Report: Solar Electricity Cost Likely to Fall 50% in 2009 6 comments
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By Ucilia Wang
The cost of solar electricity is likely to drop by 50 percent in 2009 from the previous year due largely to a big fall in solar panel prices, said New Energy Finance Monday.
The 50 percent drop refers to what's commonly called the "levelized cost of electricity," or the cost of producing the power over the lifetime of a solar power plant (from building to operating power plants). Utilities and banks use these metrics to determine their investments and operational costs for these generation facilities over time.
The levelized cost for solar electricity fell to as much as $160 per megawatt hour in 2009 for the worldwide market, said Jenny Chase, head of solar research at New Energy Finance.
The $160 per megawatt-hour came from installations in sunny spots – such as the deserts in the western United States – that used the cheaper thin-film solar panels, like the ones produced by Tempe, Ariz.-based First Solar. The cost of building solar energy systems using thin films can be as low as $3 per watt, New Energy Finance said.
For projects located in less sunny locations that use the more expensive crystalline silicon solar panels, their levelized cost could more than double, Chase said.
The levelized cost for other types of renewable electricity, such a wind and geothermal, are expected to drop 10 percent in 2009 over 2008.
These levelized cost don't take into account any government subsidies.
"It's incredibly exciting. The price of photovoltaics has plummeted this year, and we are seeing that opening up new markets that wouldn't have made sense before," Chase said. "Governments around the world are going to cut subsidies, but they are still going to see a buoyant demand for solar."
Major solar energy markets are European countries, such as Germany, Spain and increasingly Italy, as well as the U.S. and Japan. China and India recently announced or implemented solar incentive programs, which will help create demand for their domestic manufacturers and enable them to meet any pledge for reduction greenhouse gas emissions.
Without government incentives, solar electricity remains more expensive in general than power from coal and natural gas power plants, however. Government subsidies are meant to help bridge the difference the costs of installing and operating solar power plants and the similar costs for fossil fuel-based power, Chase said.
The levelized cost for electricity from fossil fuel power plants range between $55 and $105 per megawatt hour, depending on whether they include a price for carbon emissions, she added.
The costs of installing and operating solar power plants differs not only in different countries but also within countries such as the U.S., where individual states offer their own incentives and wield the authority over setting electricity prices.
"Recently in the U.S., we've seen a number of rebate programs being reduced or eliminated. These incentive changes often have just as large an impact on the ultimate cost of PV generation as falling module prices," said Shayle Kann, an energy analyst with GTM Research, in an email.
For consumers, how much they pay for solar electricity also varies depending on the amount of government incentives. And that price, of course, also depends on whether they are paying for electricity from their own solar energy systems, or through their utilities who buy solar electricity from power producers. A recent report by the Lawrence Berkeley National Laboratory on the prices paid for installing each solar energy system in the U.S. showed the disparity between system prices for different states. The lab relied primarily on data about small solar energy systems installed at homes or businesses.
Although the prices for solar panels and the levelized costs all have dropped significantly, consumers aren't likely to see the same reductions in how much they pay for solar power.
The significant pricing decline in solar energy equipment over the past year – from silicon to cells to solar panels – has played a big role in the levelized cost reductions. Solar panel manufacturers have reported anywhere from a 30 percent to 50 percent drop in their products' pricing. Supply outstripped demand as the recession dimmed the banks' interest in loaning money to solar power project developers.
The solar panel pricing decline has tapered off, while demand has picked up nicely in the third quarter, particularly in Germany, where generous government subsidies and banks' willingness to invest in solar power projects are making Germany this year's top market.
In fact, a solar energy industry association in Germany told Reuters that the country is likely to install between 2.5 to 3 gigawatts of solar energy systems in 2009, up from a forecasted 2 gigawatts. Market research firm iSuppli also recently revised its forecast for Germany installations to 2.5 gigawatts from 1.53 gigawatts.
The German government has reported that the country saw 1.47 gigawatts of new solar installations from January to September this year.
Many manufacturers who posted a big drop in profits or even losses earlier this year have reported a big surge in sales for the third quarter.
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Without that a crude calculation of levelised costs is deeply misleading.
In the field of solar power, most typically the costs per megawatt of installed power is confounded with actual output, so that you don't allow for it's only producing power around 25% of the time in the case of solar power.
Other frequent problems with the figures are that installation is not costed, and that can be 50% of the cost of a solar installation, or firgures are presented without stating that they include veryn large subsidies, which although they affect the price to the individual do not alter the cost - it is just that someone else has to pay it.
I am not saying that the figures given are false, just that on the basis of levelised costs without any breakdown it is impossible to determine wheether they are accurate or not, or even bear any relationship to the true state of affairs.
