Solar will get to grid parity in the US within four years

Energy policy day at Oxford University last Friday – many senior industry, academic and government people on the panels. Speaker after speaker ignored solar because ‘PV is too expensive’. Charts appeared on the large screen in the lecture theatre with PV sitting at about £250 a megawatt hour, or about seven times the current wholesale price for electricity. People really ought to read the newspapers: PV costs have fallen vertiginously for years. Solar isn’t yet competitive with coal in the UK but it isn’t far off.

In the US, the position is even more favourable for solar. Here’s what Neal Dikeman, a leading US cleantech venture capitalist, wrote today:

First Solar announced a $0.99 cent/Wp target within 4 years for installed with trackers utility scale in its investor deck.  That equates to around $4-5 henry hub gas price in a new combined cycle gas plant.

The scary thing is that best utility scale PV solar is already approaching the $1.50/Wp range in the LAST quarter, equating to $7-8 Henry Hub.

The Top 5 PV manufacturers announced module costs all south of $0.65/Wp.  First Solar says <$0.40/Wp in 4 years. Greentech Media says the best Chinese C-Si plants will do $0.42 within 3 years.  Screw the EU and US dumping  trade wars.  That my friends, is grid parity for a massive swath of the electricity market wholesale AND retail.

These companies are learning to work on GP margins of sub 10%.  They are getting lean, and mean and good

(A few notes: Wp is peak watt. This is usually expressed in Europe just as watts. Henry Hub is the US gas exchange. Last week’s prices (late May 2013) were about $4.20. US wholesale electricity prices are far lower than in the UK and Europe: current Texas prices are about $42 or £28 per MWh. Large UK solar fields are already at $1.50 a watt. So solar in the UK, which achieves about two thirds the output of a plant in the southern US will be competitive with grid power at the same time or before.)

The most disruptive effect of UK solar will be the marked dip in midday electricity demand between 10 and 2 as panels on factories and warehouses achieve peak production. The UK grid is used to fairly flat summer demand at these times. This isn’t going to be the case for much longer as building owners wake up to the increasingly obvious fact that PV saves you money. UK policy makers need to wake up to the impact of even lower PV prices than today rather than making comments about solar that are two years out of date.