According to research by the Fraunhofer Institute for Solar Energy Systems in Germany, by 2025 solar PV energy plants will deliver the cheapest power available in many parts of the world.
Before 2025, the cost of producing solar power in central and southern Europe will have dropped to between 4 -6 US cents per kilowatt hour (26p-39p-/KWh), and to as little as 2-4 US cents/KWh by 2050.
The report highlights the current cost-effectiveness of solar-generated energy compared to energy from coal and gas-fired plants. For example, Dubai’s Mohammed bin Rashid Al Maktoum Solar Park developed by Acwa Powerwill, sell solar electricity for 5.98 US cents/KWh, and large German solar plants are delivering power for less than 9 US cents. By comparison, electricity from new coal and gas-fired plants costs 10 US cents/KWh and from nuclear plants as much as 11 US cents.
The researchers say this could have significant implications for reducing Europe’s energy dependence and helping the EU achieve its decarbonisation targets for 2020 and 2030. Up until now, the high cost of solar PV compared to other low-carbon solutions has meant it has a limited role due to its high cost when compared to other low-carbon solutions.
“The study shows that solar energy has become cheaper much more quickly than most experts had predicted and will continue to do so,” said Dr Patrick Graichen, Director of German analyst Agora Energiewende, which commissioned the report. “Plans for future power supply systems should therefore be revised worldwide. Until now, most of them only anticipate a small share of solar power in the mix,” he said.
The study also reveals that electricity generation costs for solar power is highly dependent on financial and regulatory frameworks, due to the high capital intensity of photovoltaic installations. Poor regulation and high risk-premiums reflected in interest rates can raise the cost of solar plants by up to 50%. “Favourable financing conditions and stable legal frameworks are therefore vital conditions for cheap, clean solar electricity. It is up to policy makers to create and maintain these conditions,” said Graichen.
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This article has been adapted from an article published in Building4Change.