A recent report from Queen’s University of Canada has found that the costs of solar energy are overstated in common electricity cost comparisons and that PV solar energy has already reached grid parity in some locations. The Queen’s University press release begins with a startling and arresting statement:
“The public is being kept in the dark about the viability of solar photovoltaic energy…..”
Key failures in many comparisons include:
- Failure to allow for a 70% reduction in the cost of solar panels since 2009
- Overstating the drop in productivity of solar panels
- Failure to account for the full cost of conventional plants
- Failure to account for subsidies to conventional power
The report is by K. Branker, M.J.M Pathak and Joshua Pearce, Adjunct Professor, Department of Mechanical and Materials Engineering.
Dr Pearce says:
“Many analysts project a higher cost for solar photovoltaic energy because they don’t consider recent technological advancements and price reductions, older models for determining solar photovoltaic energy costs are too conservative.”
He believes the technology is approaching the “tipping point” where they can produce energy for about the same price as other traditional sources of energy. In certain locations and given advantageous financing options, Pearce and his colleagues consider the tipping point to have been passed.
Such tipping points are a holy grail for all new technologies.
The report states that some studies fail to allow for the 70% reduction in the cost of solar panels since 2009. As well as this, quality solar panels now only suffer a 0.1% to 0.2% annual drop in productivity. Many cost analysis reports have this figure at 1%.
Equipment costs have also dropped more than is being reported by analysts. The Queen’s University report has equipment costs at under $1 per watt of electricity produced. There is a 2010 report which prices solar equipment at $7.61 per watt.
The report is critical of a lack of clarity of “assumption, justification and completeness” in the calculation of levelized cost of electricity (LCOE). LCOE is the method used to compare the relative cost of electricity production using different technologies.
Criticisms of common use of LCOE include the use of outdated data, consideration of theoretical rather than real plant utilization of technology and failure to calculate the correct plant lifetime. There has also been a failure to account for the full costs of a traditional plant, such as decommissioning, carbon and other environmental costs, insurance subsidies (nuclear) and fuel subsidies (fossil).
“it is still a common misconception that solar PV technology has a short life and is therefore extremely expensive in the long term. Yet, depending on the location, the cost of solar PV has already dropped below that of conventional sources achieving grid parity.”
Life-time cost of solar PV is crucial to the whole argument. The upfront cost is the biggest hurdle and so the cost effectiveness of solar is highly dependent on the types of financing available. This is an aspect of solar PV generation which the report considers should be taken into account at policy level.
The full report puts a variety of assumptions to the test with regard to equipment cost and financing options. Various scenarios are examined using a range of variables such as financing options, interest rates and loan duration. Many of the scenarios see solar PV generation falling within the grid price range for Canada ie. achieving grid parity. The report concludes:
“Given the state of the art in the technology and favourable financing terms it is clear that PV has already obtained grid parity in specific locations and as installed costs continue to decline, grid electricity prices continue to escalate, and industry experience increases, PV will become an increasingly economically advantageous source of electricity over expanding geographical regions.”