Solar PV will narrowly beat onshore wind to wholesale grid parity in Europe, according to a new report.
Although some areas could hit wholesale grid parity by as soon as 2018, most large-scale wind and solar deployment in Europe will still require subsidies over the next 20 years, according to the study from consultancy Pöyry.
Starting from the fairly straightforward conclusion that solar will be more competitive in the south of Europe, while wind would be better suited for northern Europe due to the spread of resources, Pöyry claims that on reaching grid parity, solar and wind could account for an additional 220GW of solar and 40GW of onshore wind.
It found that solar PV is likely to reach grid parity, meaning price competitiveness with other forms of energy including coal, ahead of onshore wind, while neither concentrating solar power (CSP) or offshore is expected by Pöyry to attain wholesale grid parity any time before 2040.
Turkey, currently holding the highest wholesale electricity prices in Europe will be the runaway winner of the grid parity race as simulated by Pöyry. Grid parity is expected for solar as early as 2018 and 2019 for wind (onshore). Spain could reach grid parity for solar PV as early as 2021, soon followed by Portugal, in 2022, while Italy would also reach parity, during the period 2025 to 2032, dependent on region. With the exception of a few regions including Britain and Ireland and the aforementioned Turkey, not many places in Europe will hit grid parity for onshore wind before 2030, according to Pöyry.
The consultancy used its modelling software, BID3, to simulate conditions for solar and wind across Europe’s electricity market. BID3 uses historical weather patterns and a range of other data to model weather conditions for each year from 2014 until 2040.
It is important to note that the report centres on wholesale electricity prices, rather than retail price. A recent report from Eclareon showed that various markets worldwide have already reached retail grid parity for commercial solar, including Spain, Germany and Italy.
However, retail grid parity, a comparison between the price of electricity generated by a specific energy source versus what the average household would pay, is often shown to be achieved more quickly in studies than wholesale grid parity, since it takes into account all the factors constituting a home electricity bill. In other words, retail price includes transmission and distribution costs, taxes and margins gained by utilities and all the other factors that drive up bills to households. As it is therefore higher than wholesale price, it is much easier for renewables to compete on price with retail grid parity.
The Pöyry report puts forward the opinion that the usefulness of retail grid parity as a comparison may be limited, since factors influencing the cost of electricity to households are subject to changes. For instance, some regions have suggested – or already put – surcharges on solar generation for use of the grid, while the adoption of time-of-use charges such as exist in much of the US, could artificially boost prices in an unforeseen way in future.
Another interesting point highlighted by Pöyry is the threat of revenue cannibalisation. That is to say, the addition of more renewable energy sources could put downward pressure on wholesale prices. This could reach a “threshold level” at a high penetration of renewables, where the achievable load factor of solar and wind would be reduced due to the difficulty of adding these intermittent sources of power, and would combine with falling wholesale prices. At this threshold level, revenues for solar and wind may not be self-sustaining. The report implies that energy storage, still at present in its earliest stages of deployment, could mitigate this pressure from intermittency.
Nonetheless, reaching competitiveness with wholesale markets, if achieved, will “mark a massive shift in the evolution of these technologies”, Pöyry says, resulting in large-scale deployment of both solar and wind. Reaching this competitive point however, will require further shifts in capital and deployment costs. Policy and regulatory uncertainty meanwhile, could impact on all levels of renewable deployment.
Read the orginal article: http://www.pv-tech.org/news/wholesale_grid_parity_for_europe_a_long_way_off_report