Solar Energy Perspectives - IEA

Chapter 10: Policies
Chapter 10
Policies
An integrated approach to solar energy needs to consider all solar technologies and how they
intersect with others, and the policies relevant to different stages of technology and market
maturity. Identifying the policy needs, and designing the policy tools that will give policy
makers in 10 and 20 years from now a broad choice of affordable and sustainable energy
technologies, is currently the most pressing objective.
This chapter focuses on the important issue of the economics and financing of the early
deployment of not-yet-competitive solar technologies, and related policy needs. The first
section considers the costs of support schemes from a broad perspective. It aims at making
clearer what, in most support schemes, is “normal” payment for energy, and what could be
termed subsidy, or learning investment. The second section discusses the various support
schemes, market designs and CO 2
pricing.
The costs of early deployment
Solar electricity, whether from PV or CSP, is not yet competitive with most other electricity
generating technologies and energy sources. Its current deployment – called “early” for this
reason – is essentially driven by incentives.
Support incentives reflect the willingness of an ever greater number of governments and policy
makers to broaden the range of energy technology options with inexhaustible, clean renewable
energy sources. They drive early deployment, which in turn drives learning and cost reductions.
Long-term benefits are expected to be considerable, from climate change mitigation to other
reduced environmental impacts, reduced price volatility and increased energy security. Shortterm
costs, however, raise concerns among policy makers. In the last few years, drastic policy
adjustments have affected PV in European countries and the financial sustainability of its
unexpected rapid growth, driven by production incentives and unexpectedly rapid price declines.
Debates among policy makers on the costs of support schemes are unlikely to disappear from
the agenda anytime soon. At the end of 2010 existing PV commitments, usually extending to
15 or 20 years, represented yearly amounts of USD 7.6 billion in Germany, USD 3.6 billion
in Italy, USD 2.8 billion in Spain and USD 0.8 billion in both France and the Czech Republic.
Except in Spain, where the public budget is liable, these costs are passed-on to ratepayers.
The accumulation of financial liabilities due to support policies to solar electricity must be
fully understood. For example, the current cumulative PV capacity is 40 GW, the next
additional 40 GW would likely bring system costs from USD 3/W at present down to USD
2.55/W on the basis of a learning rate of 15% for utility-scale PV systems. The total investment
would be about USD 111 billion.
What would be the “subsidy” part of the overall cost of incentives? A worst-case scenario
would consider a market value of only USD 1/W, at which level PV electricity is competitive
in most countries, including not so sunny ones. In this case, the overall investment is worth
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