Solar Energy Costs on Par with Conventional Power

Solar energy finally costs the same as conventionally-generated electricity in parts of Europe.
Published: Thu 27 Mar 2014

In Germany and Italy, commercial solar power has pulled even with conventionally generated electricity rates. This is according to a report from consulting firm Eclareon which has also revealed the extent to which solar energy has integrated into the energy market.

Electricity produced through solar panels no longer costs significantly more than conventionally-generated power. Italy and Germany are at grid parity and have proper regulation to support this development. PV solar systems are used for self-consumption, representing a viable, cost-effective, and sustainable power generation alternative.

Levelled cost of energy

The analysis, by consulting firm Eclareon, was carried out on behalf of an international group of sustainable energy interests. The research focuses on the commercial sector rather than the residential sector and it assesses a standard 30KW solar photovoltaic system for the average commercial building. The analysts implemented a “leveled cost of energy” (LCOE) methodology in seven different countries: Brazil, Chile, France, Germany, Italy, Mexico and Spain.

The levelled cost of energy accounts for all of the factors that contribute to the overall cost of electricity-these include installation, maintenance, depreciation and investment. The aim was to provide a more complete picture of each power source’s economic position vis-a-vis its rivals.

According to the analysis, solar’s levelled cost of energy in Italy and Germany is now at “grid parity” which means that it is even with retail electricity prices in general in those countries. Spain has also reached parity and Mexico and France are making headway.

Progress in Brazil, Chile and Mexico is still impeded by high installation costs.

Standing in the way of grid parity

The research warns that high installation costs in many other countries such as Brazil, Chile and Mexico are impeding them from attaining grid parity.

In addition to this regulatory law in European countries isn’t geared to handle a world in which electricity consumers also produce and sell their own electricity. Sometimes there are added fees for people who generate their own solar power, sometimes they aren’t legally allowed to sell their excess power back to the grid, and sometimes laws can rocket back and forth from solar-friendly to solar-unfriendly in short order. In Madrid, recently introduced regulations make it illegal for people to consume the electricity they produce from their own solar panels.

As a result, meaningful market competition between solar power and other forms of electricity is difficult to attain, even when their respective prices have pulled alongside one another.

Solar still costly in the US

In comparison to its European counterparts, solar is still rather costly in the US.

This is mostly due to demand. In 2011, Germany boasted more than 21 times the solar power, per capita, of the US which certainly helped to reduce the price of solar. In addition to this, US companies struggled to recruiting customers and spent ten times more than their foreign counterparts on solar marketing costs.

But, the biggest reason for hindering US solar development is the so-called "soft costs." These include everything from fees and taxes to company overheads. For instance, while German installers added US$1.20 per watt to the cost of each panel in 2011, US companies added US$4.36 per watt.

According to the Department of Energy, soft costs make up 64% of the price tag on installing residential solar systems in the US.