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Subsidy free solar power

Globally, renewable energy has almost universally relied upon subsidies, solar power included. This has resulted in precarious market situations, with boom bust scenarios as subsidies have dried up due to economic imperatives. Engerati reports  that in Spain generous subsidies created a booming market in 2008 which came to a halt during the global economic crisis. This left many small-scale solar producers reliant on these subsidies in a precarious situation.

But, it appears that the industry is reviving itself without subsidies and feed-in tariffs. A new utility-scale solar plant in Seville is proving that it can be done. Jose Luis Garcia, who focuses on climate and energy for Greenpeace Spain points out that solar energy, is running through its learning curve a lot faster than anyone could have anticipated. As a result, the need for economic support for new plants has decreased.

Today a solar panel costs about 80% less than five years ago and it yields the same amount of power. In addition to this, costs are projected to be lower by another 50% by the end of this decade.

According to Red Electrica de Espana, there was 4,681 MW of solar PV capacity in Spain by the end of 2013 which generated 8,937 GWh of electricity or 3% of Spain’s total electrical demand. Another 2,300 MW of solar thermal provided 4,554 GWh, or almost 2% of the total demand. Wind made up almost 21% of the country’s total demand.

The 2.5 MW Seville plant is not huge. But the company behind the plant, Enerpro, is planning a number of 1.0 MW plants which will total another 12 MW.

Currently, the Spanish grid operator has 40,000 MW of planned PV plants that await grid integration while their investors are valuing the fact that electricity from the new PV plants can now compete in the market without any support system to make the investment financially viable.

According to analysts from global investment bank UBS the arrival of socket parity – where the cost of installing solar is cheaper than grid-sourced supplies – is about to cause major growth in unsubsidised solar installation in Europe.

In response to the significant decrease in European electricity prices, a team of energy analysts from UBS, has drawn up a report entitled “The unsubsidized solar revolution.” The report suggests that investing in solar will become a no brainer for households in several European countries. The report also points out that this revolution will also have profound implications for the incumbent energy industry.

“Solar has turned from a heavily-subsidised marginal technology into a mainstream source of power generation,” the UBS analysts write. “Thanks to significant cost reductions and rising retail tariffs, households and commercial users are set to install solar systems to reduce electricity bills – without any subsidies.”

In the long run, an increasing number of customers will effectively become utility competitors. It is estimated that in Germany alone, there could be an installation of 80 GW of unsubsidised solar. This is added to the 32 GW already installed through subsidised installation, and the 52 GW cap put on subsidised installations.

By 2020, up to 43 GW of unsubsidised solar could be installed in Germany, Italy and Spain, replacing up to 9% of electricity demand. “We are at the beginning of a new era in power markets,” the UBS analysts write. ”Purely based on economics, we believe almost every family home and every commercial rooftop in Germany, Italy and Spain should be equipped with a solar system by the end of this decade.”

UBS points out that there is no immediate prospect of unsubsidised solar in other European countries, either because retail tariffs are lower (France), or because of little sun (northern Europe). But, it definitely has implications for other countries, particularly Australia, which has high retail tariffs and excellent solar resources, and which already has a near 10% penetration rate of rooftop solar on available households.

The emergence of cost-effective battery storage will allow consumers to become even more energy independent as peak pricing is removed. Without peaks, the profit margin of generators is removed. Even bigger savings for the consumer is expected as PV with battery storage, while more costly now, is expected to cross over in 2014.

The only challenge for unsubsidised solar is that its development can be stopped by regulation, or fixed tariffs. However, given the rising costs of fossil fuels, this would be a PR nightmare for the generation industry.

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