In sunny regions, solar power will be cheaper than electricity from coal or gas in 2025. This is the conclusion reached by a study that was conducted by Fraunhofer ISE on behalf of Agora Energiewende.
The production cost of PV electricity in Central and Southern Europe is expected to fall to between 4 and 6 € cents / kWh. By the year 2050, prices are even expected to be as low as 2 to 4 cents. The study is based on conservative estimates, so technological innovations might drive prices down even further. According to the authors of the study, electricity generated by large PV systems in Germany costs less than 9 cents per kWh, which is comparable to electricity generated by modern coal or gas power plants at 5 to 10 cents / kWh. Nuclear power generated by modern plants is reportedly even slightly more expensive at a production price of up to 11 cents.
The study identifies financial and regulatory framework conditions as the key to reducing prices further. The cost of the hardware on the world market will fall, regardless of local conditions. However, unreasonable regulations could increase costs by up to 50% due to higher costs of financing. This could nullify the effect of the higher levels of local sunlight. In one example, the authors of the study compared southern Germany and southern Spain. Spain gets approximately 50% more sunshine, which should make solar power very inexpensive there, but the poor financial conditions (high capital costs) for photovoltaic systems completely cancel this out. This means that solar power generated in very sunny regions could theoretically be just as expensive as solar energy in regions with less sun, depending on the different financing options.
“Favourable financing conditions and stable legal framework conditions are therefore indispensable prerequisites for cheap and clean energy from solar power plants. It is the responsibility of politicians to create and maintain them,” said Patrick Graichen, Director of Agora Energiewende.
The 82-page study “Current and Future Costs of Photovoltaics” can be downloaded as a PDF document on the web page of Agora Energiewende.