€0.02 Solar Is Quite Possible

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Originally published on Renewables International.
By Craig Morris

A new analysis by Germany’s Photon Magazine finds that solar might be the cheapest source of electricity already today – not in sunny regions, but in cloudy Germany.

Recently, I wrote about the astonishingly low prices that photovoltaics has posted in countries from the United Arab Emirates to Mexico. From my standpoint, anything below five cents looks suspicious and requires explaining. Local conditions (note: not subsidies) tipped the scales. These conditions – practically free land, (nearly) zero-interest loans, and practically nonexistent business taxes – are not applicable everywhere, so the prices simply do not apply universally.

Which makes Photon’s analysis all the more interesting. In this month’s issue (available only in German), the experts investigate a different assumption: what if solar panels didn’t last for 20 years (the duration of German feed-in tariffs), but much longer? The longer they last, the less expensive power generation becomes. After all, maintenance costs are just 1% of the upfront price annually.

The authors point out that the recent price in Abu Dhabi is equivalent to 2.6 cents in euros. They then put up the following calculation for German conditions, assuming a rather low annual production of 800 kilowatt-hours per year (in most locations, 1,000 can be reached, and 900 is easily the average for the country as a whole):

  • 20 years: 5.25 cents
  • 30 years: 3.79 cents
  • 40 years: 3.06 cents
  • 50 years: 2.63 cents
  • 60 years: 2.33 cents

One reason to assume a much lower annual production level is degradation; solar panels sold today generally have a performance guarantee of 85 percent of the original rated output after 25 years. Two things are salient (and possibly suspicious) about the calculation:

  • 5.25 cents is extremely low for German conditions today. The recent auctions produced a price of 7.4 cents, and the companies still have two years to complete those rates.
  • We simply do not know how long the solar panels currently built will last. 60 years seems fanciful, and numerous panels will give up the ghost within the warranty period. However, it is likely that many of them will last 30 years or longer. And even those extra 10 years bring down the cost by around a third.

I wish I could say more about the assumption of 5.25 cents, but to my mind the article does not properly explain how it was reached. The main explanation comes here (my translation):

“A large solar array (20 megawatts or more) facing East/West on affordable property with a grid connection in the vicinity costs around 700 euros per kilowatt. This is not an overly optimistic assumption; industry insiders know that even lower costs have been reached in the latest international utility-scale projects.”

In other words, the article basically calls for utility-scale solar to return to Germany, where arrays larger than 10 megawatts have practically been banned in the past few years (theoretically, you can build them, but they are not eligible for feed-in tariffs).

As for longevity, the article points out that arrays built 40 years ago are still in operation, and the first manufacturers have begun offering 30-year performance guarantees.

The finding is a bit tendentious, but the calculation is nonetheless worth investigating. Germany still calculates the cost of solar based on a 20-year time frame, which is clearly outdated. On the other hand, there are reasons (a lack of space being one) why utility-scale arrays are avoided in Germany. Quite possibly, Germany is already building five-cent solar – and other countries are building solar for less than two cents. We simply won’t know for another 30 years.

Reprinted with permission.

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65 thoughts on “€0.02 Solar Is Quite Possible

  • I find 40 year lifespan credible. Installation prices of E700 MW is about $1 watt USD…can be done today. So, all in all, 5cents kwh doesn’t strike me as too much of a stretch in Germany even at 900kwh per year generation per KW.

    • Newer products are showing degradation rates that lead to 80 to 120 year lifespans, in cooler climes.

      • Rightwinger Stephen Moore claimed a couple of years ago that solar panels only last 10 years. The truth rarely gets through the MSM.

    • 700 EUR/kWp is like $0.8 Wp at this moment.

      • Right. Currency has changed and would now be about 80cents Watt US. Still in the 5cent kwh ballpark at 900 kwh/year production. But, my gosh, that is cheap enough.

      • Most European large scale developers will be building at under €750/kW with post MIP tier 1 panel come the end of this year with an average expectation of cost reduction next year in the region of €30-40kW

    • I think the inverter is not yet stable for that period of time.

        • Let us hope you are right. I work with the guy who designed and built inverters for Sunsil (now gone extinct) and he has explained to me that the problem will persist until the technology switch away from silicon and into silicon carbide or GAN because they are capable of much faster switching.

          SMA that is 20% Danish owned consider themselves market leaders and they most certainly cannot go beyond 10 years guarantee.

          • SMA has an interesting warranty: you can buy it at the last minute. So if after 9 years inverters are down from their current price of around $2000 to 40% of that you can decide at that point whether to save the money for a new one or extend.
            “Extended warranties can be purchased any time during the SMA America factory warranty period.” [ original warranty is for 10 years ]
            But someone else found these reasons against an extended warranty:

            1. it’s additional money locked up that could go into something else

            2. it pushes back my break-even point

            3. technology gets better and cheaper over time

            4. company may not be around to honor the extension

            5. I may want to expand my system 10 or 15 years from now, at which point I’d swap out the failing inverter with a larger capacity one.

