15 June 2012
The future of solar power looks bright, according to a “The Prospects for Cost-Competitive Solar PV Power,” a new working paper by Stefan Reichelstein, William R. Timken Professor of Accounting at the Stanford Graduate School of Business, and Michael Yorston, graduate student in the Department of Management Science and Engineering at Stanford University.
Their paper studies the life-cycle cost of electricity generated by solar photovoltaic, paying particular attention to key factors such as location, public subsidies and the long-term learning effects in manufacturing solar panels.
It concludes solar PV is not yet competitive with fossil fuel, like natural gas, from the perspective of a utility that can either build a new natural gas power plant or invest in solar installations.
For a commercial power user, such as a business with plenty of rooftop space, the cost of generating its own electricity is now on par with what the business would need to pay in retail electricity prices, Reichelstein says. In that sense, grid parity has been achieved for commercial-scale installations with two important qualifiers, he adds. First, the facility has to be in a favorable location, such as the Southwestern United States, and secondly the business must be able to take advantage of the current federal tax subsidies.
The industry has consistently been able to lower the cost of solar panels, and, Reichelstein says, if this trend can be maintained for the next 10 years, and if subsidies are continued for that period, there is a real prospect for solar to become cost competitive on its own (without a subsidy), at least for commercial installations. He says utility-scale installations will take longer to become competitive, possibly 15 years.
Read the entire conversation with Reichelstein here.