Solar PV at grid parity! Now what?
This should be a time of great celebration for the solar PV industry. Australia has defied all expectations and will become one of the first countries in the world to reach grid parity – where the cost of producing energy from rooftop panels over the course of their 25-year lifetime equates to the cost of retail electricity.
According to Muriel Watt, the chair of the Australian Photovoltaic Association, the unsubsidised cost of a solar PV module bought for around $1.80/watt translates into a cost of energy of around 29c/kWh – the rate that many households are paying at the same time that this energy is produced in the early to mid afternoon. She says that at $1.22/W, where prices have now fallen, the equivalent production cost is 25c/kWh.
That has happened due to a range of factors: generous government incentives that have caused huge demand and in turn delivered economies-of-scale that delivered buying power on the international markets; plunging module prices; the rising Australian dollar; and soaring energy network costs. Last, but not least, it’s because Australia has more sunshine than any other developed country – and can produce twice as much electricity from the same panels as Germany, one of the world's leaders in solar PV.
Industry analysts suggest rooftop PV installations this year will likely top 700MW, taking total installations in the country to more than 1 gigawatt. Grid parity, which has always been considered as the holy grail of the industry, should unlock a new phase of growth, but the industry faces a new hurdle: and it’s not just in the shape of feed-in tariffs and solar credits that have either been wound down or wound up, it’s about grid capacity.
In Western Australia, the towns of Broome and Carnavon are accepting no new installations, in some areas of Queensland the rooftop systems have a limit of 1kW, in other areas there is a limit of 1.5kw. In areas where the feed-in tariffs have been dropped entirely, the right to connect solar PV has also been lost.
”We are reaching the scenarios that we thought wouldn’t happen until we reached 30 per cent (of the market),” Watt said at the Ecogen 2011 conference in Brisbane.
Part of the problem, Watt says, is the inflexible coal-based market that Australia has inherited, and because network operators have no incentive to allow solar on to the grid. In some ways, she says, the thinking is little changed from the time two decades ago when a team at the University of NSW wanted to make the first grid connection for a solar PV array in the country. They were required to go through the same paperwork and obtain the same power station licence as an operator of a 660MW coal fired power station – all for the sake of a 1kW array.
The rules may have evolved, but the thinking behind them has not. “We need to change the energy market rules to focus on how to facilitate distributed generation,” Watt says. “We need to get across to somebody that distributed generation will cost a lot less in the long term than constantly having to upgrade networks and treat everything as if it were central power station.”
Part of that will come from public acceptance. But even though nearly one in ten households now have solar PV, the technology is not getting good press. Partly because of over-generous subsidies, Watt believes there has been a “campaign to demonise” solar PV, and says there is little understanding of the technology or its costs, with large sections of the public convinced that it is expensive and does little to reduce abatement. “This is no longer a niche market,” she says. “It is a perceived threat to somebody.”
But whether you agree with this assessment, or even of Watt’s definition of grid parity – some say it is not really there in the eyes of the public unless there is a 10-year payback rather than a 25-year return – the industry is agreed on one thing, and that is that it has to change its sales pitch to the public: the attraction of solar PV must no longer be about making money, but about saving it.
In this sense, solar PV is facing the same challenge as solar hot water and energy efficiency: obvious gains over the medium to long term, but high upfront costs. Take company executives, for example. Numerous surveys show that they have, and will, ignore energy efficiency opportunities with even short-term paybacks, and “negative” cost abatement, unless they are told to act. They appear to have too many other things to think about than to save money.
Ric Brazzale, the head of Green Energy Trading, said recent data showing a fall in overall demand meant that policy makers needed to look at the National Electricity Market differently from the past. “We need to get used to reducing demand and that’s driven by extensive rollout of solar… and we are yet to see the impacts of energy efficiency, but that’s another story.”
Watt, somewhat controversially, suggests that the focus of the industry should not be on trying to restore tariffs for energy exported to the grid, but to have policies focused on encouraging zero net energy buildings. This was a theme picked up earlier in the day by World Bank renewable energy expert Dan Kammen, who noted California requires that by 2020 all new homes will need to be net zero energy through energy efficiency and onsite generation of renewables.
“That’s a strategy we know how to do,” he says. What is more challenging is a requirement for all new office buildings to be net zero energy by 2030. “That is not a goal that the state knows how to do tactically," he says. But by combining the two laws and “learning by doing” – a theme you hear repeatedly in this sector – the target should be able to be met with a combination of bold near-term policies and a longer-term strategy.
