Unsubsidized utility-scale solar electricity will become cost-competitive with gas by 2025, according to a new report from Lux Research. Moreover, the analysis firm says, increased gas penetration actually benefits solar by enabling hybrid gas/solar technologies that can accelerate adoption and increase intermittent renewable penetration without expensive infrastructure improvements.
The U.S. Department of Energy says between 11-21 GW of concentrating solar power can be integrated with existing fossil power plants in the U.S.
The levelized cost of energy (LCOE) from unsubsidized utility-scale solar closes the gap with combined cycle gas turbines to within $0.02/kWh worldwide in 2025, a Lux analysis of 10 global regions found. Solar's competitiveness is led by a 39% fall in utility-scale system costs by 2030 and accompanied by barriers to shale gas production – anti-fracking policies in Europe and high capital costs in South America.
‘On the macroeconomic level, a 'golden age of gas' can be a bridge to a renewable future as gas will replace coal until solar becomes cost-competitive without subsidies,’ says Ed Cahill, a research associate at Lux and lead author of the report. ‘On the microeconomic level, solar integrated with natural gas can lower costs and provide stable output.’
Lux Research analysts created a bottom-up system cost model and analyzed LCOE to evaluate solar, gas and hybrid technologies' competitiveness under different gas price scenarios across 10 regions around the world through 2030.
Solar can be competitive with natural gas as early as 2020 if gas prices are between $4.90/MMBtu and $9.30/MMBtu, depending on the solar resource, Lux says. In the report's scenario of gas prices above $7.60/MMBtu, solar will be broadly competitive by 2025 in all 10 regions.
Lux expects solar power prices to fall to $1.20/W by 2030. According to the report, utility-scale thin film leads the pack with installed system prices that fall from $1.96/W in 2013 to $1.20/W in 2030, primarily due to increasing module efficiencies.
Nevertheless, the transition from a subsidized solar sector to an unsubsidized one will be turbulent. The report says turmoil is imminent because standalone solar will not yet be competitive when subsidies start expiring in top solar markets of China, the U.S. and Japan. Companies will need to diversify geographically and transition to areas with fewer gas resources – or develop hybrid systems that take advantage of low gas prices, Lux says.
More information about the report can be found by clicking here.