Solar power prospects

May 27, 2011

Free Market Foundation

The production of electricity from renewable energy technologies is growing much faster than the electric power supply as a whole. Solar power is among the fastest growing segments of the renewable energy market, says H. Sterling Burnett, a senior fellow with the National Center for Policy Analysis.

Globally, grid-connected solar capacity increased an average of 60 per cent annually from 2004 to 2009, faster than any other energy source.

Solar electricity production grew 15.5 per cent in 2009 alone.

Today, however, solar power still accounts for less than one-half of one per cent of the world’s electric power output.

Despite its impressive growth, and even with significant subsidies, solar power is substantially more expensive than conventional power sources in most locations. Analysts agree that if solar is to become a significant power source, it must compete with other energy sources in markets without subsidies to any form of energy, barriers to the entry of new producers or discriminatory price regulations.

According to projections of future energy costs by the International Energy Agency (IEA):

Over the next decade, with continued government support, solar power prices will decline sufficiently to compete with conventional electric retail prices in a “few” countries by 2015 and “several” countries by 2020.

The IEA projects that the cost of solar electricity in 2020 will range from $0.13 to $0.26 per kilowatt-hour for commercially produced solar power and $0.16 to $0.31 for electricity produced by residential systems.

If the IEA’s estimates are correct, the price of solar power will still be higher than the cost of conventionally produced electricity in 2020.

With major technological breakthroughs that significantly reduce the cost of solar power production and the imposition of new environmental mandates that raise the price of electricity generated by other sources, solar could reach grid parity in some areas of the United States by the end of the decade.

Source: H. Sterling Burnett, Solar Power Prospects, National Center for Policy Analysis, May 11, 2011.

For text: http://www.ncpa.org/pub/st334

For more on Environment Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=31

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 17 May 2011