Solar Energy Poised To Hit Mass Adoption Phase

Countries with regions of grid parity for solar energy
Countries with regions of grid parity for solar energy (Deutsche Bank)

The stars are getting aligned for solar energy, causing the technology to cross the chasm to embark on the exciting mass adoption phase, according to the recent Deutsche Bank’s 2015 Solar Outlook.

Thanks to rapid reduction in solar panel and balance of system costs, improvements in efficiency and competition, overall solar systems costs have declined at an average of ~15% compound annual rate over the past 8 years. The emergence of YieldCos, publicly traded spin-offs of companies in the solar industry designed to hold the operating assets that produce a predictable cash flow, also plays a positive role.  Relatively immune to input cost (the cost of sunlight does not swing wildly like other fuels such as crude oil and natural gas), renewable energy assets such as solar offer stable cash flow attractive to many yield seeking investors, while at the same time help lower the cost of capital for the parent companies.

Thanks to the rapid decline in system cost achieved so far, today’s unsubsidized electricity costs for solar vary anywhere between $0.13 and $0.23/kWh, well below retail price of electricity in many markets globally. If the industry continues to maintain the level of cost reduction it has enjoyed so far, grid parity is expected to be reached for about 50% of the target market in the next 3+ years. The current ~140GW per year market could potentially almost double to ~260GW over the next 5 years.

The rapid advance in storage solutions, the lack of which has long been the Achilles’ heels for intermittent renewable energy like solar, would further push the technology up the adoption curve in the next few years.

 

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