President of the European Photovoltaic Industry Association (EPIA)
According to the EPIA Global Market Outlook for PV for 2013-2017, we are at a ‘turning point in the global PV market’, with ‘profound implications in the coming years.’ Why is it a turning point and what are some of these implications?
On a positive note, we’ve proven that renewables have already been able to demonstrate their cost and price development. If you’d asked anyone, only a few years ago, whether it was possible for a decentralised, photovoltaic (PV) system on a roof in Germany to produce electricity at below EUR 0.15 per kilowatt-hour (kWh), without any subsidy, where you normally pay EUR 0.28/kWh, like I do, they would have said, ‘maybe in 50+ years, but definitely not in this decade’. And most northern countries like the UK, at least south of Manchester, have similar sunshine conditions to Germany. But today, at EUR 0.15/kWh for rooftop decentralised PV in most northern countries and well below EUR 0.10/kWh in Spain, Italy and Southern Europe, you’re already able to produce electricity from rooftop PV at well below the retail price of electricity in these countries.
Also, looking back at how things have changed, in the 1990s all the major utilities and municipalities in Germany were saying that it would never be possible to have more than 4% of renewables in the electricity production mix – even including hydroelectric. Today, we have 25% in Germany, and 5% of this is for PV alone. That shows how things have developed through the technology advances. That is the big game changer. Meanwhile, the large nuclear or fossil-fuelled power stations will only become more expensive. Each power station is a project in its own right and materials are getting more expensive, even if you are increasing efficiency. In addition, fuel will be more expensive in coming years.
So why is it a turning point now?
In a positive way it is a turning point because, up until two years ago 80% of the solar PV modules produced in the world were installed in Europe. Obviously, this is not a very healthy situation for a global industry. Now the European market is slowing down but other regions in Asia, Africa and America outweigh this. Last year only 50% of the modules produced globally were installed in Europe. So, we are no longer so dependent on a few countries supporting PV and are increasingly competing openly in the energy sector. This is shown clearly in EPIA’s flagship publication, ‘Connecting the Sun’.1
Take India for example. Here they are adding PV to existing diesel systems, which might be in a mining factory in the desert. By adding PV and the necessary control equipment, they end up with lower energy costs. With several gigawatts of newly installed diesel systems in India, there is a good market volume for PV. That is the turning point. We are truly developing a global PV market.
Does that mean that PV can compete without the subsidies and feed-in tariffs?
In the future PV will be competitive without subsidies – but not in countries where other fuels are heavily subsidised. For fossil and nuclear power, the generation cost will be around EUR 0.10/kWh and PV will definitely be below EUR 0.10/kWh, as will onshore wind. And for fossil-fuelled power, they’re still working hard to develop carbon capture and storage. So far, the results aren’t very encouraging. And even when it is done, technically, the question is how expensive it will be and how safe it will be forever. If CO2 leaks out in the future, that’s not really what we need.
Is the new abundance of oil and shale gas, especially in the USA going to undermine chances of renewables like PV becoming competitive with fossil fuels?
Some people are talking of fracking and having cheap gas. That may be possible for some places in the USA – but not without some environmental concerns - but not for Europe. In Germany, if we could use all our available shale gas, it would just deliver enough for 17 years, based on annual gas consumption today. Is that a solution for the future? Definitely not.
So is PV now a good investment for the homeowner in Europe?
As a private homeowner you can now ask yourself whether to make an investment that gives you at least 25 years’ use (the warranty period for the major components, like the modules, which probably means the real lifetime of the products is above 30 years).
But the real advantage comes if legislation allows you to utilise the electricity produced in your own home, which I think should be possible. After all, if you’re growing vegetables in your own garden you should be able to eat them and not be forced to shop at the local market store! If that is the case, you can then optimise your PV system. That is what is happening now in Germany. Self-consumption should be increased from present levels of 20-25%. You can also do a lot to increase that self-consumption, like demand side management. Some things you can do yourself, like switching on the dishwasher when the sun is shining. And there are some more sophisticated methods for demand side management, like home managers – such as those sold by SMA, the company I represent at EPIA. These can switch appliances in a house on and off.
