The Solar Energy Breakthrough Will Change the Energy Business Landscape

The cost of solar modules has fallen substantially over the past six months and is expected to fall still further. Photovoltaic solar energy is nearing its breakthrough point. This will happen once the cost of solar electricity equals the cost of electricity from the grid.

That point is referred to as "grid parity" and will vary from country to country depending on the market segment. In sunny California, the grid parity point for private households is near, as solar irradiation is high and consumers pay a high price for their electricity. In France– a little less sunny and with low electricity costs due to its cheaply available nuclear power– grid parity is a little further away.

Nevertheless, grid parity for solar PV will come to all countries eventually, because the cost of solar electricity will continue to fall, while the cost of electricity generated through fossil fuels will only increase. Solar modules and systems will become cheaper as a result of improvements in technology and the scaling up of manufacturing processes. The cost of electricity from the grid will become more expensive as a result of growing demand and the scarcity of fossil fuels. Increasing environmental concerns translating themselves into eco-taxes may raise the price as well. Grid parity could be reached in California and southern Italy in less than two years, while it may take a little longer in other countries, such as Spain, Portugal, and Greece. Other countries will soon follow suit. What can we then expect?

Once grid parity has been reached, consumers will be presented with a choice: (1) to buy all their electricity from traditional energy utilities or (2) to pay the same price and (partly) generate green renewable solar energy from their own roofs. Not only will the growing focus on green and sustainable development make solar power a preferential alternative, but even more important will be price stability. Following its installation, a solar energy power system will generate solar electricity at fixed cost for at least 25 years. Operation and maintenance costs are negligible. The cost of solar electricity will be determined by the depreciation schedule and the interest rate. Both of these can be forecast over a long period of time. Compare this to the annually changing cost of grid electricity. Is it likely that fossil fuel-based electricity prices will be stable over the next 25 years? This would seem to be an unlikely scenario when looking at growing concerns about climate change, Asia’s rapidly increasing energy demands, international political instability, and anticipated uncertainties about the easy exploration of oil reserves.

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