21.11.2012
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Photovoltaics

US economists say solar competitiveness "may never arrive"

Analysts at AllianceBernstein doubt that solar will ever become cheap enough to compete without subsidies – and they cite Germany as an example.

Last week, Renewables International reported on the misleading economist's view point when it comes to renewables: deployment will not bring down costs; research will. And technologies with different strengths and weaknesses are compared merely in terms of price.

Now, it has come to our attention that the chief investment officer at AllianceBernstein and one of her associates claimed last month on their firm's website that solar will "never" become cost competitive without subsidies – unless society "pays out trillions of dollars to get there."

The authors base their conclusion on a theoretical calculation of future cost declines. If, for instance, the cost of solar drops by 13 percent every time installed capacity doubles, as the analysts calculate, the installed capacity we would have by the time we reach cost parity with natural gas (the comparison made by the authors) would already exceed the entire world's power consumption.

The analysts are not unfamiliar with the situation in Germany: "Germany, for example, has subsidized the solar industry to the tune of 50 billion, yet it only gets six percent of its electricity from solar power." The comment is reminiscent of the discussion about wind power in the 1990s in Germany: we have spent so much money on wind power, yet we only get 1, 2, 3, 4, 5, 6, 7, and now 8 % of our electricity from wind power – the sentence stays the same, with just the figures changing.

 - While the world celebrates cheap solar, some financial analysts remain in denial.
While the world celebrates cheap solar, some financial analysts remain in denial.
Benjamin Klack / pixelio.de

Then comes the renunciation of deployment in favor of innovation: "The marginal tax dollar would find a better home in the research labs of universities, where fundamental technological breakthroughs are more likely to yield a big increase in efficiency and corresponding decline in price." In fact, solar researchers themselves – at least those in Germany – have always believed that basic polycrystalline solar cells are the answer, and there is no reason to believe otherwise today.

But despite the analysts' familiarity with the German situation, they apparently do not know what an installed system costs over here. They write that an installed panel would have to drop from the current price of "about $4.40 per watt" to $1.40 dollars per watt to "become cost competitive with newly built natural gas-fired plant." As Renewables International has pointed out numerous times, prices of installed solar arrays are much higher in the US than in Germany, where the latest figures per watt are around 1.70 euros per watt, equivalent to around two dollars depending on the exchange rate. But clearly, solar is half as expensive in Germany than it is in the United States.

It should also be pointed out that the United States currently has some of the cheapest natural gas in the world, so the comparison is already quite loaded. But the hidden cost of fracked gas is so great that Germany is not even considering the technology.

One wonders what AllianceBernstein's calculation would look like if they started at two dollars per watt rather than 4.40 – and if they included all of the externalities of natural gas. (Craig Morris)

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1 Comment on "US economists say solar competitiveness "may never arrive" "

  1. Zach - 21.11.2012, 14:51 Uhr (Report comment)

    haha, wow, absurd...

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