Solar to reach cost parity by 2025

December 5, 2013 | By Barbara Vergetis Lundin

Solar electricity will reach cost parity in 10 major regions, accelerating adoption without subsidies, and will even benefit from abundant natural gas. That is according to Lux Research.

Solar parity with gas. Click to enlarge. Credit: Lux Research

Unsubsidized utility-scale solar electricity will become cost-competitive with gas by 2025, the research says, and increased gas penetration will actually benefit solar by enabling hybrid gas/solar technologies that can accelerate adoption and increase intermittent renewable penetration without expensive infrastructure improvements.

The levelized cost of energy (LCOE) from unsubsidized utility-scale solar closes the gap with combined cycle gas turbines (CCGT) to within $0.02/kWh worldwide in 2025, a Lux analysis of 10 global regions found. Solar's competitiveness is led by a 39 percent fall in utility-scale system costs by 2030 and accompanied by barriers to shale gas production, such as anti-fracking policies in Europe and a high capital cost in South America.

"On the macroeconomic level, a 'golden age of gas' can be a bridge to a renewable future as gas will replace coal until solar becomes cost competitive without subsidies," said Ed Cahill, Lux Research analyst. "On the microeconomic level, solar integrated with natural gas can lower costs and provide stable output."

Lux Research analysts created a bottom-up system cost model and analyzed LCOE to evaluate solar, gas, and hybrid technologies' competitiveness under different gas price scenarios across 10 regions around the world through 2030. They found that solar can be competitive with natural gas as early as 2020 if gas prices are between $4.90/MMBtu and $9.30/MMBtu, depending on the solar resource. In the likely scenario of gas prices above $7.60/MMBtu, solar will be broadly competitive by 2025 in all 10 regions.

Subsidized-to-unsubsidized transition will be turbulent experience challenges because standalone solar will not yet be competitive when subsidies start expiring in markets like China, the U.S. and Japan, according to the research. Companies will need to diversify geographically and transition to areas with fewer gas resources or develop hybrid systems that take advantage of low gas prices.

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http://www.fierceenergy.com/story/solar-reach-cost-parity-2025/2013-12-05