Solar power is about to breakthrough to economic parity and beyond, according to new research, and will fundamentally change the economics of power generation; not to mention the power companies. By 2020, 18% of Germany’s, Spain’s and Italy’s power could come from unsubsidised solar. But despite this optimism, the industry is under pressure as never before. Who will win, remains to be seen.
What is changing?
Installed global capacity reached 70 GW in 2011, and continued to rise in 2012. Germany still dominates, but Italy, Japan, Spain and the USA are all investing. Some industry forecasters estimate that by 2020 installed capacity could reach 297 GW, with revenues to match. Environmentalists have been promoting the promise of solar power for years: now it is more sober bank energy economists and engineers taking the lead.
A recent UBS report has calculated that in southern Germany solar power is about to pass price parity with other forms of generation. By 2014, it predicts that, with the advent of ever more effective storage, that price differential will grow – in favour of PV solar. They recommend investment in unsubsidised residential solar power in Germany, Spain and Italy, which by 2020 could provide 9% of total power in those three countries.
In Australia, meanwhile, similar optimism. Here researchers have calculated that Australian homes provide over 400 sq km of roof space suitable for solar power. And, that if that were exploited, if could provide 134% of all residential power needs; 38% of the nation’s total needs.
And, to make it a trio, engineers have calculated that New York State could be fossil free by 2050, relying entirely on renewables. Solar would comprise 38% of that total. A similar plan is underway for California – and they are looking to conduct similar research for the other 50 states.
But despite this rosy outlook, companies are under pressure from oversupply and falling prices, but also pressures from natural gas and fracking in the USA changing demand. Suntech, the largest Chinese solar manufacturer, was declared bankrupt in March; and in the same month, Bosch announced it was closing its solar business. More consolidation is likely.
Why is this important?
Price parity in solar power could herald a revolution, bringing power to the people, making customers competitors to power companies; creating a cleaner, greener more reliable supply system. Between 21% and 29% of households, in Spain and Germany respectively, could be independent or even supplying the grid; offices and manufacturers could also significantly reduce their reliance on the utilities.
The advent of effective storage is a critical part of the equation, and is improving fast. As storage improves, so overall demand and especially peak demand will reduce as householders and other solar generators are able to capture and store their power for use later. By 2020, that independence of supply could result in a 70% drop in power purchased in summer months, and a 20% fall in winter months. Reduced peak demand will also reduce spot market prices and so further reduce income for conventional utility companies.
The Fukushima nuclear and Germany’s subsequent decision to phase out nuclear power is part of what is driving solar power; so too is the need to reduce carbon emissions and the benefits of reduced pollution and commensurate reductions in health and clean-up costs. Germany is cited as an example of effective policy and investment. Asia and other medium sized markets such as South Africa, Romania and Saudi Arabia may soon be taking a leaf out of their solar book, and are seen as growth markets.
In the USA, whose installed base lags Germany’s, the focus on fracking is distracting from investment in solar and other green technologies. But here, the advent in 2016 of the end of tax credits for solar is already spawning financing innovation with crowd-funding, investment trusts and securitised assets – buying up leased installations – all emerging.
Solar power is reaching a critical point technologically and as a result economically. Who will benefit from the opportunities remains to be seen, but the rooftop revolution could be big.