Photovoltaics is one of the most fast-growing renewable energy sectors in the global economy. Its growth potential is driven by such factors as rising public awareness of environmental issues related to the use of traditional power sources, increasing cost of conventional energy sources, as well as national energy security concerns. While these factors apply to all alternative energy sources, solar technology has unique advantages. Sunlight is free, abundant, widely available, and renewable. Besides, it can be converted to electrical power with less environmental damage. Also, PV systems are modular, which means that they create generating capacity of almost any desired size and power. They can work both on- and off-grid.
Analysts and industry players foresees the market to reach 14-26 GW by 2015, growing at a Compound Annual Growth Rate (CAGR) of 17-32%, depending on the scale of sector support by national governments. Through 2015, production capacities along the PV value chain are expected to grow with a CAGR of 20 to 30%.
Оne of the major constraints of the PV sector growth is that solar generation rates are still higher than those of fossil fuel based electricity and other renewable sources. Solar PV demand continues to be driven by government incentives in countries trying to reduce their dependence on oil and conscious about environment.
But the price of solar electricity has been rapidly declining over time. In 1976, it was about
$2.00 per kWh, and today it is $0.15 to $0.50 per kWh, averaging at $0.25/kWh. Based on the current technological advances, materials pricing trends and installation volumes, the cost of solar electricity is expected to decrease by 8% each year or by over 50% every 8 years.
According to EPIA, by 2020, the PV electricity cost can reach a level of under 0.10 €/kWh for industrial size systems and under 0.15 €/kWh for residential systems.
According to industry analysts and players, grid parity ─ the tipping point at which the solar energy is cost-competitive with other sources of energy on electricity grids ─ could happen already in the next couple of years in some southern regions of the EU (Italy, Spain) and within 2-5 years from now in some other countries countries (such as Germany, Japan) and in parts of the U.S. (e.g. California where retail electricity prices for residential users already reach $0.36-0.40/KWh – same as unsubsidized solar power costs), if the price of fossil fuels continues to rise at its current pace.
Another factor driving the market growth is so called “investment competitiveness” – when investment in a PV system would be profitable over some years compared to the price of a grid contract for the same number of years, in the absence of any external price subsidies. According to EPIA, investment competitiveness can be reached in some European regions already in 2010, and by the end of 2020, PV will be competitive in 76% of the European electricity market.
It is also worthy to point out that critics of solar electricity as being more expensive often fail to consider such factors as:
· The type of PV application (grid-connected or off-grid)
· What exactly is PV competing with ─ what are the alternatives?
· The location, initial investment costs and expected lifetime of the system.
· Progress in PV cost reduction.
Many off-grid applications are already cost-competitive. PV here is generally competing with diesel generators or the potential extension of the public electricity grid. The fuel costs for diesel generators are high, while solar energy is free and inexhaustible. The extension of the electricity grid requires a considerable investment. While initial investment costs for off-grid PV can also be high, their lifetime operating costs are very low. Off grid applications are therefore often the most suitable option to supply electricity to remote areas.
For grid-connected systems, which is and will remain the largest market segment, a lot depends on pricing trends for electricity from conventional sources. For example, in Europe in 2005 – 2007 electricity prices increased by about 16%. At the same time, PV generation costs have been decreasing, and this trend is expected to accelerate: by 2020 the cost of solar electricity will have more than halved. This would make it competitive with typical consumer electricity prices. Grid parity is expected to be reached first in southern countries (in a few years) and then spread steadily towards the north (expected by 2020):
