Friday, January 17, 2014

Photovoltaic energy already competitive without incentives in Europe

Ugo Bardi's solar panels on the roof of his home

The journal section "Energy Systems and Policy," published in Frontiers in Energy Research, is a new, open access journal that aims at publishing high quality papers also by means of an innovative peer review process. The journal has just started its activity but such good papers seem to be already flowing in. Here is a summary of Luis De Sousa's recent paper on Frontiers, as described in his blog "At The Edge of Time". The gist of the paper is that falling costs have made photovoltaics already competitive with traditional suppliers. The result is that the support measures put in place by many European governments have done their job: now PV energy is expected to start a phase of growth as off-grid, stand alone systems.

The full paper by Luis de Sousa is available open access on Frontiers in Energy Systems and Policy. Published by Frontiers in energy research

Photovoltaics: new policy challenges for Europe

by Luis de Sousa

"Photovoltaics: new policy challenges for Europe" is the title of an article of my authorship published by the Frontiers in Energy Systems and Policy journal. The abstract:
After the turn of the century governments across Europe set in place a series of programmes to expand investment on grid-connected solar power technology, especially photovoltaics (PV). But in face of rapidly declining costs most of these programmes have been tapered in recent months. Using a simple cost model this article shows that PV technologies can indeed supply electricity to the grid for less than 0.10 €/kWh in large swaths of the continent, apparently justifying this policy change. However, the roll back of fixed rates to PV suppliers will likely result in a market structure close to perfect competition, where profits are not expectable and the price should fall towards marginal generation cost: 0 €/kWh. Due to the scalable nature of PV, many consumers in Europe are now able to produce their own electricity at a cost considerably lower than the rates demanded by grid utilities. Investment on PV is thus set to continue in spite of recent policy changes, but henceforth on off-the-grid systems, conceived for self consumption. Long term this trend presents serious challenges to utilities and traditional electricity suppliers, putting at stake the existing electricity market framework.
This article continues and formalises my recent work on Photovoltaics in Europe, in particular its potential impacts on the electricity market. The roll back of feed-in-tariffs (FIT) seems justified by the rapid decline in PV modules and installation prices. However, this may have unintended consequences that I try to explore.

In this article I used the Solar Power Cost Calculator (SPCC) to compute maps of PV electricity cost in Europe, that put this question into a geographic perspective. Electricity at competitive prices is now a possibility in large swaths of the continent.

I then present an overview of the Perfect Concurrency (or Perfect Competition) concept, pointing out that most of its conceptual characteristics are met by an electricity market with large numbers of small suppliers. This supports the hypothesis that without FIT PV investors will have no incentive to connect their systems to the grid, rather using the electricity for self consumption.

Using the results from the SPCC and electricity rates to consumers I computed anther map portraying the gap between the cost of a Wh generated by a PV system and that of a Wh tapped from the grid. Half a dozen member states already exhibit gaps over 0.10 €/kWh, with another half also in positive territory.

These results lead to a reflection on several open challenges: (a) the smart grid concept, (b) scaling tools and methods for off-the-gird systems, (c) the future structure of the electrical grid and (d) unexpected impacts from storage technology developments.

All journals hosted by Frontiers are published in open access and thus the article is available to the public in its entirety.
The full citation:

de Sousa L (2013) Photovoltaics: new policy challenges for Europe. Front. Energy Res. 1:7. doi: 10.3389/fenrg.2013.00007


Ugo Bardi is a member of the Club of Rome, faculty member of the University of Florence, and the author of "Extracted" (Chelsea Green 2014), "The Seneca Effect" (Springer 2017), and Before the Collapse (Springer 2019)