Germany has recently offered federal support to encourage local storage for PV. What is the advantage?
If you add a few kWh from batteries it will increase your self-consumption possibilities to 70% or more. You then get even cheaper electricity for the next 25 years. The difficulty here is that, with investment in the batteries of today, the costs are still about EUR 0.20/ kWh. If you then add the generation costs from the PV system plus the storage, you are, in some countries, just about on a level with the cost of electricity from the grid. But that’s why support at this stage is useful – and I emphasise support, not subsidy. A support scheme has a goal. For PV in Germany, 12 years ago we started with a feed-in tariff where the goal was to have lower costs and price with increased volume, which indeed was the case. When we started, we had, in Germany, a levelised cost of about EUR 0.60/kWh; today we are at EUR 0.15/kWh and below
The same will be true for storage. The battery industry has still not identified the technology for decentralised storage of electricity in homes in the kWh range and in municipalities in the MW/h range. Like for PV, it needs some push and support schemes to get people interested in investing. When the market shows up I am pretty sure we will be at storage costs well below EUR 0.10/kWh in the medium term and even EUR 0.05 – 0.06/kWh. With 10 euro cents for production of PV plus 5-8 euro cents per kWh for storage, you’re still below 20 cents. If you pay 28-30 euro cents, because electricity prices will increase, then by including storage you will be able, in a few years, to be below what you pay normally.
What are some of the technological challenges for solar PV now?
For the next few years we have a lot to do to bring costs down further. Today’s prices are mainly determined by overcapacity. The next steps should lead to good efficiency improvements and lower material costs. That means that future production costs will be below today’s prices. Then we’ll see the prices continue to decrease, according to the price/experience curve.
In 2012 the European market declined for the first time, compared to the previous year. Meanwhile, China plans to quadruple its solar power generating capacity to 35 GW by 2015. Is this good news or bad for European manufacturers?
It’s great that they have increased their goal for the next few years to install at least 10 GW a year of new solar PV in China. This is good for China, it’s good for the planet, and it’s good for industry in China. It’s positive.
How about its impacts on the European solar industry? Will there be a market for European manufacturers?
I would say, knowing what the competition within China will be like, there will be some challenges for companies outside China. There might be joint ventures for example. SMA has taken a majority share in a Chinese inverter company in order to be able to participate in this increasing market. I think that is the way to go, as in many other industries, like the car industry.
So the potential markets for European manufacturers are elsewhere, like India and South America?
In many places it depends on the size. There aren’t many countries where you can identify a multiple gigawatt/year market. India will be one. It depends on the size of the installation and the products being made in that country. In the future it will be more important to compare the cost of low volumes of [domestic] production versus importing the technology and then having to add transport costs. Components are going down, but transport costs will go up.
Given the changing market for renewables, is the EU SET-Plan still an effective tool for achieving low-carbon goals in Europe?
First, within the SET-Plan, it was possible – together with our umbrella organisation, the European Renewable Energy Council (EREC) – to have an agreement on a number of renewable targets for 2020. Now we would still like to see a clear political commitment from the EC and Parliament for 2030. We would like to have a clear goal – where we would like to be in 2030. And of course it should not be too broken up into too many details. But, as we did for the last 10 years, to give support to those technologies that have proven that they are able to develop and get cheaper and cheaper with volume. PV is perhaps the best example of that. There is no other technology within the energy sector that has been able to demonstrate, over a 20-year period, a decrease by more than a factor of ten. That is outstanding.
So whenever you decide to create a market support system, you should also take a close look, together with industry, to make sure that you are not supporting a technology that stays the same with increased volume or, in the worst case, even goes up. This will involve close monitoring to make sure that the promises are always kept. If this is done, then I’m pretty sure you can very soon arrive at the goal of green electricity at affordable prices that are below those of fossil and nuclear and without further support schemes.
1To download the EPIA report, ‘Connecting the Sun’, see: http://www.epia.org/fileadmin/user_upload/Publications/Connecting_the_Sun_Full_Report_converted.pdf