In a move that surprised few observers, the UK government recently slashed subsidies for solar projects. So what does this cut mean for solar power in this country? Does it make any sense, or should we be supporting other innovative energy technologies? Stimulated by a growing market for sustainable energy generation, the solar industry has advanced in huge strides over the last few years. Current bulk prices for photovoltaic (PV) modules stand at €1.32/W and €0.99/W for mono-crystalline and thin film technologies respectively, down from about €10/W a decade ago. These costs put large industrial solar parks at a total cost of about €4/W. So how far from being economically viable is solar power?
The sharp reduction in system costs and government subsidies have brought rife penetration. For example Germany now has more than 10GW peak capacity, followed by Spain with more than 3.5GW, Japan with 2.6GW, USA with 1.6GW, and Italy with 1.2GW. More than half of this capacity was installed in the last two years and every year more than 6GW are deployed globally, the equivalent of four large nuclear reactors.
Solar photovoltaic electricity makes sense in sunny climates, where irradiation can be as high as 2200kWh/m2/year. But what about more temperate climates? The European Commission has made an interactive map available to calculate energy generation of photovoltaic plants. A fixed angle installation in southern Spain receives an average of 5.9kWh/m2 of energy per day compared to 3.5kWh/m2 in Cambridge, UK. Let’s consider a 1MW-peak plant – about the size of a football pitch. The plant should cost around £3.5M to build. Assuming a system efficiency of 16% (solar cells and conversion) and efficient energy management, the annual energy generation in Cambridge would be 1.2GWh. In a 20 year lifetime (efficiency drops to 80% at end of life) the total energy generated is 21GWh.
Energy prices have increased in recent years. Bulk electricity is currently purchased by the National Grid at around £38/MWh. Assuming prices will remain constant in real terms and ignoring interest, the energy generated by our power plant represents a current value of £0.8M. Clearly this is a long way short of the initial investment. However, we are comparing solar PV against conventional fossil-fuel power plants.
To be attractive to private investors, our plant would need a subsidy of around £300/MWh – exactly the level at which feed-in tariffs for large PV schemes had been set (at £293/MWh). However, wind power could be economic with a subsidy five to ten times smaller than this. Compared with this, in the UK at least, setting subsidies for solar power at their former level was always going to be hard to justify or sustain in the current economic climate – we would do better to invest in other sustainable technology developments, or in more efficient energy management. Worse than that, such high subsides may well even stifle the development of innovative green technologies which could outperform both wind and solar power.
Nevertheless, the PV industry marches on thanks to incentives and innovative new products it is expected to halve prices again in a few years. At about that time electricity prices may have doubled and at that point PV – and probably many other innovative green products – may be able to pay for itself in Britain. Let’s look at this numbers again in 2014.