Kammen also noted the recent forecasts by the International Energy Agency that solar - both PV and thermal - could provide more than half of the world's energy requirements by 2060 and a majority of its electricity needs. That is based on a forecast of solar costs falling to around $100/MWh by 2030. Kammen said if this forecast was met, the cost of solar panels would need to fall to around 50c/w. "A few companies a few years ago thought that they might achieve $1/w, now they realise that in competition with China, they must achieve this," he said.
Comments on this article
re: why it's all worth it...
g'day mike,
is there anywhere i can view pic's of your house please?
we too at one stage designed and buit our efficient and sustainable house (never went the renewables way for power, too many people in the industry only there for their own pockets)
but in the sub-tropics it was a cool house - warm house, no heating no air con, and one light globe lit the whole 3 bedroom sized modest home.
find our home of the past here:
<p><a href="http://www.lensgarden.com.au/eco'_home_essay.htm">eco' home essay</a></p>
len
Parity - Clupea Politicus Julianus - the red herring, no?
Andy - you're right! - about 20c pkWh would run out of your 10kW PV system. And that would be better than the current residential retail tariff charged by grid operators, say 22c (and about to go up like a rocket mostly due to grid infrastructure upgrades and not appreciably due to carbon pricing).
So PV Grid Connect is around parity with Grid Retail Tariff. Not really apples with apples from a generation of electricity view (small scale generator retail price vs large scale generator wholesale price). But wholesale is up the food chain from where we mere mortals can make a difference.
Where we can, and from a consumer's perspective, it means that the inevitable widening of the gap ($/kWh home made vs $/kW grid retail) will over time help offset the cost of a clean home made PV energy system.
why it's all worth it...
I have designed and built a house that needs no heating and cooling, and runs on ~3 kWh/day. You can see how it's done at:
http://damnthematrix.wordpress.com/?s=2.2+kw
http://damnthematrix.wordpress.com/2011 ... a-is-over/
http://damnthematrix.wordpress.com/2011 ... fficiency/
Reply to Sam Richards
Like you I figure larger scale solar makes a lot of sense. But my contacts in that part of the industry say that ground-mounted solar costs more than roof mounted. Another issue is transmission losses. Some large scale solar plants are aimed at edge of grid locations. I'd like to see the vast areas of well-oriented industrial roofing put to good use. In many cases all (or most) of the electricity generated would be used on site, so no transmission losses.
Solar PV at parity?
This is the second article in nearly as many days about the financial competitiveness of renewables. A couple of days ago it was claimed that a new Queensland Wind farm would reduce net power costs by more than subsidy costs (tax certificates offsets), and now Solar is no more expensive than coal generated power.
If this is so why are you still spruiking the need for Carbon Taxes and ETS schemes?
Batteries
Chris, you don't say whether you want to use them totally off-grid, or in conjunction with an on-grid system. There is a HUGE difference, as with an on-grid system, you have to ensure that none of your electricity enters the grid when the grid is off. Crispy fried possums on the nature strip are one thing; crispy fried power company linesmen are another altogether.
There are systems which enable you to have battery backup with an on-grid system, but they are hugely expensive, complex, and not worth it unless you live in an area with a really dodgy grid supply, which equates in this context to black- or brown-outs at a rate of about 5 per week.
There have been several discussions in the last few months about batteries with on-grid systems on the Energy Matters website: http://forums.energymatters.com.au/
and there are probably similar in the Forum area of the Alternative Technology Association website: www.ata.org.au/
Lots of really useful stuff about domestic solar PV systems, in both places
Solar will continue to grow
Prices have dropped from $4.30 pervwatt to $1.30 per watt for solar panels over the past four years. Inverters have halved. Mounting systems and installation costs have dropped by 40%. The most frustrating reality is that overheads remain stubbornly high driven by endless bureaucracy with regional, state and. national variations to regulations.
250,000 installations over the past twelve months has led to scale in supporting I.T systems and mass automation in manufacturing and installation.
The industry has tremendous momentum and has created an estimated 14,000 jobs (one third of the coal industry).
I can't see solar replacing base load however it is clearly has a role in assisting in postponing new generation. A recent U.S study of 10,000 installations has revealed the most cost optimum size is a ten kilowatt roof mounted system. The recent solar flagships price at $6,500 per kilowatt only reinforces this research.
Not sure why people are down on this industry. I've put 5 KW on my roof and spent $20,000 of my own money on it. Our house is carbon neutral and we a assisting to reduce peak load.
Give the industry a break...
Sounds promising
Can someone explain why we are even bothering with home rooftop Solar power?
Surely it would be cheaper and more efficient to do it on an industrial scale?
