PV predictions

Solar photovoltaic (PV) electricity can be competitive with grid power in some European markets as early as 2013, and in all market segments across the continent by 2020, according to a new study by the European Photovoltaic Industry Association (EPIA).

The data, released 5 September, suggests PV technology has shown impressive price reductions over the last 20 years, with the price of PV modules decreasing by over 20% every time the cumulative sold volume of PV modules has doubled. Importantly, EPIA also says there is a huge potential for further generation cost decline: around 50% until 2020.

To achieve the results, EPIA analysed five markets: France, Germany, Italy, Spain and the United Kingdom. They show that under the right regulatory and market conditions, PV electricity can reach full competitiveness with conventional power sources across Europe by the end of this decade.

Financial support

But achieving PV competitiveness across Europe will require political commitment to regulatory frameworks that support development of the technology and removal of market distortions. The smart deployment of support mechanisms, such as Feed-in Tariffs (FITs), has helped PV gain a market foothold in many countries of the world, compensating for the difference in cost competitiveness between PV electricity and that of conventional sources.

EPIA reckons that as the competitiveness gap narrows for the PV sector, due to technology development and parallel decrease of generation cost, PV will be able to rely progressively less on dedicated financial support, leading to the phasing out of such support schemes. This will happen even quicker if internalisation of external effects is implemented for all technologies and subsidies to other energy sources are also phased out, leading to a truly level playing field.

“The PV industry is doing its part, with costs coming down as the technology continuously improves,” explained Reinhold Buttgereit, EPIA Secretary General. “But politicians will have to do their part.

“They shouldn’t change the rules too often, we are talking about long-term investments. Achieving competitiveness for PV will require commitment to regulatory frameworks that support development of the technology and removal of market distortions. Removing administrative and grid connection barriers will allow the European market to develop in a mature way and accelerate the drive toward competitiveness.

“Technological improvements are lowering PV prices dramatically and having a real impact on generation cost,” he continued. “As PV generation costs decrease thanks to economies of scale, technological advances and the development of mature markets, and as the cost of electricity from other power sources goes up, PV will become more and more competitive.”

Central legislation and incentivisation

But what does he think about central legislation or incentivisation schemes? Where should these be heading, and what must they do?

“What is needed is not government intervention in the market, just appropriate policies, the right incentives and a nudge in the right direction,” he responds. “Smart deployment of support mechanisms, such as Feed-in Tariffs (FITs), has helped PV gain a market foothold in many countries of the world, compensating for the difference in cost competitiveness between PV electricity and that of conventional sources.

“As that competitiveness gap narrows for the PV sector, due notably to technology development and parallel decrease of generation cost, PV will be able to rely progressively less and less on dedicated financial support, leading to the phasing out of such support schemes in the very near future.

“But achieving competitiveness should not mean the end of all policy support for PV. For example we will still need to ensure that administrative procedures are not too burdensome. Dedicated support mechanisms could be required for specific technologies, or to support innovation. And remember that conventional energy sources also receive subsidies; the goal is a truly level playing field but until we get there, we need policies that support real development of renewable energy markets.”

Grid issues

Something which often vexes renewables developers is an ongoing lack of clarity surrounding grid infrastructure and the path towards an EU wide power network. Right now, is the EU grid sufficiently developed to enable wider take up of renewables?

“The EU grid needs updating, but not just because of PV,” says Mr Buttgereit. “Europe’s energy mix is changing in a lot of ways and its grid will have to be enhanced to better integrate new decentralised energy sources, such as small biomass plants, wind or PV. The intermittency of wind power will also require grid changes. New consumption modes that modify the electricity demand pattern, electric vehicles, or heat pumps, to name two examples, will also require grid enhancements.”

He says the EPIA data shows that for European countries, and different market segments, grid parity will not happen at exactly the same time everywhere in Europe. But eventually it will happen everywhere. Before 2020, PV will offer every European citizen the chance to become a “prosumer,” producing and consuming his or her own decentralised source of electricity at a competitive price. “Another benefit of solar PV is that it allows the local generation of electricity.

“PV has huge potential to be a mainstream energy player in the EU. What’s needed is the political will to create the right conditions for realising this potential. If the technical and commercial capacity of PV is backed up by smart policies, photovoltaics could provide up to 12% of electricity demand in European countries by 2020. This, like many of the PV forecasts we have made in the past, is probably quite conservative,” he concludes.