Solar Energy Perspectives - IEA

Solar Energy Perspectives: Policies
USD 40 billion and the “subsidy” part of the incentive system is USD 71 billion. One can
thus compute the total undiscounted amount of investment required to bring PV systems to
competitiveness, using several simplifications 1 and following these worst-case assumptions,
at about USD 6 350 billion. However, the real cost of support policies, i.e. the amount of
incentives needed to fill the gap between the cost of PV and that of competitive technologies,
would be lower at USD 1 266 billion, or about 5 times less (Table 10.1).
Table 10.1 Amounts of investment bringing PV costs to USD 1/W (worst-case scenario)
Additional
capacity
(GW)
Cost
target
(USD/W)
Total cost
(USD bn)
Cumulative
capacity
PV support
(USD bn)
Cumulative
investments*
Cumulative
support
costs*
40 2.55 111 80 71 111 71
80 2.17 189 160 109 300 180
160 1.84 321 320 161 621 341
320 1.57 545 640 225 1 166 566
640 1.33 927 1 280 287 2 093 853
1 280 1.13 1 576 2 560 294 3 669 1 147
2 560 0.96 2 679 5 120 119 6 348 1 266
Notes: All costs are undiscounted. * Not taking account of the sunk costs of the current 40 GW basis.
The oversimplifying assumption used here of a unique break-even point as a worst-case scenario
differs from reality. As this publication shows, solar electricity (whether PV or CSP) is already
competitive in some markets, and will be soon in much larger ones. Solar electricity is competitive
off grid, whether for rural electrification, telecommunication relays or isolated houses. Rooftop
PV is close to grid parity in several markets (for example if PV systems are installed in Italy at the
price they are installed today in Germany). 2 PV and CSP plants are close to fuel parity at peak
demand times. In sunny regions, when oil products are burned at demand peaks, PV or CSP
plants are competitive when oil prices are above USD 80/bbl. These are not “niche markets”
anymore, as telecommunication relays and rural electrification might have been at the end of the
last century. Rather, they are leading or opening markets with a value measured in billions. Any
sound, global deployment strategy needs to make support incentives as cost-effective as possible,
as is considered in the next section. It must also build on these leading markets, so the costs of
subsidies will remain considerably lower than the trillions of US dollars referred to above.
Nevertheless, in scaling up, investment costs always increase, as a doubling in cumulative
capacity is necessary to get a 15% unit cost reduction. If incentive mechanisms entirely
finance these investments, they would make the overall amount of subsidies appear to be
continually growing even when unit costs approach competitive levels. It is important to
1. The calculus first takes all PV as utility-scale, with a cheaper starting point but a smaller learning rate than residential PV. It takes
an even investment cost of USD 3/W – the cost of utility-scale systems in the most mature market, Germany, under the assumption
that other markets will join this level. Third, an average between the cost at the beginning of each “doubling” period and the cost at
its end is taken for unit PV cost. Fourth, it assumes that USD 1/W is the break-even point, i.e. figures the discounted cumulative value
of the electricity that would need to be produced anyway. This latter assumption allows deducting the discounted market value of
the electricity produced from the gross cost of PV investment the difference being the “true” cost of support policies.
2. Grid parity opens the door to “net metering”, where electric meters work both ways as electricity is bought and sold by
consumers/producers at the same price. It would then become an acceptable means to support solar electricity deployment provided
it varies by time of use and differs at peak, mid-peak and off peak times.
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