Solar Grid Parity Comes to Spain
Dec 26, 2012 - Peter Kelly-Detwiler- forbes.com
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Bloomberg reported last week that a number of solar developers in Spain have applied for permits to connect to the country’s electric grid and sell solar power at market prices. Taken together the permit requests total 37,5 gigawatts (GW = 1,000 megawatts). Clearly, not all of these proposed facilities will get built. To put it into context, Spain has about 4.2 GW of installed solar capacity at present (representing almost 10% of the country’s peak power generating capability). If even a fraction of these plants were to be built, it would crush the market and bankrupt the developers. However, if the amount is limited, the first few actors are likely to see a profit.
The proposed installations are enormous – the largest eyed for Europe to date, ranging from 150 to 500 MW – with costs coming in as low as $.073 to .079 (.055 to .060 Euros) per kilowatt-hour. These plants compare in size to the 290 MW NRG/First Solar Agua Caliente facility in Arizona, and Exelon‘s 230 MW Antelope Valley project in Southern California, but they are considerably less expensive.
This is a far cry from a snapshot of solar in Europe just a half decade ago. At that time, Spain was looking at subsidized prices for solar coming in at 9X traditional fossil plants. These prices surely stimulated the market, resulting in Spain installing more solar than the entire rest of world in the boom days in 2007-2008.
However, the Spanish economy and ratepayer paid a significant price – transfers from ratepayers to solar developers totaled $3.3 bn before the program was axed this year. It is that kind of program which fuels conservatives’ anger. But it is also this type of program which sometimes sparks a technological revolution.
The rest of the world has Spain to thank for inching so far out into traffic that they lost the hood ornament on the car: the stimulus effect from that program (and that of Germany – which has spent a couple billion Euros for 30,000 MW of solar – and other European countries) helped create a global industry with rapidly falling costs and increasing efficiencies.
As a consequence, we are now able to talk seriously about grid parity of solar resources, and sun-drenched Spain has gotten to the point that utility-scale programs can be envisioned without subsidies.
Of course, this is also made possible by the glut of solar panels flooding world markets. At present, solar panel production capacity exceeds supply by a factor of two to one, and prices have fallen by two-thirds over the past two years. Once supply tightens up, the economics may change somewhat. At the same time, efficiencies and technologies will continue to improve and the dynamic for increased solar penetration will likely grow. In the long run, the limiting factor will not be cost, but rather the challenge of integrating an intermittent solar resource into the power grid.