Cost of solar energy will match fossil fuels by 2013, claims Solarcentury

Falling production costs for solar panels and increasing nonrenewables electricity costs have brought parity closer

• Adam Vaughan
• guardian.co.uk, Tuesday 12 May 2009 17.07 BST
• http://www.guardian.co.uk/environment/2009/may/12/solar-energy-price-fall

Solar energy will fall in price to match the cost of conventional fossil fuel electricity far sooner than previously expected, the UK's largest solar company has claimed in a new report. Solarcentury said British homeowners will see solar achieve "grid parity" – the point where solar electricity rivals or becomes cheaper than conventional nonrenewable electricity – by 2013. Most predictions suggest that technological innovation will not bring the price down far enough until 2020 or later.

The company suggested falling production costs for solar panels and increasing conventional electricity costs have brought parity closer. Prices for solar and grid electricity in residential homes are expected to crossover at around 17p to 18p per unit of electricity (kWh) in 2013, followed by parity for commercial solar electricity in 2018.

Last December, the renewable energy analysts New Energy Finance predicted silicon costs – a key material for much solar panel technology – would fall by 31.5% in 2009 compared with 2008 levels. Energy consultants Element Energy, under commission from the government, have also forecast solar PV costs will fall by around half between now and 2020.

Derry Newman, CEO for Solarcentury, said: "When you reach grid parity, you have a watershed moment where the perceptions of investors and consumers shift. People have been programmed to believe solar is expensive and takes a hundred years to pay back, but when parity arrives people realise it takes 8-10 years to payback, and they can then be making money out of it."

Jeremy Leggett, executive chairman of Solarcentury said, "The feed-in tariff that the government has said it will bring in from April 2010 is vital. A burst of premium-pricing for solar energy, of the kind now on offer in 18 European countries, will stimulate a very fast-growing market."

Experts said the projections were based on significant assumptions in future energy prices, which have been extremely volatile over recent years – last year saw gas and electricity prices double, but now household bills are falling again

Ray Noble, solar PV specialist at the Renewable Energy Association, said: "The predicted grid parity by 2013 could be possible if all of the predictions, both in terms of grid electricity prices increasing and reductions in the cost of solar PV, come through. However that's a big if – any slight changes in the pricing can add further years to this date." He added that the important message is that even if grid parity slipped to 2016, the moment when solar can compete on cost is not far off.

Chris Goodall, Green party parliamentary candidate and author of Ten Technologies to Save the Planet, warned the grid parity predictions were based on unrealistic price assumptions. "This projection of residential grid parity depends crucially on continually increasing prices of conventional electricity, but I just don't see any evidence that residential electricity will cost 17-18p a kWh in 2013. The 'underlying' retail price of electricity at the moment is no more than 11p per kWh," he said.

Newman argued that China will continue to take more fossil fuel and believes peak oil will begin to bite in 2013, which will both contribute to rising prices in fossil fuel electricity.

Other parts of the world, such as Spain and California, have already achieved grid parity on the price of solar, but only for large installations rather than small scale ones for homeowners.