I can think of a heap of reasons why domestic solar power is a bad idea.
1. Each installation is a custom job taking more time.
2. Installations are often not optimium due to shape or position of the roof.
3. Roofs often need maintenance.
4. Support costs would be higher.
5. Domestic quality components are not as good as commercial.
Why not do it on an industral scale?
Solar HW is different of course.
Be Cosistent
If you want to include interest rates in cost of Solar, then you must also consider inflation and increases in grid power over the next 25 years. To include costs but omit benifits is not fair comparison.
Transport charges to end user MUST be included in cost. I don't give a toss how much factory gate prices for anything are; all I am concerned with as a consumer is how much I am charged.
The effect on house prices of presence of a PV system is impossible to judge, A typical house may cost about $400,000; a pv system about $4000 . You cannot detect a 1% change in house prices as normal noise is more than this.
Grid parity also depends on where you live. I have a 2kw system in Perth. If I take out all subsidies and FIT, the cost per kWH is 20c, compared with 22c for grid.However for new systems the FIT is important, at the new WA rates you will be subsidising coal fired power
No smoke and no fire!
Whenever the sun shines or the wind blows, some coal or some gas can be saved for future generations. I think we are the generation of idiots bound to burn all our resources in a single century to cause as much pollution as we can. In case we wake up and try to overcome the cavemen, mentality then we may look far more positive at cleaner energy options. Some of us may have forgotten that coal fired power stations had far more subsidies than any other form of electricity generation. These power station and mines were built and financed by our State Government with tax payer money. It was a 100%subsidy for the coal powered electricity industry. I am sure that any other energy option is getting far less than that!
Calculating the cost of solar power
For a transparent calculation of the cost of solar power using a range of assumptions see: http://bit.ly/pvvYEI (the short version) or http://bit.ly/raPAGf (the long version).
Renamed
Reconsider this little piece under the "Climate Speculator"
Batteries
Chris
Perhaps I can help with some battery information graham.revill@gmail.com
Batteries
Chris
Perhaps I can help with some battery information graham.revill@gmail.com
Fair comment Tim
I agree the long term trend for solar PV prices can not be down forever.
Poor fellow my language
"[D]istributed generation will cost a lot less in the long term than constantly having to upgrade networks..."
Bunkum!.
The same folk who claim cheapness in a distributed network are those who state that blackouts are a myth because the sun is shining or the wind is blowing somewhere in Australia, so all we need is to cover Australia wall-to-wall with transmission lines, but then ignore the cost.
"Parity"
Bunkum again. Even if... IF... installations could produce an average cost of power over a lifetime of 25 years of the retail price, the grid price - the wholesale price as averaged during the whole of 2010 for the Eastern Australian Grid, was about 5 cents, perhaps as low as 4.
The grid target is 5 cents, not the retail customer's 25 cents, unless batteries, on-site backup backup generation, maintenance and cost of capital are included. The retail price should only be used for comparison purposes if the proposal is for a whole of system comparison for electrical power with absolutely no connection to the grid.
Rational comparison, despite the noises from the cheer squads, indicates that the gap between solar and current mains power, before subsidies and handouts, is huge and will remain so.
Batteries? Unless you live on a boat or an island, forget them. They lack capacity and are too expensive and short-lived to solve your intermittency problems.
Good progress, but CSP with storage is the enabler
Downward price progress on private PV is good news.
It's already possible to get 13-19c kWh cost systems in many parts of Australia depending on insolation. It won't be long before it's a no brainer to simply not having a sunk cost (electricity) going out the door and to protect yourself against energy inflation.
In the meantime we need plant like CSP with storage to enable carbon free response to the variable power input from PV (and wind).
Supply = variable wind + variable PV + variable CSP + hydro + gas backup (if necessary) = Demand.
Getting policy maker's heads around undoing the base load concept will be the revolution renewables need.
Your right Steve...
but then again in 25 years the price of a solar panel will be 4-5 times the price of today - it is all relative.
@Tim Northcott - Get real
If grid prices are at or below 43.6c/kWh in 25 years I will run naked down the street.
its not all about "own use"
Andy, your numbers may be right (someone else can do the check re location/ efficiency etc.) however it only works if you are using all of the power when generated. This would hardly apply to anyone. Hence need for grid feed in tariff (FIT).
I am a big supported of the potential of distributed power, esp. rooftop PV, however I get really pissed off at the solar industry and Greens who have politically cruelled the industry by their support of rip off gross FIT.
These tariffs should always have been net not gross. Plus they need to allow for network costs. A net FIT of 50% retail would be fair and far more sustainable. Thus in my case I would save 25c kWh when my PV is generating when I am using, and 12.5c when feeding into the grid.
