Solar power towards grid parity

Solar is increasingly important to the global generation mix. 5% growth rate in total capacity additions from 2012+. Wind installs assumed flat at 5 year average of 39.5GW. Credit: EIA, GWEC, Deutsche Bank Estimates

Solar power is now widespread thanks, mostly, to governmental subsidies in various forms. These have been essential since the cost of solar power is greater than the one of the grid, the cost of electricity delivered through the grid. This cost is an average of cost from different sources, carbon, gas, oil, nuclear, hydroelectric.

The cost of solar power has decreased over the years thanks to technology evolution, now it is in the range of 0.13/0.23 per kWh, a cost that is lower than the average retail price of electricity but still greater than the production cost.

According to Deutsche Bank in its “2015 solar outlook” by 2017 solar power will reach grid parity (same cost of production as the average cost of electricity provided by the grid). This, again, will be the result of technology evolution both in increased solar panels efficiency and in lower manufacturing cost (whilst the Western world is working on increasing efficiency, India with its frugal innovation is busy on decreasing manufacturing cost).

Even with lower oil cost, the cost of electricity on the grid is not expected to decrease in the coming years (oil account for about 5% as electricity production source), actually some increase is expected. Couple this with an expected decrease of 40% over the next 4 to 5 years in solar panels and you see that we are moving towards a shift in economics towards solar.

This will result in a continuous growth in solar production, without the need for government subsides.

Good news but do not expect that solar will eventually substitute the grid. The sun shines just a few hours per day, mostly at times you are not using electricity and its effectiveness decreases as latitude increases…

Given the variable characteristics of solar power generation ICT will play a significant role in making the most out of it.

Author - Roberto Saracco

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