Grid parity for solar power – competitiveness with electricity prices – has for some years been known as the ‘Holy Grail’ of the PV industry, with many speculating on when and where it is likely to be achieved. PES investigates.
Obviously, much depends on the amount of sunshine in the skies above. The west coast of the United States and parts of southern Europe are already very close to achieving grid parity (i.e. within five years or less) and emerging markets like India and China are investing heavily to obtain a firm foothold in the market. Northern European countries where the duration and strength of sunlight is much weaker have some way to go but the will seems to be there.
A considerable advantage of solar electricity is that it is mainly produced around midday when conventional electricity is particularly expensive, so solar electricity largely replaces expensive peak-load electricity at preferential customer prices.
Grid parity (competitiveness with retail electricity prices) will be reached progressively in several European markets. Countries with the highest solar irradiation and higher electricity prices, such as Italy and Spain have the potential to reach grid parity starting this year and 2012, respectively. Grid parity is expected to be reached in Germany in 2015 and cover progressively most other EU countries up until 2020.
“Italy is the first large-scale market where it will happen … It is certainly going to be next year,” Anton Milner, chief executive of the world’s biggest maker of solar cells, Q-Cells, told a conference in 2009.
Italy’s residential segment of the PV market – the main driver of growth so far – is expected to be the first to reach grid parity, followed by commercial consumers, mostly supermarkets which put solar panels on their roofs in 2012. Industrial-size PV segment appears likely to catch up around 2015 mostly due to an expected increase in costs of gas-fired power generation, which accounts for the largest share of all electricity produced in Italy.
However, Milner’s optimism is not entirely shared by Gert Gremes, president of the GIFI, the largest Italian PV Industry Association representing 83 Italian companies. In a recent interview he said that expecting grid parity by 2010 was unrealistic, and pointed to the country’s political and bureaucratic system as the major hindrances. “We should always remember that the lengthy authorisation procedures and the fiscal system (VAT and land tax) for PV plants in Italy strongly contribute to postponing the reaching of Grid Parity,” he said. “Therefore, a few more years are needed in order to make PV electricity competitive with traditional generation and, in the meantime, it is crucial to allow the Italian PV Industry to become stronger and more competitive in all market segments.”
In the United States, a more positive outlook is forecast with recent predictions that a number of solar companies will hit a long-pursued industry target of $1 per watt by 2012. That race toward a $1 per watt manufacturing cost is leading to brutal price competition and a potential shake-out among solar suppliers, according to analysts.