This 12.5c still represents a subsidy but I think it is justifiable to support household PV. Large scale adoption of rooftop PV in cities would offer savings to the grid over time.
Worst case - real case
Andy,
The cost needs to be funded so your $63,000 at 7.5%pa over 25 years will cost you an additional $76,668 in interest costs. Amoratise that over your optomistic output of 320,000 kWh and you get 43.6c/kWh. Sorry bud but you've passed parity :-)
Worst case scenario, still better than parity
Forget the $1.80 per watt, that's some weird species of red herring (Clupea politicus[don't have one!])
The current cost of installed PV is more like $4.00 per watt
So, re-running the numbers - a 10 kW system at $40,000 plus capital cost ($15,000), throw in a new inverter in case the first one gives up after 15 years ($8,000) that's $63,000 (I'll ignore depreciation and tax breaks - I'm sure that's someone else's gig)
Now let's presume the system generates 320,000 kWh over 25 years (that's allowing for a 15% performance reduction - realistic - over 25 years) That brings the cost of solar energy in at 19.68 cents per kWh
With next years commercial tariff to hit 39 cents (!!) per kWh, you could double my figure and still come in at parity.
I can't see how there's an argument here.
Batteries
David - i like the idea of Batteries for daytime storage of PV energy. I have been looking for a commercial available-now product, been to the CSIRO and UNSW sites but there isn't much info. I would like to know if there is a Battery, its voltage, capacity and efficiency rate, the control system and the views of the CEC. If anyone has a good source could they post ? Thanks.
Is it a better return than the pokies
The obvious customers now are commercial power users , like Clubs that have lots of roof space predictable power demand and longer term finance strategies.
I know of 2 councils in my area who have installed substantial systems also.
Re: Better than parity!
Andy, I would re-run your numbers factoring in the cost of capital over the 25 years.
$1.8/W ?
225W LG panel = $790*.. equates to $3.51/W
*solaronline.com.au
excludes framing, inverters and install.
Distributed generation and home battery banks
Adapting power supply systems to distributed power generation will be simplified if and when on-site power storage (battery banks) is widely adopted.
- LED lighting, rechargers and consumer electronic devices can be powered off the batteries
- batteries can also be recharged from home exercise cycles (Tour de France riders put out about 250W, so an average exercise cycle user might come close to powering a flat screen LED TV ~120 W).
- batteries mean you've got emergency power in case of blackouts.
A quantum leap in demand for solar PV will follow from release of the next IPCC Assessment (AR5: WG1: Physical Science - September 2013; WG II: Impacts, Adaptation and Vulnerability - March 2014; WG III: Mitigation of Climate Change - April 2014)
Seriously, better than parity
Timothy,
Solar modules (provably) will still be generating after 30 years, they start degrading pretty much straight away but it's a slow and linear process. Modules which need replacing after 5 years are not legally sold in this country (the CEC prevents it).
And by the way, retail energy prices are degenerating much, much faster than any modules.
It's fine, you keep paying extortionate retail rates, I'll go solar (whoops, I already did).
Parity pipe dreams
A technical proof that solar PV finds parity with retail carbon power is all well and good, but as with many promotions of alternative power, quantum leaps in acceptance are required.
First the parity assessment requires a 25 year investment view. Problem is that few Australians take such a view with any investment. For instance the average period for owning a house is less than 10 years and solar PV can not move with you and I have yet to see a PV array cause a price premium for a secondary house sale. The dearth of funds for infrastructure build shows we rather leave funds on at call deposits than make term investments.
Perhaps most fatal, is presence of so many solar PV operators, all clamoring for the opportunity to install a piece of infrastructure that needs to operate for 25 years to earn its place. These guys are great on the sell, offer an array of products, configurations and exotic places from which components are sourced. There is no certainty that the installer or component manufacturer will honour any warranty claims over the 25 period, in fact many have now ceased operations and when maintenance issues arise in the next few years, expect a huge demand on government to fix the problem of disabled PV arrays.
Has Watt’s analysis factored in costs of repair and maintenance?
Can Watt direct us all to installers who can install panels and associated materials at the $1.8 / watt rate that last the distance at a zero defect rate
Worse than parity
Andy,
In a perfect world you would get 100% return over a 25 year period but this just isn't the case. Good panels will start to degrade after 15 years (the cheap ones - after about 5 years), then you will have to replace your invertor every 3-5 years at around $5,000 for a 10kW system.
Question; Where can you buy an unsubsidised panel for $1.80 Watt ???