The answer is definitely yes according to a new report from the Fraunhofer Institute for Solar Energy Systems, commissioned by an organisation called Agora Energiewende. The report – Current and future costs of photovoltaics – suggests that “In a few years, solar energy plants will deliver the most inexpensive power available in many parts of the world.“
The first health warning is that Agora Energiewende presents itself on its web-page like this: “Our central question is: How do we manage the clean energy transition? Agora Energiewende will prepare the ground so that Germany will take the right course. We see ourselves as a think tank and policy laboratory that focuses on dialogue with energy policymakers.”
It is, in other words, concerned only with the how rather than the why. It is a joint initiative of the Mercator Foundation (founded by the Schmidt family, a major shareholder in the Metro Group) and the European Climate Foundation (with offices in The Hague, Brussels, Berlin, London and Warsaw). None of this means that we should dismiss the study out of hand, but neither can we ignore the fact that it is coming from sources with vested interests.
Only a few years ago, solar energy was by far the most expensive way to generate electricity. It is certainly true that the cost of generation has decreased very significantly since then, partly due to improvements in panel design, partly to inevitable cost reductions in manufacturing with increasing volumes and process improvement, but also very largely because panels are overwhelmingly sourced from low-cost Chinese manufacturers.
Large companies such as BP, Shell and Siemens exited the business and many more manufacturers closed down over the last few years, along with scores of smaller manufacturers. The market, driven by renewable energy targets and public subsidies, was a very attractive one to enter when profits seemed to be pretty well guaranteed. It was also good public relations (or window dressing) for BP in its ‘Beyond Petroleum’ days, as well as similar ‘old energy’ businesses.
The truth was that the very attractiveness of the market drew in Chinese manufacturers, creating intense price competition as well as excess capacity. The result, according to the study, is that the feed-in tariff for large-scale PV systems in Germany has fallen from 43 cents/kWh in 2005 to 8.7 cents today, a drop of 80%. This is a remarkable drop and, on the face of it, does make solar energy quite competitive. And if this is the price needed to make it economic in Germany, then the situation in sunnier places should be significantly better.
But what the study fails to say – in common with similar pro-renewables reports – is that this is not the full story. In particular, solar power is intermittent, even though the timing of output is pretty clear.
The Fraunhofer team predicts that solar power will soon be the cheapest form of electricity in many regions of the world. In coming to this conclusion, they look at two extreme scenarios. In the most pessimistic, the annual increase in installed PV generating capacity would increase to 175GW in 2050, from 40GW annually today (to reach about 6,000GW of total capacity by 2050). The most optimistic case (the ‘breakthrough scenario’) assumes that 1,780GW of capacity would be added every year by 2050, giving a total installed capacity of 36,000 GW.
To come back to the situation in Germany, the country had an estimated total generating capacity of 177GW in 2014. By October 2014, the country had 38.1GW of installed solar generating capacity, higher than wind (35.6GW) and, indeed, the largest nominal contribution of any form of generation (hard coal, 28.4GW, lignite 27.8GW, gas 28.4GW, nuclear 12 GW, biomass 8.1 GW and hydro 5.6GW). [These and figures below from the Fraunhofer Institute: Electricity production from solar and wind in Germany in 2014]
Solar represented 21.5% of the nominal generating capacity in late 2014. Over the period January to November of that year, total electricity production was 427.7TWh. Of this, the contribution of solar was 32.4TWh, or just 7.6% of the total, while brown coal, representing just 15.7% of nominal installed capacity generated 129.3TWh, or 30.2% of the total. The installed solar capacity could nominally produce 6.4TWh of electricity in a week, but in practice the maximum output was 1.26TWh in week 23, a capacity factor of about 20%. Installed capacity per se means very little.
It’s also interesting to see that Germany has been a net exporter of electricity for at least the last decade. Last year, net exports amounted to about 35TWh. This will largely have been of unwanted solar and/or wind energy, sold at low spot prices. The net figure also masks a greater total export of unneeded electricity, since there were many times when the country had to import electricity.
During summer 2014, for example, when solar output was at its peak, imports were higher than exports in July and the two pretty much balanced each other out in August. For May, June, July and August in total, exports totalled about 19.6TWh, and imports came to about 17.5TWh. If net exports were 35TWh and imports about 25TWh, total exports would have been 60TWh, or 14% of all electricity generated.
Now imagine a world according to the ‘breakthrough’ scenario envisaged in the Fraunhofer report. Any country having a large installed PV capacity would have severe problems in balancing supply to the grid. Germany can get away with it because it is well interconnected with neighbouring countries, particularly France with its large nuclear capacity. But, despite solar contributing considerably less than 10% of total electricity, the installed capacity is enough to swamp the grid on sunny days with low demand.
Superficially, solar may look affordable, but without delving deeper and looking at total system costs, it is misleading to suggest that it could be the generating method of choice for a stable electricity supply. This situation would, of course, be very different if affordable energy storage systems were to be available on a massive scale.
Martin Livermore
The Scientific Alliance
St John’s Innovation Centre
Cowley Road
Cambridge CB4 0WS
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