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€0.02 Solar Is Quite Possible

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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