Is Solar Competitive?

on Jun 4, 2012

Recently, BusinessGreen reported the publishing of a new report by Bloomberg New Energy Finance (BNEF) discussing the competitiveness of solar photovoltaic power. In the report in question, BNEF asserts that common perceptions regarding the solar PV power competitiveness “are misleading and out-of-date”.

The BNEF paper, entitled “Reconsidering the Economics of Photovoltaic Power”, notes that in terms of competitiveness, solar PV power is much closer to conventional electricity generation than realised by many policy makers. According to the BNEF research paper, the average prices of PV modules have fallen by nearly 75 percent over the past three years. In addition, as reported by BusinessGreen, the paper indicates that new PV installations rose 54 percent in 2011, reaching 28.7GW of capacity, 10 times the new built level of 2007. As a result, solar power is now competitive with daytime retail power prices in a number of countries.

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According to the research, countries with higher prices of electricity, such as Denmark, Germany, Italy and Spain as well as parts of Australia, have already reached “socket parity”, which in the BNEF paper is defined as the point where a household can make 5 percent or more return on investment in a PV solar power system simply by using the energy generated to replace household energy consumption. The BNEF paper also quotes data from the International Renewable Energy Agency (IRENA) indicating that grid-connected PV in Africa has already become competitive with diesel-generated power. Similarly to Africa, in India PV-produced power is already competitive with power produced through burning diesel. The BNEF analysts also note that the falling PV costs mean that solar power has already become a viable electricity generation option in the Persian Gulf Region as well.!m[](/uploads/story/37/thumbs/sun_inline.png)

Among the paper’s main conclusions is that the observed shift in the prices of solar technologies should be taken into consideration by policy and investment decision makers. This is particularly important in terms of the design of different supporting policies and policy mechanisms such as feed-in tariffs. The BNEF paper notes that if PV power is considered to be too costly, governments will be less likely to take on the related financial burden. The other main research conclusion is that the recent reductions in PV prices are likely to be sustainable, with the price drop being mostly a reflection of reductions in manufacturing costs.

BusinessGreen points out that the conclusions presented in the BNEF paper are in line with those of a similar report of the consultancy company McKinsey, predicting that within the next few years solar power technologies would become cost competitive with conventional power on account of improvements in manufacturing processes.
In addition, the BNEF paper conclusions to a certain extent correspond to the projections of a recently published report of the European Photovoltaic Industry Association (EPIA). According to EPIA’s “Global Market Outlook for Photovoltaics Until 2016”, the global PV market will continue to grow in a more sustainable manner, driven by the competitiveness of PV technologies, rather than by financial support schemes.


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