          • I am convinced the inverter issue will be resolved whether or not they achieve similar lifetime expectancy as the module.

            To those looking to extend the lifetime of your inverters you should consider cooling the inverter with a fan.

          • We need an electronics knowledgeable person to step in here. What is it in inverters that is the most likely to fail in less than 20, 30 years? Could that component not be upsized or made easily replaceable?

          • The capacitors. That is why faster switching is important and thus the transition away from silicon to SIC or GAN. Faster switching means smaller capacitors and smaller capacitors means that the more expensive types with higher stability becomes affordable. Also the electron mobility is better so the energy losses are lower. US military has poured a lot of money into the research because especially GAN is more resistant to EMP bombs.

            GE is now about to launch http://www.geglobalresearch.com/innovation/silicon-carbide-small-device-broad-impact

          • Silicon carbide is relatively straightforward with *very* cheap raw materials. I’m surprised it’s taking this long to switch to it.

          • Eivind Johansen the creative genius behind Giga that Intel bought to go beyond gigabit processors became an Intel Fellow and when he was there he researched SIC and GAN on Sapphire to up the speed an make EMP resilient computers especially for military purposes. He help me a lot as mentor and we also were in advanced state of discussion about a fusion with one of his companies. From what he has told me and what another of his key engineers told me the switch was not that straight forward 8-10 years ago. I suppose that it easier now due to the experience base created through the development within solar and LED research.

          • “SolarEdge includes a 25 year warranty for power optimizers and a
            standard 12 year warranty for inverters, extendable to 20 or 25 years.” Straight from the Solaredge website.

          • My conservatory came with a 10 year guarantee, guess what happened when it sprung a leak after 18 months?

          • You can make an inverter to last long. The main parts that break down are the caps, transformer winding insulation, and the switching transistors. Generally sizing larger parts compared to the peak stresses and running the design cooler will make the design much more reliable. It usually isn’t econimal to make any design last much more than a dozen years due to the “discount” rate

          • Good thinking. Using computer fans, a small dedicated solar panel and a step down converter should do the trick – provided you can protect it from the elements.

      • Apparently it’s not easy to build long life inverters. Mine (for a 3.1k system) died after 8 years and was replaced under warranty. From what I hear that’s not unusual.
        But: Google recently announced winners in their design competition for much smaller inverters. At the outset I thought they were asking the impossible, given that current inverters require lots of spooled copper but the winners were able to meet the design goals without that. So maybe top notch engineering can overcome the inverter issue.

        • I live in an area where there are a lot of off the grid people. I haven’t heard of anyone having inverter problems. My inverter is now about 15 years old and has had zero problems.

          • My two inverters are 16 years old and have performed flawlessly. I expect another 4 years out of them. They are Schneider brand.

      • There are inverter warranties for 25 years. Micro inverters have had panel lifetime warranties for the last several years. 20 years is common for string inverters. But the key is replacement cost at the end of 20 years. The price is falling and falling. So, the old formula of replacement at the same cost at 15 years is no longer valid.

  • http://cleantechnica.com/2016/05/02/lowest-solar-price-dubai-800-mw-solar-project/ – May 2016
    “Dubai Gets Record-Low Bid Of 2.99¢/kWh For 800 MW Solar PV Project”

    2.99c USD x 0.90 exchange = 2.69c EURO Exchange rate is probably a little different since you did the calcs. Just checking.

    Germany has solar resource similar to Western Washington State in USA, the worst of the continguous lower 48 States. Southern California (Mohave Desert area) has solar resource closer to Abu Dhabi. Panels, racks, single axis racks, and even soft costs will continue to drop in cost. Clearly we’re headed to Utility Scale solar at less than 4c/kWh in that area …and then in many others across the Southern USA, including the small country of Texas.

    Last year I was still thinking 2c/kWh Solar PV was a stretch. I wasn’t sure it could be done. Now I’m thinking it might be possible. That’s a disruptively low cost of electricity and Abu Dhabi is already seeing 3c/kWh. Even 3c/kWh wins against all but Wind.

    • “Last year I was still thinking 2c/kWh Solar PV was a stretch. I wasn’t sure it could be done. Now I’m thinking it might be possible. That’s a disruptively low cost of electricity and Dubai is already seeing 3c/kWh. Even 3c/kWh wins against all but Wind.”

      • And yet wind and solar are projected to make up only 40% of the production mix in 10 years. Seems like it would be more than that.

        • “And yet wind and solar are projected to make up only 40% of the production mix in 10 years.”

          Projected by whom?

