Current and Future Cost of Photovoltaics
Long-term Scenarios for Market Development, System Prices and LCOE of Utility-Scale PV Systems
Since its first application in space missions in 1958, solar photovoltaics technology has come a long way. In Germany, a breakthrough in costs was observed over the last years, following a decade of massive investment in research and deployment. New solar photovoltaic power plants in Germany today cost almost 80% less than those built several years ago. While some industry experts today proclaim the arrival of a “solar age” that will completely change the way how power systems look like in all corners of the world, other experts expect an end in the decline of prices and thus see an end to the “solar bubble.” This uncertainty poses a challenge for policy makers, as an evaluation of policy choices often requires analysis of future scenarios, including scenarios for the distant future. We have therefore asked Fraunhofer ISE to develop scenarios for the future cost development of electricity produced by solar photovoltaics – both under conservative and optimistic assumptions. The results are very interesting indeed – we hope you enjoy reading them.
Solar photovoltaics is already today a low-cost renewable energy technology.
Cost of power from large scale photovoltaic installations in Germany fell from over 40 ct/kWh in 2005 to 9ct/kWh in 2014. Even lower prices have been reported in sunnier regions of the world, since a major share of cost components is traded on global markets.
Solar power will soon be the cheapest form of electricity in many regions of the world.
Even in conservative scenarios and assuming no major technological breakthroughs, an end to cost reduction is not in sight. Depending on annual sunshine, power cost of 4-6 ct/kWh are expected by 2025, reaching 2-4 ct/kWh by 2050 (conservative estimate).
Financial and regulatory environments will be key to reducing cost in the future.
Cost of hardware sourced from global markets will decrease irrespective of local conditions. However, inadequate regulatory regimes may increase cost of power by up to 50 percent through higher cost of finance. This may even overcompensate the effect of better local solar resources.
Most scenarios fundamentally underestimate the role of solar power in future energy systems.
Based on outdated cost estimates, most scenarios modeling future domestic, regional or global power systems foresee only a small contribution of solar power. The results of our analysis indicate that a fundamental review of cost-optimal power system pathways is necessary.
Fraunhofer Institut für Solare Energiesysteme (ISE)
Johannes N. Mayer, Dr. Simon Philipps, Noha Saad Hussein, Dr. Thomas Schlegl, Charlotte Senkpiel
Fraunhofer ISE (2015): Current and Future Cost of Photovoltaics. Long-term Scenarios for Market Development, System Prices and LCOE of Utility-Scale PV Systems. Study on behalf of Agora Energiewende.