Solar Photovoltaic Predicted to Become Cost-Competitive in Europe

European Photovoltaic Industry Association

Solar Photovoltaics Competing in the Energy Sector: On the Road to Competitiveness

A study recently released by the European Photovoltaic Industry Association (EPIA) concludes that electricity from solar photovoltaic can be competitive with electricity from the grid as early as 2013 in Italy, and will become competitive in other markets (France, Germany, Spain and the United Kingdom) by 2020. The study concludes that over the last 20 years, the price of PV modules has decreased by over 20 percent every time the cumulative sold volume of PV modules doubles. Similarly, system prices have declined, and achieved a 50 percent reduction in Europe during the last 5 years. The study projects that system prices could decrease in the next ten years by 36 to 51 percent depending on the segment. This would result in the cost of PV electricity generation in Europe decreasing from a range of 0.16 to 0.35 euros per kWh in 2010 to a range of 0.08 to 0.18 euros per kWh in 2020 (depending on system size and irradiance level). Along with the decreasing cost of PV electricity, the price of grid-supplied electricity is expected to increase between 2 to 6.7 percent per year on average, thereby shortening the time needed for PV to become competitive. The study considers the full cost of photovoltaic electricity generation by using the concept of Levelized Cost of Electricity (LCOE), which takes into account all investment and operational costs over the system lifetime, including fuel consumption and equipment replacement. The study concludes that achieving PV competitiveness across Europe will require political commitment to regulatory frameworks that support development of the technology and removal of market distortions. One such support mechanism, of course, has been the widespread use of Feed-In Tariffs in Europe, which compensate for the difference in cost competitiveness between PV electricity and that of conventional sources.