Utilities retiring their old coal-fired power plants in recent years have overwhelmingly chosen to replace them with natural gas generators. Within 12 years, solar energy could feasibly supplant or at least supplement gas.
“Far from being bulldozed by cheap natural gas, unsubsidized utility-scale solar electricity will become cost-competitive with gas by 2025, according to a report from market research and analysis firm Lux Research. “In fact, 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 cost of solar panels has plummeted more than 70 percent since 2007 and Lux predicts that complete utility-scale solar systems will continue to see dramatic price decreases, falling another 39 percent by 2030.
Utility-scale thin film solar is likely to have the biggest price drops. Lux Research Associate and report author Ed Cahill predicts that utility-scale thin film will fall to $1.20 per watt by 2030, primarily due to improvements in module efficiencies.
Even without subsidies, which are due to begin expiring in 2016, solar could compete with gas at that price.
In fact, solar could even be competitive with natural gas earlier in some areas. European ant-fracking regulations and increasing political and individual community and state opposition to fracking in the U.S. could drive natural gas prices higher than expected.
The feasibility of natural gas power plants depends on fuel costs, which are variable and more likely to increase than they are to fall from their already extreme lows. Solar, on the other hand, requires utilities to make a one-time capital investment. Even without subsidies, solar at $1.20 per watt and no continuing fuel expenses could entice utilities to look more carefully at solar as a real alternative to natural gas.
Even if utilities don’t start replacing natural gas plants with solar, they might consider hybrid plants that pair both technologies.
Even with this long-range good news for the solar industry, Cahill predicts that times will be tough as subsidies expire in the U.S., China and Japan in the second half of the decade.
“Turmoil is imminent because standalone solar will not yet be competitive when subsidies start expiring,” according to the Lux report. “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.”