By Rafael Diranzo

Over the last few years, there has been a consolidated downward tendency in the costs of photovoltaic installations--in annual mean of 7% or a 20% cost reduction each time the yearly output volume doubles. This cost reduction is due, among other reasons, to the improvement of the production processes--including increasing automation, higher efficiency and productivity in cell production as well as considerably improved performance, both as regards raw materials and finished products. At the same time, electricity bills continue to rise whereas the incentives that foment the injection of the PV energy production into the grid are dwindling each year.

These tendencies enable us to ensure that the price of electricity and PV production will be leveled and that grid parity will be reached in the near future. Cost reduction makes the PV sector competitive in terms of solar kWh, without any type of subsidies or incentives, with respect to the cost of kWh consumption. In other words, when the price of photovoltaic kWh equals that of kWh paid by the consumer. Before 2016, the price of power consumption will in certain European countries exceed the cost of PV generation, so that any consumer will be able to produce and consume their own power more cheaply rather than buying it from the local electricity company. Shortly after grid parity is reached for domestic consumption, it will reach industrial consumption as well.

Europe: Reaching Grid Parity

According to the experts, Italy will be the first country to reach grid parity as here the price of domestic power currently exceeds 0.20 per kWh and radiation rates are among the highest in Europe. In short, cost reductions of equipment and PV production plant installations will reach grid parity in less than 5 years. After a few years, Germany will follow, and shortly thereafter the rest of the European countries. In this context and with these forecasts, the EPIA (European Photovoltaic Industry Association) maintains that by the year 2020, 12% of the European power consumption will be facilitated by PV solar energy.

Legal Action Required

Some Southern European countries are projected to reach grid parity in less than five years--the average price for domestic power in the EU is 0.17 per kWh. For this very reason, we should start planning the regulation of PV power production as soon as possible. It is important that within a few years regulations and infrastructures be in place to ensure stand-alone power consumption and storage or the sales or injection of surplus power into the grid. We, therefore, need to start investigating the best regulatory framework to fit the future grid parity. Governments will need to take this into account when drafting the legislation and schemes regarding renewable energy and power efficiency. Clearly, these legal actions will have to ensure stability to the profitable PV market.

However, until grid parity is reached, the EPIA argues, cost reduction will be met with increasing technical research within a convenient political framework: reasonable power sales incentives, smooth administrative processing of installations, priority to grid access and public investments. States need to be aware that fomenting this technology means a solid investment in the future, not only in domestic power production capacities, but also concerning the creation of a consistent and sustainable industrial fabric.

Preparing for grid parity, politicians need to contemplate two basic considerations: the need to maintain public support for the technology until full competitiveness is reached with the rest of the power sources and the importance of stand-alone power consumption, which is essential to reaching full competitiveness halfway through this decade. The majority supports the latter consideration because the user continues to pay his fixed power rates and the corresponding taxes; as long as no definitive solution is in place for the accumulation, the PV producer will have to continue using the supply grid during certain hours of the day.

Advantages Continue

In Spain alone, the implementation of stand-alone consumption will enable the Spanish PV market to move up from 11.5 GW to approximately 17 GW, which would add up to 5.8 billion to the GDP and create more than 50,000 additional direct jobs. Energy dependency would be reduced by 5% and the power peak demand by 6%. Approximately 2.5 billion in CO2 emission payments would be saved and the environmental targets and the penetration of renewable energy by 2020 made feasible. In addition to these positive macroeconomic data, consumers will be able to save much money directly on their energy bill: with an annual energy balance, the internal consumption in the domestic market would range between 60% and 80% and would average between 30% and 50% in the commercial/ industrial markets.

All of these benefits would apply without increasing the public subsidies that are already in place under the current regulation and without affecting the regulating agents of the electric system.

When this occurs, a large, very beneficial decentralization process of the power production will follow in any geographical area or state. This will enable a larger stand-alone energy production, less dependence on fossil fuels, greater stability of the grid, less loss through transportation and, as we all know, a substantial reduction of CO2 emissions and other waste involving non-renewable traditional energy sources. The advantages do not stop here, however. The growing industry in this sector can create much wealth, employment, industrial investment and can even be attractive to outside capital.

The industry and all of the companies in the branch are asking for a gradual rate reduction which would enable the sector, through investigation and integration of the production process, to continue lowering the price of the products. The sector needs an appropriate legal framework enabling companies to project their medium-term planning.

Very Beneficial Industry

The photovoltaic solar energy sector can mean a great stimulus for the Spanish economy. Energy is one of the basic needs and renewable sources give us the means to achieve this in a simple and limitless fashion without any harmful environmental side effects. Cost increases and the environmental effects of fossil fuels also present a unique opportunity to develop new sources of wealth and employment, such as renewable energy. We had better make sure not to miss this opportunity.

The sun could be the oil of many countries.    

Rafael Diranzo is Communications Director at Siliken (http://www.siliken.com/).

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