          • One of the knowledgeable commentators on this site mentioned it, but I can’t recall who it was, and I can’t find the post.

          • If the originator of the 40% figure was the IEA or EIA, consider the source. Both agencies are notorious for underestimating the use of renewable energy.

          • It took only 8 years to put a man on the moon beginning with Pres. Kennedy’s challenge.

            We could have 80% renewable energy in 10 years if there was political leadership to accomplish it.

  • Craig is too conservative in writing “anything below five cents looks suspicious”. Agreed that the Dubai 3c/kwh auction is a special case, with delivery stretching to 2019, and a winner out of nowhere. But the large Mexican auction attracted a low bid of 3.6 $cents from the large and reputable foreign developer ENEL, and the average was 4.0$c. Several similarly well-known developers bid under 4$c in Dubai. It looks very much as if banks and other institutional investors have decided that okay pv projects (big, experienced developers, credible offtaker, nearby grid connections) are bankable and low-risk at low interest rates. I’d take a bet that German solar will reach 5.25 euro cents before 2020, provided the auction volumes are increased somewhat from the current mingy levels and the EU’s “SolarWorld” minimum price is lowered to parallel world prices.

    2c solar will certainly arrive. The question is when. Where will be stable and sunny countries like India and Mexico. In a sense it doesn’t matter much. 4c solar is already enough to kill coal and nuclear and reduce gas to backup. It is now competitive with wind in many places; an interesting fight is shaping up.

    • So then why isn’t the lie of “energy poverty caused by evil environmentalists” going away? Why is it that the only time we hear about the extremely poor in energy media is to be told about them in the abstract, while in actual fact some of the countries they live in are moving faster on wind and solar than on natural gas?
      Any time you hear that lie, type out a link to this site. The announcements of new energy projects around the world are powerful evidence that our energy beliefs are obsolete.

      • The lie isn’t going away because the right wing media and their politicians keep repeating it, and their audience still believes it. Facts mean nothing to these people. Trump said he “knows all about solar,” and it’s too expensive.

        • All the stupid talk is annoying, but the ITC, and PTC getting renewed is much more important. It gives wind and solar a couple more years to become even more efficient, and make even more friends, while while a few more fossil interests go bankrupt, particularly coal. Gas generation is still rising, so they will take more time. And in the mean time,make sure to let people know that saving the planet is cheaper than the alternative.

          • The key cost drivers in solar power now aren’t the panels.

            Inverter and “balance of systems” costs are high and need to come down, but that’s already happening.

            The main cost driver in the US is marketing expenses and profit margins by the installers. Which is ridiculous. We need an organized program to bring those numbers down, until solar is cheaper than all fossil fuels. (After it gets there, installers can collect their remaining profit margins and I’m find with that. But jacking profit margins and marketing up so high that solar is more expensive than fossil is *not OK*.)

          • How about bringing back the WPA and, in addition to building roads and bridges, put people to work installing solar panels?

          • Permit and inspection fees too which vary dramatically.

          • If worse comes to worse, wind is already cheaper than fossil fuels and nuclear, isn’t it, with solar close behind?

    • 3.7 cents on a 25 year PPA for Palo Alto. Pulling out the subsidy would mean that it’s under 5c/kWh. 2.3c/kWh over 10 years means about 0.9c/kWh for a 25 year PPA. (If they used the PTC rather than ITC.)


      I’m really interested to see where wind prices are going to be for 2015 considering what we’ve been hearing about much higher capacity factors.

      • 2015 is past and gone;-)

    • Wind unsubsidized wind PPA’s will probably go under 2 US cent per kWh around 2021.

      Vestas considers 9% annual cost drop to be a remarkable steady trend and besides that there is a constant quality improvement and scaling that combined increase the capacity factor, lower OPEX and extend design life.

      If Vestas actually manage 9% annual cost drop (lower than in recent years) then wind PPA in US could be 1,8 US cent per kWh by 2021 and if the cost drop comes with the general product improvement it could be still lower.

      Wind will probably still have a market going forward due to higher capacity factor than solar and less seasonal and diurnal output variation.

      I hope and fully expect that solar will keep pushing wind power.

      • If Lockheed will have a commercial success with LHM-1 – logistic part of onshore wind will be reduced in order of magnitude.

      • Wind should continue to be the cheapest, but deployment will be limited by difficulty securing sites (NIMBYs). Solar will accelerate past wind because of much greater ease securing sites.

        • Wind will continue to have the advantage of producing more hours of the day, lowering storage needs.

          And solar will continue to have the advantage of producing during some of the highest demand hours of the day.

          I can see a mix of the two. With proportions differing from area to area. Lots more wind in the PNW. Lots more solar in the SW.

          (And probably lots of sharing over transmission lines.)

