Cost reductions will see solar power prosper without support in Britain finds report
Solar power will prosper without subsidies in Britain as early as 2020, calculated a report which found that electric utilities could face similar disruption as they are already experiencing in Germany.
Germany has about seven times more installed solar power than Britain, and a more mature, lower cost market. As a result, it is a guide to where the British solar industry and power markets more generally impacts may be headed.
Germany’s biggest utility, E.ON, announced on Monday that it was hiving off its entire conventional generation and commodity trading business to focus on renewable energy and customer services, saying that rising investment and falling costs made renewable energy the “new energy world”.
Thursday’s report, supported by Berlin-based think-tank Thema1, used the experience of the German market to project solar costs in Britain, assuming a stable regime of steadily falling subsidies.
It found that solar power would be competitive without subsidies as soon as 2020, in the British commercial rooftop market, including schools and offices. The domestic rooftop and large-scale solar markets would also be economic within the next 10 years.
“We are firmly convinced that solar will become the bedrock of the global power system going forward,” said report author Gerard Reid, a partner at corporate finance company Alexa Capital, which finances low-carbon energy projects in Germany and Britain.
“That said the road going forward is unchartered and difficult. Our message to the UK government is to reduce support for solar but to do so gradually.”
One of the report’s main findings was that battery storage could make a big difference in the British residential solar market, provided costs fell steadily for example on the back of government research support and huge ongoing investment in the electric vehicle (EV) automotive industry.
The report found that if lithium ion battery cost reductions assumed by the EV industry were replicated in power generation, then solar battery pack systems could break even without subsidies from as early as 2020 in Britain.
Battery systems could be vital for unsubsidized solar power in Britain, where peak demand is in the evening, by allowing households to consume more of their solar power and so generate bigger savings from smaller utility bills.
“Utilities and policymakers have consistently under-estimated the rate and impact of solar market growth, and this could be another surprise,” said Gerard Wynn, at consultancy GWG Energy.
Solar cost reductions would trigger similar changes in the British power market as already seen in Germany, the report said. German utilities have suffered from falls in wholesale power prices, as a result of priority grid access for renewable energy which has a guaranteed tariff and zero fuel costs.
E.ON said on Monday it was overhauling its strategy to focus on renewable energy, because of steep cost reductions and rising investment.
“EON will in the future totally concentrate on renewable energy, the distribution network and customer solutions, and with that concentrate on the most important elements of the new energy world,” said chief executive Johannes Teyssen at a press conference on Monday.
“In no other form of power generation is so much capital flowing as in renewables, a trend which will not slow down but accelerate. Renewable energy revolutionises not only power generation but also together with other technical innovations the whole role of the customer. He can already produce a large part of his own needs with a solar system. Going forward thanks to energy storage solutions he will be able to become independent of the classical distribution of power and gas.”
“A big driver of the changes in German energy markets is the ever improving maturity and viability, and as a result growth, of renewable energy.”