When will solar be cost competitive with gas and coal?

  • Time to read 1 minute

Analysts split over when solar will reach grid parityAs the price of electricity continues to rise, and solar costs continue to fall, the moment where solar will cost the same as other forms of electric generation is fast approaching. However, analysts disagree on when that day will come.

Piper Jaffray & Co. Analyst Principal and Senior Research Analyst Ahmar Zaman recently told The Wall Street Transit that solar will reach grid parity—the point when solar will cost the same as fossil fuel—in most markets by 2015.

“I think that’s relatively optimistic compared to our analysis,” said Matt Feinstein, an analyst with Lux Research, Inc. “We see closer to 2020.”

Feinstein agreed with Zaman that some markets, like Hawaii and California, are likely to reach grid parity as early as 2015—particularly California. “

A market like Hawaii is already at grid parity. Countries in Europe, we see closer to 2020. Asia after 2020,” said Feinstein.

Each energy market is different, according to Feinstein.

“Grid parity is at the mercy of whatever the cost of energy is. That is the kind of thing that varies worldwide,” he said.

In the U.S., there are numerous factors that will affect when each energy market reaches parity, Feinstein said. Solar is already reaching the economies of scale needed to reduce the cost of photovoltaics, and prices are dropping.

“Firms are going to continue to reduce the cost of solar,” Feinstein said. Those costs will come as photovoltaics become more efficient and more companies enter the market.

Solar is a market that is both mature and still maturing, Feinstein said. While photovoltaics are a largely mature product, other aspects are not. These are the places where costs need to come down.

Now, according to Feinstein, it’s becoming more about reducing the costs of other components and things, like “the soft costs” of installing solar.

“That’s why you’re seeing companies like SunRun come out in favor of streamlined permitting costs. They’re a pain for installers,” he said.

Different cities and towns as well as utilities have different permitting processes, and installers working in multiple areas—if not multiple states—have to be able to meet all the different permitting requirements.

“Much of it is not online. These all just add up in terms of human hour costs and cost of time,” Feinstein said. “The industry is starting to shift its focus [to addressing these costs]. But it does not anticipate that it will be an easy task.”

Image courtesy of NREL.