Solar Grid Parity Markets — Comparison Of Solar & Retail Electricity Prices
Originally published on RenewEconomy.
This graph from another report from US investment bank Alliance Bernstein caught our eye. It is a map of the world looking at how solar – on an unsubsidised basis – compares with retail electricity prices in 30 large energy markets.
The green shows the grid parity markets as at the end of 2013. (Apologies about the quality, try clicking on the graph to enlarge). The first number relates to the population and the second is the comparison – where applicable – of the cost of rooftop solar versus retail prices, wholesale prices versus utility scale solar, and solar versus diesel in areas of low electrification.
Australia is a standout, with Bernstein estimating savings of around 46 per cent for solar versus retail prices, thanks to its high electricity costs and its abundant sunshine.
No other developed country comes close on the savings that rooftop solar PV offers households users in Australia. (The US is not depicted at grid parity, although Bernstein notes that states like California, Hawaii and other south-western states clearly clearly are at grid parity, but others in the north and east are not. Interestingly, Europe is considered not at grid parity, which is a claim that may be contested in Germany, considering that payments for solar PV are now well below the retail price).
Bernstein notes that solar is now cheaper than natural gas as a means of generating electricity on the east coast of China. Given that new coal-fired generators are banned in large parts, and are not part of the energy solution anyway, and nuclear and hydro are subject to complex approval processes and long-dated construction programs, the remaining options are gas and solar. “And solar is cheap, and so in a nutshell, that’s why we feel good about solar and in many parts of Asia.”
In the Middle East, Bernstein notes, oil is used to generate electricity and does so at a cost of around 16c/kWh. That’s about twice the cost of solar, which ranges from 5c-8c/kWh in the desert. In India, the comparison is made with operating a diesel generator, given that nearly 400 million do not have access to electricity. “Solar on that footing looks pretty good,” Bernstein says.
It notes a recent visit to Rajasthan in north-west India where unsubsidised solar was being installed in villages with no roads and houses with no power supply. “The alternative to solar in this market is using kerosene lamps and walking to the next village every other day to charge your cell phone,” the Bernstein analysts write.
“So, if you can get together the $50, you can buy a solar panel, together with the battery, cell phone charger and light bulb. Then you go from the 19th to the 21st Century. It’s an easy sell into this market.” And it helps explain why new PM Narendra Modi has vowed to address that energy poverty by using solar in every home by 2019.
“Broadly, where we get to with solar globally is there are plenty of end markets where solar is just cheap, clean, convenient, reliable electricity,” Bernstein concludes.
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Spain illustrates the limitations of this analysis. Bernstein say solar is at grid parity. That is, everyone would be installing unsubsidised solar panels on their roofs – with a level playing field. But the government has imposed a deterrent tax on solar (in the form of a ludicrously high “backup charge”) to stop people like me from doing this. The purpose is to stop us from making the already dire finances of the utilities who made bad bets on fossil fuels even worse.
Policy is never really neutral. So grid parity is only a rough first-cut indicator of the choices consumers, utilities and governments actually face in different markets.
No doubt there is deserved angst about stranded carbon assets. And this isn’t restricted to the ownership of actual carbon reserves, there are many other stakeholders representing different portions of the industrial supply chain. The decline of fossil fuels is going to be traumatic for millions of stakeholders. I suspect the transition will be tough on the economy itself (not that renewables won’t create real value), but the decline of other industries will certainly create disruptions. We may alreday be in the early stages of this, as we are beginning to see downgrades of utility and coal equities.
Expect a lot of desperate rear guard actions. Real progress will depend on people making strategic choices that go beyond narrowly focused personal cost/benefit.
Even if solar is cheaper the upfront costs makes consumers hesitate.
Especially if you don’t have much capital to do the initial investments.
Which is why disruptive growth happens not a parity with the incumbent, but when you are roughly half the cost of the incumbent. At this price difference, it becomes feasible for the customer to finance the change over and still come out money ahead. Solar PV is already there in a number of markets. Most of Australia and the island state of Hawaii are good examples. Simple economics are already driving them to convert to Solar PV.
…and Solar PV, Wind, and Energy Storage are continuing to drop in cost. …other energy sources are not dropping in cost. Many more areas will soon be at a disruptive difference in cost. The increasing market will mean further reduction in prices (the virtuous cycle) and more political sway. A radical change in our energy infrastructure has just begun.
According to PVinsights, http://www.pvinsights.com , solar electricity has reached grid parity in many countries. Lower solar component or system cost helps solar energy affordable.
“Europe is considered not at grid parity, which is a claim that may be
contested in Germany, considering that payments for solar PV are now
well below the retail price).”
I think I read an article recently that mentioned an unsubsidized Solar PV installation in Italy. That implies grid parity or better economics.
“n the Middle East, Bernstein notes, oil is used to generate electricity
and does so at a cost of around 16c/kWh. That’s about twice the cost of
solar, which ranges from 5c-8c/kWh in the desert. In India, the
comparison is made with operating a diesel generator, given that nearly
400 million do not have access to electricity. “Solar on that footing
looks pretty good,” Bernstein says.”
No, 16c/kWh electricity from diesel can only be the cost if you are subsidizing the cost of your oil. The Saudis, for example, subsidize the oil they use to generate their electricity. If you account for revenues they lose from market sale of that same oil, then the cost of their oil generated electricity is MUCH HIGHER. I’ve read in numerous places that the cost of diesel electricity is close to 50c/kWh. This is certainly the case for diesel electricity in rural India. The cost of electricity in Hawaii went up to 33c/kWh-45c/kWh (depending on which island) in September of 2011 because of their high (mostly) use of oil to generate electricity. I assume it has not come down since. The cost of oil is still close to $100/barrel.
The Saudis are now pushing installation of Solar in their country. They’ve determined their population growth will require them to use all of their oil for electricity in 30 years time. They need to use their desert solar resources if they want to have any oil left for export. How’s that for ironic?
Similarly, Solar PV is being installed by one of the coal mining companies in Australia …to produce energy at this remote site for their mining operations. Too funny.