On Nov 24 07:22 AM Davewmart wrote:
> The banks work from levelised costs, but not without having the full
> breakdown and the assumptions behind how they are calculated.
> Without that a crude calculation of levelised costs is deeply misleading.
>
> In the field of solar power, most typically the costs per megawatt
> of installed power is confounded with actual output, so that you
> don't allow for it's only producing power around 25% of the time
> in the case of solar power.
> Other frequent problems with the figures are that installation is
> not costed, and that can be 50% of the cost of a solar installation,
> or firgures are presented without stating that they include veryn
> large subsidies, which although they affect the price to the individual
> do not alter the cost - it is just that someone else has to pay it.
>
>
> I am not saying that the figures given are false, just that on the
> basis of levelised costs without any breakdown it is impossible to
> determine wheether they are accurate or not, or even bear any relationship
> to the true state of affairs.
"Without government incentives, solar electricity remains more expensive in general than power from coal and natural gas power plants, however." Is there a good source to actually look at these costs?
I am a fellow Grinch! - I used to work in cost accounting.
Somewhat like bank managers used to be before they discovered how to get Government to cover lousy investments!
ALWAYS look a gift horse in the mouth - and never believe anyone who says that ' the power is really free'
The energy market has so many overt and indirect subsidies that you can't get at a completely objective cost measurement.
The best you can do is rule out some as the costs become obviously daft, or alternatively get real figures for a concrete project - renewables in particular have a habit of, for instance, sticking solar power in 'where the sun don't shine' so to speak - purely due to subsidies,
The whole of Germany, for instance, which gets less sun than almost anywhere in the US, including places at the same latitude, as the cloud cover is higher.
A good rule of thumb is to ignore those projects which project several advances on present technology, and trot out some fantstically low 'levelised cost' to justify them.
For instance, Arizona is obviously much better for sunshine than Germany.
Take a look at projects which aim to use solar power for peak load, which is fairly near to when you get peak sunshine, and the basic solar thermal technology is well understood - you can look at the record of existing plants.
Things ain't all good though, as you have to have turbines to produce the power, which incidentally need cooling - expensive in water in the low-rainfall areas which are best for solar.
Unfortunately, you need to amortise the turbines - you olnly get solar around 25% of the time, so if you just use the turbines then your costs will be massive.
It gets worse, as even at the latitude of the Mohave, you only get around 25% of the sunshine in the winter that you do in the summer, due to shorter days and weaker sunshine.
In practise, you burn natural gas to use the generating equipment efficiently.
Unfortunately the optimum set-up for gas is not the same as for solar thermal, so you don't do so as efficiently as you would burn the gas normally.
On top of that you have to build long power lines in most cases, as you build solar thermal stations where land is cheap as it uses a lot of it.
Japan and Australia have just started making fuel cells for the home, which would use natural gas right where it is needed for electricity and use waste heat to produce hot water.
The total efficiency is perhaps 95%.
That compares to maybe 35% or so for burning the large amounts of natural gas that is needed for the 'solar thermal'plants.
You would probably get as much or more energy this way than building the solar thermal plant, so you might as well not bother mining for the materials and jsut use the gas in the latest plant.
This post has gone on, so I will just mention that coal would not exist in it's present form if it had to deal properly with it's emissions, never mind CO2, oil does not pay for it's wars.
Nuclear power, it's opponents argue, does not pay the full possible cost of insurance against cataastophic accident.
Well, neither do the natural gas refineries, which could cause damage on the scale of a small nuclear explosion and are far more vulnerable.
The bottom line is that no-one would build anything but natural gas plants if there were no subsidies, or coal if they can get away with not paying the cost of emissions.
That is not to say that we should rely totally on gas, but that is the case without intervention, although arguably the environmental damage from new sources of gas is not costed either.
On shore wind and biogas are the nearest contenders in renewables, although wind in particular causes real hassles if it takes up too large a part of the grid, and suffers from the sme problem as solar in that it needs backing up by gas used at non-optimal efficiency.
Nuclear is probably the cheapest resource able to contribute in a really decisive way.
Poor regulation is the main reason for high costs, and the real challenge in America is to get their act together and reduce build costs - they can build exactly the same designs elsewhere far more cheaply, and not just because they have cheap labour.
It should not be imagined that nuclear power would be as cheap as natural gas and coal are at present in the US though.
Anyway, that is the way I see things.
Hopefully robdoc will chime in with his far more expert judgement.
I like using Nukes for power generation and the newest technology is reducing the need to do something with the waste as it is producing way less waste and is capable of concentrating it and re-using it for more power generation instead of having to be stored somewhere. My preference is for renewables though in one or more forms. Oil is better used in things like plastics and other industrial uses - burning it just seems like such a waste. Have a good Thanksgiving - everyone at SA.