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Viable Solar Power

Posted in Energy by moneymanagement on July 8, 2008

The Mckinsey Quarterly has an excellent article on  Economics of Solar power

The highlights are as follows

The solar sector includes a diverse set of players, including the manufacturers of the silicon wafers, panels, and components used to generate much of today’s solar power, as well as the installers who put small-scale units on individual roofs, utilities and other operators setting up enormous solar collection systems in deserts, and start-up companies striving for breakthroughs such as lower-cost thin-film technologies. All are operating in a dynamic environment in which long-held assumptions—subsidies, the primacy of incumbents, and the predominance of silicon-wafer-based technology—are being eroded.

But the sector’s economics are changing. Over the last two decades, the cost of manufacturing and installing a photovoltaic solar-power system has decreased by about 20 percent with every doubling of installed capacity. The cost of generating electricity from conventional sources, by contrast, has been rising along with the price of natural gas, which heavily influences electricity prices in regions that have large numbers of gas-fired power plants. These regions include California, the Northeast, and Texas (in the United States), as well as Italy, Japan, and Spain.

As a result, solar power has been creeping toward cost competitiveness in some areas. California, for example, combines abundant sunshine with retail electricity prices that, partly as a result of the state’s policies, are among the highest in the United States—up to 36 cents per kilowatt-hour for residential users.1 Unsubsidized solar power costs 36 cents per kilowatt-hour. Support from the California Solar Initiative2 cuts the price customers pay to 27 cents. Rising natural-gas prices, state regulations aiming to limit greenhouse gas emissions, and the need to build more power plants to keep up with growing demand could push the cost of conventional electricity higher.

The road ahead

The extent and speed of this emerging sector’s growth will depend on its ability to keep driving down the cost of solar power. No single player or set of players can make that happen on its own.

• The necessary technological breakthroughs will come from solar-component manufacturers, but rapid progress depends on robustly growing demand from end users, to whom many manufacturers have only limited access.

• Utilities have strong relationships with residential, commercial, and industrial customers and understand the economics of serving them. But these companies will have difficulty driving the penetration of solar power unless they have a much clearer sense of the cost potential of different solar technologies.

• In some regions, regulators can accelerate the move toward grid parity, as they did in California and Germany, but they can’t reduce the real cost of solar power. Poor regulation might even slow the fall in prices.

Although these considerations make it difficult to predict outcomes and to prescribe strategies, certain economic principles do apply.

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2 Responses

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  1. Skinpro said, on July 8, 2008 at 4:27 am

    I just read in that there are great new technologies in Solar and solar thermal that make Solar power more affordable than the other power plants that use fosil fuels and there is no contamination, something that not even Nuclear power can say (can you say nuclear waste?)

    Solar panels, photovoltaic, solar thermal are the answer, wind turbines have also a lot of new technologies that are making them more efficient and cost effective as well as safer for use in cities and towns arround the US.

    the Solar pannels or Photovoltaic energy is already being used in Japan and Germany.

    You have to contact your congressman to make sure that they extend the tax credits that Bush bettoed. This give a 30% tax credit for the purchase of Solar Panels. Also tell them to increase the credit for hybrid cars; For a gas gustling SUV you can get up to 100K in tax credit from the government and you only get 2K for a hybrid, is it a wonder why people decided to go for the SUVs instead of the eccofriendly hybrids?

  2. Bookmarks about Solar said, on September 3, 2008 at 8:45 am

    […] – bookmarked by 2 members originally found by ricardoole on 2008-08-13 Viable Solar Power – bookmarked by 6 members […]

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