Grid Parity of Solar Energy: Imminent Fact or Future's Fiction?

• Author: Papaefthimiou, Spiros

1. INTRODUCTION

   Solar energy is the major exogenous energy source for our planet, with estimated practical potential between 50 and 1,600 TW. On the other hand, the global primary energy consumption ranged from 16.5 TW to 18 TW (in 2009 and 2012 respectively). For 2009, 6.5 TW were used to generate 2.1 TW of electricity at an average efficiency of 31.3%. Thus, if we could just supply these 2.1 TW of electricity from solar energy, we would decrease the primary energy demand by 6.5 TW. The most developed and promising technologies for practical exploitation of solar power are photovoltaics (PV) and concentrating solar power (CSP) systems. In both systems solar energy is converted into electricity: in the former directly through a semiconductor based device, while in CSP systems concentrating mirrors focus sunlight onto a receiver to produce electricity through a proper thermal conversion cycle. In both systems the crucial parameter is the conversion efficiency of solar energy into electricity and thus its maximization is a major key point.

   In renewable energy related literature, the debate around the development of PV and CSP has focused on high up-front investment costs, while the major questions have been when these technologies (and mainly PV) will become cost competitive compared to their fossil fuels counterparts, and which actions or policies would be necessary in order to facilitate this. A large part of PV or CSP generated electricity occurs during the summer noon hours, thus they coincide almost perfectly with utility system peak demand, while virtually all electricity generation is during the daylight hours when utility demands and costs are highest. Thus, the actual generation benefits of solar technologies are significantly higher than what a simple average comparison of electricity prices would suggest. In addition to higher production and investment costs, solar systems also entail a number of additional challenges mainly due to the need to upgrade the electricity grid to deal with dispersed and intermittent production.

   The concept of grid parity has emerged as a key competitiveness indicator and has become a major milestone or the "holy grail" especially for the PV industry. Broadly speaking, grid parity refers to the time that the prices of the electricity generated by an alternative energy system (i.e. PV or CSP) and those of conventional electricity production intersect. Worldwide interest related to the terms "Solar Energy", "CSP", "PV" and "Grid parity" was quite intense during the last decade, due to the climate change effects and the realization that fossil fuel based energy production will inevitably become rare and more expensive. Figure 1 shows the normalized number of web searches from 2004 till today for the above mentioned terms in Google. The search trends for solar energy and CSP technologies show that the respective global interest remained almost continuous during the past decade, while for PV a decrease is observed after 2010. On the other hand, the concept of grid parity appears after 2008 while the interest about the term was strong till 2012 and seems to have declined afterwards.

   The rapid growth of the studied technologies and especially PV in recent years is mainly due to favored policy actions. In order to sustain this trend, either the economic viability of the produced electricity needs to be proved or governments will have to continue providing financial incentives and prohibit regulatory barriers. The aim of this paper is to evaluate the potential of both PV and CSP technologies to provide economically viable electricity generation, either nowadays or in the short term future. This is pursued through a methodological analysis of the current cost of electricity produced through PV and CSP based on experience curves for both technologies and the respective grid parity thresholds by year 2030.

2. CURRENT MARKET STATUS OF PV AND CSP TECHNOLOGIES

   PV and CSP represent promising options for sustainable electricity production and could significantly contribute to the mitigation of C[O.sub.2] emissions and the minimization of energy dependence from fossil fuels. A global energy supply from PV and CSP, would need about 1.5% of the global desert area, while solely for PV cells installation on 4% of the surface area of the world's deserts would produce enough electricity to meet the world's current energy consumption. Both technologies are among the nine "technological paths" which the EU and its member states plan to implement to collectively promote sustainable energy use.

   Common PV have no moving parts, a life expectancy between 25 and 30 years, average maintenance costs of less than 0.01 $/kWh, and they do not need water for operation, which is a big advantage especially for applications in desert climates. The main raw material used for the fabrication of most PV panels is silicon, the second most abundant mineral in the upper earth crust.

   Three alternative CSP designs exist: solar tower, linear fresnel and dish engine systems. The CSP market initiated in the early 1980s but lost pace in the absence of government support. Recently, the revival of this market is prominent with 14.5 GW in various stages of development across 20 countries and 740 MW of added CSP capacity between 2007 and 2010. Although suitable conditions for the installation of CSP exist in many countries worldwide (i.e. Southwestern United States, Spain, Algeria, Morocco, South Africa, Israel, India and China), the majority of CSP capacity is installed in United States and Spain, due to favorable feed-in tariff policies and investment tax credits. However, future capacity additions are very likely to occur mainly outside Europe and especially in US due to geographical and policy reasons (i.e. Spain has capped annual CSP installations at 500 MW while the US have launched a highly ambitious multi GW for the coming years). Currently, several CSP projects around the world are either under construction, in the planning stages, or undergoing feasibility studies and the market is expected to keep growing at a significant pace.

   PV and CSP installations have grown exponentially at a global level over the last three decades. As illustrated in Figure 2, globally installed PV capacity increased from 0.07 GW in 1985 to approximately 234 GW in 2015 with an average annual growth rate of around 32%, while for the last decade the growth rate was 48%. Similarly, the installed CSP capacity increased almost ten times over the last decade to reach 3425 MW by the end of 2013, presenting an average annual growth rate of around 40%. These outstanding growth rates of solar technologies are mainly attributed to sustained policy support and subsidization (through attractive feed-in tariff schemes) mainly in countries such as Germany, Italy, United States, Japan and China.

   PV industry has made steady progress over the past 40 years toward increased efficiencies while incrementally lowering the initial installed cost of systems. PV installation costs decreased from 22 $/Wp in 1980 to about 2-5 $/Wp in 2005, mainly due to increases in plant size, improvements in module efficiency through intensified R&D investments, and reductions in the cost of silicon. On the other hand CSP investment costs are higher: for Parabolic Trough systems they are around 3.15-4.20 $/W and rise to 4.90 $/W if the system includes six-hour thermal storage. However, without financial support schemes, solar electricity generation costs are generally higher than competing technologies in most countries. The real benefit of subsidized prices (for electricity production through PV and CSP) is so intense that even the addition of carbon taxes in the order of 10-20 $ per ton of C[O.sub.2], would not necessarily reverse the picture. Apart from cost related issues, the main obstacle towards the implementation of large-scale use of PV and CSP is their intermittent energy production, but the combination of PV, CSP and wind farms with proper energy storage facilities is anticipated to significantly decrease these issues. Another potential solution can be the combined installation of solar systems in different time zones in both earth's hemispheres, based on optimal site selection and optimized generation and storage capacity. Global or almost global solar systems could completely eliminate intermittency even without energy storage meeting electricity demand of > 2 TW. This could be achieved through a configuration of installations in just six sites (of about 111 km x 90 km localized at latitude 35[degrees]): the east and west of Australia, the Saudi Desert, the westernmost Sahara, the Atacama and Mojave Deserts. The potential drawback in...