar energy that feeds into the grid, the lower the wholesale price will be during periods of peak solar production, as more supply chases demand.

Read full article at