By early 2015, the total world capacity of photovoltaic (PV) projects totaled 175 gigawatts (GW), up from almost 39GW in 2010 and 8GW in 2000. Last year’s growth concerned particularly large-scale utility systems: projects of 4 megawatts (MW) and larger increased by an estimated 65 percent, and 70 solar PV plants larger than 50MW were operating in at least 14 countries.
Key figures from the REN21 report show that such developments have been led by the continuous declining trend in solar module costs as well as a progressive improvement in panel efficiency. Higher competition and growing markets are favoring cost even in the downstream industry, comprising most of the so called ‘soft costs’, as balance of system (BOS) components, system and project development and installations.
NUMBERS OF THE PV REVOLUTION
• In 2014 PV modules cost was 80% lower than in 2000. Half of this reduction occurred over the last three years.
• Lowest wholesale prices now range between 50 and 70 cents/watt.
• Efficiency under laboratory tests touched 25% for silicon modules and 18.6% for CdTE technology.
• Between 2009 and 2014, LCOE for silicon PV fell by 53%.
• Some bids reported actual cost of generation of utility scale plants below $60/MWh.
• The world’s largest plants have a 550 MW capacity, comparable to normal natural gas-powered power stations.
Furthermore, domestic and international investors’ new approaches are lowering the financing costs, which especially in the case of large utility scale projects could significantly reduce the overall Levelized Cost of Electricity (LCOE). It is therefore unsurprising that a growing number of large scale projects worldwide have been secured by tendering processes characterized by extremely low bids, with the top six reporting an actual cost of generation around 60 US dollars per MWh.
Further reductions will likely characterize the market, as the International Energy Agency (IEA) expects module costs to fall to 0.3 USD per watt by 2035, and average LCOE of large-scale PV plants to be below 100 USD/MWh by 2025, and then gradually reach 60 USD/MWh. These figures are fueling high expectations as the IEA foresees that, to limit the global mean temperature increase to 2°C in 2050, a deployment of 1,700GW of PV by 2030 could be put in place assuming high policy support worldwide. Furthermore, a Deutsche Bank study recently found that unsubsidized solar PV-generated electricity has already reached grid parity in 30 out of the 60 countries examined – up from 15 in 2013 – concluding that such conditions could be extended to 80 percent of the world by as early as 2017.
Such developments are and will continue to create new opportunities for solar systems to displace traditional fossil fuel generated power, and most notably for the often pledged transition away from some region’s continued reliance on coal-fired electricity generation (coal has been responsible for more than 40% of global energy-related CO2 emissions growth since 2000.
As an Oxfam International report shows, G7 countries’ coal based generation is still the main contributor to the energy mix, with its share even increasing in Germany, Italy, Japan and the UK since 2009.
As for the two ‘dirtiest’ countries, Germany saw a 2.2GW net addition of coal capacity between 2011 and 2015, while in Japan almost 20GW of generation are locked in until 2030, and a quarter until 2040. This trend was driven by a conjunction of many factors: a depressed European carbon market, as well as free allowances (EUAs); Germany’s and Japan’s need to compensate for a sudden nuclear phase out; and cheap carbon prices driven by the US massive fall in demand which affected merit order considerations, displacing gas generation.
Many are the challenges that PV solar generation might face in competing with coal generation. In fact, when between 2009 and 2014 coal fired generation soared in G7 economies, solar PV was already providing electricity below the average retail, and in some cases even wholesale, prices. In order to meet the commitments taken in the G7 summit held in June, members’ action should address many fronts.
First of all, all countries should set stricter domestic regulation to constrain coal-fired power generation, imposing both an immediate halt to the construction of new coal plants and phase-out of highly inefficient ‘sub-critical’ coal plants (constituting 35% of total plants in EU). At the same time, in order to reap the advantage of declining costs of large-scale PV installations and foster each country’s full solar potential deployment, the priority will likely be to improve the stability and the design of market-based policy mechanisms such as premium payments, currently gaining momentum in UK, France, Germany, and Italy. These will compensate for the reductions in policy support from falling Feed-in-Tariff payments.
This article was first published under ICCG International Climate Policy series, issue n.37, accessible here in pdf format.
(Image: Perovo Solar Park in Crimea, 2012. Credit: Activ Solar/Flickr)