In this last part of our series, we will talk about why we should rejoice and pay attention. For this installment, I have interviewed my friend François Sonnet, a founding member of the Solar Change network, but first and foremost one of the pioneer of solar power in Europe.
The Swanson Law
The cost of solar panels has dropped considerably over the past 40 years. In 1977, the price of a solar panel was around $77 per watt. Francois tells me that in 2007, at the last peak of the solar industry, the price was still $3.5/w, still a 95% drop. However, a supply glut after the Great Recession has meant that panel prices dropped to $0.50/w in 2015, another 86% decline. In the past 38 years, prices have declined by a massive 99.4%! If you are familiar with the Moore Law for computers, the Swanson Law, from the name of the founder of SunPower Corporation, states that the price of solar panels tends to drop 20 percent for every doubling of cumulative shipped volume. Between 2015 and 2007, new capacity installed has grown by a factor of 25x!
However, panel costs are only part of the equation. François explains to me the concept of soft costs: they are things like the cost of obtaining permits, the installer fees, legal costs…He tells me the anecdote of a solar project in Romania, where he has to employ security guards to protect the grounds of the solar farm: “one soft cost I did not put in my initial spreadsheet”!
In 2014, globally, an installed solar system cost $2.16/w. Progress is urgently needed on that front to help lower solar power costs. The bad news is that soft costs have generally held flat over the past decade, therefore growing in importance and now representing more than 2/3 of total installed costs!
The good news is that governments are working hard to lower soft costs. See for instance the US Department of Energy, creating a $10m prize for whoever comes up with a way to significantly quicken the installation of a solar power system.
The CEO of First Solar, a US solar system manufacturer, believes we will achieve a total installed cost of $1/w in 2017 for large solar farms, hereby implying that soft costs are being worked on. “We think 2017 could be conservative”, smiles François.
It is all about money
Why does this matter? We need to look at the concept of levelized cost of electricity (LCOE). Think of it as the minimum price of electricity needed to break-even on your power generation system. The next set of data are the LCOE for major fuel types in 2014.
If First Solar CEO is right, then the LCOE of the best solar farms will drop below the level of natural gas power stations in the next two years. That implies that solar power will need no more tax credits or subsidies to be competitive. In the UK, the retail price of electricity is around USD200MWh. There again, you can see that it will soon be profitable for households to generate their own energy and remain autonomous.
I have some battery left
One aspect of solar panel which is exciting is the progress in battery technologies. The main drawback of solar power is that electricity production is variable and peaks around noon, when electricity demand (and therefore price) is not the highest of the day. Being able to generate power and store it until better prices can be achieved and/or storing it for personal use in outside of working hours make real sense. Fortunately, batteries are improving but along different directions. Tesla, in the US, is betting on economies of scale to lower battery costs fast, Bolloré in France is banking on a new lithium-polymer technology while China’s BYD is pushing its own technology of lithium-iron batteries which are better suited for power storage.
One of the main criticism of renewable energy on a power network is its variability. The system must absorb large amount of electricity production and be robust enough to fill the gap with power from other sources when the sunshine wears out. In summer, Germany can generate 90% of its electricity from solar sources at peak times. Widespread thinking about power networks is that such systems can cope easily with up to 20% of variable energy sources such as solar but faces Armageddon above that level.
However, new research shows that a level of 40% could be manageable and increase power prices by around 10% only. This is because of the integration of weather models and smarter grids. They allow power system operators to smooth energy demand at peak times and for instance reduce voltage or shut down remotely power hungry equipment and mills.
Politicians finally useful
Last but not least, politicians are pushing in the green direction. In China, there are talks about raising the 2020 installed solar capacity of 100GW to 150GW, from the current ~50GW. 150 GW is the total power capacity of France. India has only 5GW of currently installed capacity but has set aside the Thar Desert for solar projects. At 320,000 square kilometers, it is the size of Norway. In the US, tax credits for solar energy, which were due to expire in 2015 were renewed until 2019 at least.
Within a couple of years, solar power costs will have halved to the level of fossil fuel rivals and batteries will be cheaper and better. It opens a new era where clean power is becoming a reality.