Solar Energy Perspectives - IEA

Solar Energy Perspectives: Solar electricity
The current dynamics favour PV, which has a steep learning curve. It may appear that CSP
will never catch up, but the maths of learning curve tells another story: a rapid growth rate
of CSP from its current narrow basis would speed its cost reduction 2 . Detailed industry
studies also find large room for technology improvements and cost decreases (see, e.g., AT
Kearney and ESTELA, 2010). A rapid advance of numerous projects in the United States and
elsewhere, coupled with the introduction of efficient innovations (especially in the domain
of CSP towers), and the emergence of new participants, are expected to lead to sharp cost
reductions (see Chapters 7 and 8).
PV grid-parity
Electricity from residential and commercial PV systems is currently 27% more expensive than
that from utility-scale, ground-based PV systems. This cost difference, largely due to greater
margins throughout the supply chain, is expected to decrease sharply as competition increases.
In the long term, residential PV systems may even become less expensive than ground-mounted
PV, if PV is integrated at a very low additional cost in standard elements of the building
envelope (see Chapter 6). It must be noted, however, that orientation and tilt are not always
optimal, and shadows from the surrounding environment cannot always be suppressed.
Furthermore, residential/commercial PV competes with retail electricity prices, not wholesale
prices. Retail prices include, among other things, distribution costs. In practice they are
usually almost twice the cost of base-load bulk power. “Grid-parity” is reached when PV
generation costs are roughly equal to retail electricity prices.
These costs are expected to be lower than electricity retail prices in several countries. This
will allow PV residential and commercial systems to achieve parity with the distribution grid
electricity retail prices in countries characterised by a good solar resource and high
conventional electricity retail prices (noted “2 nd competitiveness level” on Figure 3.12).
In some cases, grid parity will be reached before 2015. Islands are a case in point, as
electricity generation is often based on costly oil-fired (diesel) plants. Madagascar, Cyprus,
other Mediterranean islands, the Caribbean and the Seychelles represent significant examples,
in this regard. In entire countries or regions, such as Italy or California, residential PV may also
achieve grid parity in only a few years from now. The process will take more time in countries
with lesser solar resource, but high electricity prices, and countries with good solar resource,
but lower electricity prices. Some studies (e.g. Breyer and Gerlach, 2010) assume that grid
parity would be reached in most of the Americas, Asia-Pacific and Europe by 2020. A more
cautious assessment suggests that this will take place between 2020 and 2030, but likely not
in the Northernmost European countries. Exceptions exist in countries where the electricity
from the grid is significantly subsidised, such as Egypt, Iran, various MENA countries, South
Africa, Russia and Venezuela, and, to a lesser extent, China and India. Another impediment
to grid parity stems from the fact that retail electricity prices for households often do not reflect
the true costs at all times, even if they do so on average. That is, prices are often “flattened”,
which may make them too high during off-peak demand times, and too low during peak
demand times, compared with the production costs at those times. Producing electricity at
2. Adding another 40 GW to the existing PV capacity would reduce PV costs by 15%, with a 15% learning rate at system level.
Adding 40 GW to the existing CSP basis, i.e. doubling the existing CSP basis more than five times, would reduce CSP costs by 40%
with the less favourable learning rate of 10%.
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© OECD/IEA, 2011