    • “5.25 euro cents before 2020”

      Our Lomborgian government suspended a FIT for solar that gives DKK0,6 per kWh in the first 10 years and DKK0,4 in the next 10 years and then market price. That is €0.0673/kWh.

      The reason why was a huge number of applicants indicating that terms was way to favorable.

      Your target for 2020 requires 22% cost drop, which I am 100% confident will happen before 2020.

    • Pity many of the referees are still lodged firmly in the ‘blue corner’

  • In 2001 Germany had to start with 55 EUcents/kWh to get solar going and the utilities laughed a lot. 🙂

  • Typical silicon solar panels from the 1970s are still working. Accordingly, 50 year lifespans seem quite credible *for silicon* (not for thin-films or other chemistries). Actually, I’d expect longer lifespans, since so few of the silicon panels have ever failed.

    • A couple of years ago I saw Stephen Moore, columnist and alleged economist, state that solar panels would only last 10 years which exceeded their payout period. As usual, the host didn’t challenge him.

  • well if you were living in the UAE like i do, you would have extrem high doubts that anything can last that long in the local conditions…extreme heat, humidity, sand, salt in the air…leave a piece of metal or plastic out in the summer heat and see the result…

    • NREL states that panels manufactured after year 2000 should lose no more than 0.4% of output per year in those conditions.

      A 20 year panel should be producing at least 92% of what it produced when new.

      • Even more, 30-year guarantees for under extreme conditions are already available.

      • Would some kind of cooling device be necessary for the panels in places where the temperature exceeds 110 degrees?

        • We’re building solar farms in pretty hot places now. The heat is going to lower output a bit but that’s probably offset by the extra hours of sunshine.

          My guess is that it would be a lot cheaper to just add some more panels to make up for the heat loss than to install a cooling system. Cooling panels would probably involve using a ground source heat pump and those systems aren’t cheap.

    • Maybe you should try modern technology like glas-glas panels combined with sealed inverters?

      The impact of lousy building standards and inexperienced workforces can be countered with equipment from the shelf.

  • Degradation is not so much of an issue, You keep adding panels – at successively lower prices – to make up for the output loss, now down to 0.3% per annum in any case.

  • I have no doubt about solar being cheap, which is in tandem with silicon chips.

    Unfortunately, batteries does not corespondently go down in price, and to me, that is key. After all, solar panels unfortunately don’t work at night

    • Battery prices are going down very rapidly. A few years ago EV batteries were about $1,000 per kWh. They are now under $200/kWh and should be down to $100 before 2020.

    • Why not?

      It would require a massive repurposing of US industry. It will not happen. An effort greater than the US industrial effort during World War Two.

      Offering very attractive stuff that you can’t actually deliver is just political clickbait.

      It’s like Trump claiming that he would build a wall along our boarder with Mexico and make Mexico pay for it. And like the stuff at least one other candidate is offering. If you don’t have a workable plan then you’re talking nonsense.

      • It took 8 years to put a man on the moon after Pres. Kennedy made the challenge in his speech before Congress in 1961, starting from scratch.

        It took about 6 years to develop the atom bomb.

        We can’t manufacture and install enough solar panels and wind turbines in 14 years to power the country? If our lives depended on it?

        • We probably could. But too few of us feel that necessary.

          It’s not like the climate bombed Pearl Harbor…..

          • The consequences of climate change and filthy air are much, much worse than Pearl Harbor, by orders of magnitude.

          • You know that. I know that. A lot of people don’t know that.

            And among the ones who do know the problem is adequately remote enough to keep people from getting highly concerned.

            I suspect it has to do with human evolution. It’s highly important to deal with short term problems. Get enough to eat, don’t piss off the tiger. Do that and you live a few more days and have a better chance of reproducing. How you’re going to protect yourself from the tiger 20 years from now is not as important and today’s tiger.

            I’ve been watching renewable energy and the general concern over fossil fuel use for several years. I started at the point at which wind and solar were more expensive than nuclear. I.e., unaffordable. I’ve been watching the cost of wind and solar dropping more and more to the point at which nuclear is unaffordable.

            It feels to me that we’re on track to almost totally eliminate fossil fuel use for electricity generation and personal transportation by 2050. I actually suspect we’re on track to get there five to ten years sooner. I also suspect costs will continue to decrease and the desire to get off fossil fuels will increase and we’ll be almost off FF by 2035 or so.

            I’m not optimistic about getting off in less than 20 years. I’d be happy to see things change, for people to get concerned enough to push the sort of legislation/action we’d need (in all countries) to meet that goal but I don’t see anything at this point in time that would make that happen.

            We’re apparently short years away from the first summer meltout of the Arctic sea ice (it’s melting fast this year) and we’re starting to get hit by extreme rainfalls (they’re moving the art at the Louvre upstairs right now because the Seine is flooding). Perhaps some more years of climate in our faces might speed things up.

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