Solar PV To Be One Of Europe’s Cheapest Electricity Sources

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Originally published on EnergyPost.
By Karel Beckman

Solar photovoltaics (PV) will be one of the cheapest sources of electricity generation in Europe by 2030. That is a major conclusion that can be drawn from a report on future cost reductions in solar PV recently published by KIC InnoEnergy.

The report is the final one in a series of four in which KIC InnoEnergy analyses future costs of renewable energy sources. The other three are on onshore and offshore wind and on solar thermal electricity. The analysis, based on a methodology (Delphos) developed by UK-based consultancy BVG Associates in cooperation with KIC InnoEnergy, examines in detail how a range of specific elements of PV installations are impacted by a range of technological innovations.

It concludes that technological innovations will bring levelised costs (LCOE) of solar PV down 22-30% by 2030. Combined with other types of cost reduction, e.g. in grid connection and industrialisation processes, the costs of solar PV can be reduced 37-49% by 2030. This will result in a reduction of levelised costs from €77-80 per MWh today to an average of €43-49/MWh in 2030 for ground-mounted PV in Europe, says the report. Rooftop solar PV will be slightly more expensive.

It appears that solar PV is likely to be cheaper in 2030 than solar thermal electricity and also cheaper than both onshore and offshore wind

Emilien Simonot, Renewable Energy Technology Officer at KIC InnoEnergy and coordinator of the report, written by a group of internationally renowned experts on solar PV, says the result is “very positive. It means solar PV will become one of the lowest-cost sources of electricity generation in Europe.” Rooftop PV, he says, “still has some homework to do to get its cost down.”

80%-90% of the anticipated cost reduction in solar PV can be achieved through seven innovations, notes the report, mainly in the area of cell manufacturing for crystalline silicon and module manufacturing for thin films.

KIC InnoEnergy uses the results of the study in the evaluation of cleantech startups in which it invests, says Simonot. “We always want to know what  impact the startup companies are expected to make. This makes it possible for us to compare their information with market data. This is also useful for the entrepreneurs themselves. For them it’s also difficult to get the full picture.” Investors, analysts and policymakers can also consult the data, which are all published on the KIC InnoEnergy website.

“We still have a good technology base, but no manufacturing industry anymore to transfer the results to. How can we maintain leadership if we have no industry?”

From the series of four reports it appears that solar PV is likely to be cheaper in 2030 than solar thermal electricity and also cheaper than both onshore and offshore wind. KIC InnoEnergy’s analysis of onshore wind shows possible cost savings of just 5.5% over the next 15 years, resulting in LCOE’s ranging from €60/MWh to over €90/Mwh. The costs of offshore wind are likely to be reduced by 27%, leading to LCOE’s of between €90 and €160 per MWh. Solar thermal has the highest anticipated costs – between €130 and over €200 per MWh – despite cost reductions of almost 29%.

Although the prospects of solar PV look good from a cost perspective, Simonot notes that Europe should be concerned about recent declines in investment in the renewable energy sector in Europe, in particular compared to China. “We still have a good technology base and important R&D centres in solar technology, but no manufacturing industry anymore to transfer the results to. How can we maintain leadership if we have no industry?”

Reprinted with permission.

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19 thoughts on “Solar PV To Be One Of Europe’s Cheapest Electricity Sources

  • PV will be lower cost than wind…but where? Production can double in sunny areas, production in most of Germany, Scandinavia is abysmal in winter, and not so good the rest of the year. So double the 40 E mwh. Still not bad, around 8cents kwh perhaps for PV.

    • The point of a continent-sized union is that you turn size and diversity of conditions into a strength, the way the United States once did. Instead Europe’s bankers only saw Spain, Portugal, Greece and Italy as swarthy “others” who needed a good thrashing until they’re working in sweatshops. All along the sunlight falling on those countries could have been solving Northern Europe’s problems with fossil fuels. But that would have meant investing in them, rewarding their people for their lack of the almighty Protestant work ethic.

      • Wow…

    • Who cares. Nobody will remember any 2016 predictions in 2030 😉

    • Whilst I realise the figures given are estimated average costs, I am surprised onshore wind only sees a 5.5% LCOE reduction over about 15 years, as it has seen in excess of that over just the last year! As you also say, this will vary massively across Europe – generally in the north wind will probably continue to be the best option (especially as seasonal generation best matches seasonal demand) whereas in areas closer to the Med solar will be more prevalent.

      • Unless you are expecting a quick uptake of high altitude wind over the next decade like I am.

        Renzi is going to cut PV substities. He is hinting at unconventional, Italian wind technology…

      • In Denmark new solar is about 37Øre/kWh which is roughly $0.057/kWh and the government has just halted the subsidies to protect the thermal power plants.

        I helped a friend install his solar power and excluding what we should have received in pay it was exactly double three years ago. The cost today is for utility scale and includes everything – also profits and financing costs.

    • PV may eventually become cheaper than wind power but wind is a fast moving target.

      Vestas lowered the average selling price per MW by 9.1% from first quarter 2015 to first quarter 2016 and are doing great financially. If they continue that way onto 2021 the average unsubsidized wind PPA in USA will be down from $0.035/kWh in 2014 to $0.018/kWh in 2021.

      9.1% cost drop per annum is by the way much lower than the average annual cost drop between 2008 and 2013 but slightly more than the 6% cost drop between 2013 and 2014.

      The report seems to be quite pessimistic about both solar and wind power.

      • The average Vestas MW capacity sales numbers from third quarter 2013 was €967.742/MW. The realized cost drop to €910.000/MW in first quarter 2015 was 9.4%, which means that almost 9% annual price drop has been achieved. In an interview with the Vestas CFO Marika Fredriksson she declares in translation “The cost development for wind turbines has been surprisingly stable over a longer period”

        She is unwilling to disclose whether Vestas expects changes in the current trend but they have increased their financial performance on every important metrics indicating that the cost of production has been lowered faster than the sales prices => windturbines will continue to become cheaper.

  • “How can we maintain leadership if we have no industry?”
    IP with licensing (like ARM) or offshoring (like Apple).

    Farsighted Western academics like Michael Grätzel and Martin Green have been pursuing partnerships with Chinese universities and manufacturers, presumably with an eye to licensing deals. The leading Chinese companies have been putting more effort into R&D, admittedly with a near-term focus, but they now have the in-house capabilities to hook up with foreigners for longer-term projects if they choose. Tata has been setting up research outposts in the USA. I’m sure there are Chinese examples.

    • Exactly, the “Western” world can continue to be a R&D and IP. Tata is one of the largest Indian companies and one of the major parts of its business is Jaguar Land Rover which leads through design.

    • And Chinese are learning and when they will have both design and production what leverage will west have? And in times of trouble they will protect their market and jobs in opposite to us. And production is a skill, it won’t be very easy to re-learn it. And good feedback between design and production is important. But we will have our papers and we will be able to shout loudly “this is our IP”

      • That’s inevitable anyways. China has the biggest domestic market and they will surpass the US and the EU eventually.
        There will always be industry in the West.

  • In 14 years time it can be 60% more expensive than in Dubai today. Well played lads.

    • Well, Dubai does get three times the sunlight compared to Germany. if they can make up most of that difference then they are moving in the right direction.

  • I would have liked to see a comparison of solar PV to wind (onshore & offshore) to biomass/chp and their respective LCOE’s? It’s not a like for like comparison – intermittent V constant – still an interesting exercise.
    Philip Smith-Lawrence

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