Solar Energy Perspectives - IEA

Chapter 3: Solar electricity
as from research and development (R&D) efforts. There are excellent reasons to believe that this
trend will continue, although it is not yet clear if a possible “floor cost” for full turn-key PV systems
is in the USD 1.00/W range or significantly below (see Chapter 6 for a detailed discussion).
Most recent PV cost estimates are USD 3.12 per watt-peak (Wp – electric power under
maximum solar irradiance) for utility-scale systems and USD 3.80/Wp for residential ones.
These numbers are close to the actual PV systems prices in Germany, which currently
represent half the global market. Significant deviations from these prices in other countries
reflect the lower maturity of the markets and their financing systems, and/or the different
levels of currently available incentives. High investment prices are expected to fall more
rapidly than indicated by the learning curve if deployment is sustained and markets mature.
Therefore, the rest of this analysis is based on German prices.
Market information indicates further reductions in PV investment costs, possibly achieving an
additional 40% reduction in the coming years. This trend is projected to continue due to
technological improvement and massive investment in new capacity, especially in Asia,
provided that the current incentive systems are continued. By 2020, PV generation costs are
expected to range from USD 81 to USD 162/MWh (utility-scale systems), USD 107 to USD
214/MWh (commercial systems) and USD 116 to USD 232/MWh (residential systems),
depending on the site-specific solar irradiance level (see Chapter 6).
The levelised cost of electricity (LCOE) is the usual metric to compare the costs of different
electricity generation technologies. It covers all investment and operational costs over the
system lifetime, including the fuels consumed and replacement of equipment. In case of PV
plants, the LCOE mostly reflects the initial investment costs, the cost of capital (including any
discount rate), the irradiance level and the “performance ratio”. The latter takes into account
the losses due to the inverter, the effect of less-than-optimal direction and tilt of the modules,
shadow effects and the like. Reasonable estimates for average performance ratios are 75% for
residential systems, 78% for commercial systems, and 82% for utility-scale systems. Access
to long-term debt financing has a significant impact on LCOE. For example, decreasing the
interest rate from 9% to 4%, decreasing the equity-debt ratio from 40% to 30%, and
increasing the loan term from 15 to 20 years together would decrease the LCOE by no less
than 30% (an issue we will return to in Chapter 10).
In 2010, for large ground-mounted PV systems with 10% discount rate, the generation costs
ranged from around USD 360/MWh in the north of Europe to USD 240/MWh in the south of
Europe and most of the United States, and as low as USD 180/kWh in the Middle East,
Northern Africa, and the southwestern United States.
Solar thermal electricity/concentrating solar power
Meanwhile, STE/CSP investments have not shown the same dynamism. In fact, they have lost
their competitive advantage over PV except in places with exceptionally high DNI. This often
also results from the value of storage not being reflected on markets. STE costs range from
USD 4.20/W to USD 8.40/W depending on capacity factors and available solar resource
(contrary to PV, the size of a CSP solar field can be adjusted to the resource for a given
electric capacity). This leads to current electricity costs ranging from USD 170/MWh to USD
290/MWh. This situation evokes that of PV a few years ago, when some bottlenecks in
manufacturing capabilities kept the prices higher than the learning curve suggested.
61
© OECD/IEA, 2011