Cheap solar power

Philippe Welter is the publisher of the solar electricity magazine Photon. The magazine, published in German, English, Spanish, French, Mandarin, Italian, is the world's leading trade journal for solar energy.

DW: Photovoltaics are booming, the technology is getting cheaper, but at the same time many German companies are going bankrupt. How does that go together?

Philippe Welter: It makes sense if you look at how the market has evolved. Photovoltaics were first commercialized in the United States, the first companies were founded there. Then the Japanese entered the market, they had the better technology and the better production know-how. As a consequence, US companies went insolvent and Japan's industry grew. Europe saw a very dynamic development in the first years of the new millennium, because of the so-called feed-in tariffs. There were many firms that emerged, which grew fast and gained market share from the Japanese.

But now we're seeing that the really big markets of the future will be in Asia. There are more people there than in Europe, energy supply is still lacking and they need to build up big energy capacities. Countries like China recognized that early on and consequently established their own industry.

Producers there have the advantage of modern production facilities combined with lower labor costs. Those European producers who never adapted to the sinking costs of the technology are now experiencing problems.

What are the prices of solar electricity in Germany at the moment?

The price of a traditional private facility on your housetop is now between 1,500 euros and 1,800 euros per kilowatt. If you take into consideration the costs for the loan, a kilowatt hour (kWh) of the generated electricity costs between 18 and 20 euro cents. Bigger facilities on factory rooftops or out in the fields are of course cheaper. Their electricity comes at a price of between 12 euro cents and 18 euro cents per kWh.

What will solar electricity cost in Germany in the year 2020?

Estimates suggest the price will be between 5 euro cents and 10 euro cents per KwH. If you take into consideration technological progress and sinking prices, then electricity generated on your roof at home should be at some 10 euro cents in 2020, and big facilities should be able to provide electricity for some 5 euro cents to 6 euro cents per kWh.

What does solar electricity cost in regions with lots of sunshine?

In very broad terms, you can say that twice the sunshine means half the price per kWh. In the Mediterranean region, solar electricity costs some 30 percent less than in Germany. At the equator, it's almost half the price. In those countries, it's already cheaper today to generate electricity with a solar plant than with a diesel generator.

But those countries face an entirely different problem. Photovoltaics mean high initial costs, you need to have access to loans to be able to make the investment in the first place. Diesel generators, unfortunately, have a distressing advantage - they're simply cheap to buy, even if it means having to carry oil barrels back and forth to keep your generator running. But to sum it up, we need a better structure for loans.

What does the trend towards cheaper solar electricity mean for the energy industry?

For the conventional energy industry it means a change of paradigm, that's for sure. It's something you can see very clearly when you look at the statements made by Germany's big energy suppliers lately. When he retired, Jürgen Grossmann, former CEO of Essen-based RWE, said photovoltaics essentially ruin the business for the conventional energy industry, because they're pushing the prices down on the energy stock markets. A member of E.ON's executive board said a couple of days ago that building power plants in Germany is no longer financially viable because of the economic framework conditions, with renewable energies advancing fast and forcing down prices.

The conventional energy industry will have to adapt to a more decentralized energy supply system very soon. But I doubt that it's in a position to do that. It's difficult because those companies have fixed investments of billions of euros in these conventional power plants. They simply have no way of accessing the money. Even if they wanted to and even if they decided today to invest in renewables, in electricity storage facilities and in grids only from now on, they would still not be able to make enough money available to compensate for the losses they're already experiencing in the conventional areas of energy generation.

That seems to be one of the reasons why the German government has reversed its decision in the energy changeover. It wants to give the companies more time to get out of their old investments and enter new ones.

What's the situation like in developing and emerging nations?

The situation is slightly different. In developing and emerging nations, we're not talking about coal power plants that have to be kept running for a long time, instead we're talking about new power plants that have to be built. I believe as soon as renewables become cheaper, and as soon as there are proper solutions for the storage problem, investors will increasingly opt for wind and solar energy. For an investor these technologies have the advantage that you can avoid expensive CO2 certificates and taxes on CO2 emissions and coal.

Intersolar, the world's biggest trade fair for photovoltaics, is starting in Munich. What's will people be talking about most this year?

It's all about prices at the moment. Everybody is asking the same question: How much cheaper can it get? Two years ago, many experts wouldn't have bet on solar electricity getting as cheap as it is now.

Another important topic at Intersolar seems to be storage facilities. In Germany, we've reached a point where it's cheaper to generate solar electricity on your own rooftop than to get it the conventional way, straight from the socket. Of course, that means that consumers want to use as much of this electricity themselves, and so they look for ways of storing it - even without subsidies.

Another big topic will be big storage facilities that you can integrate into electricity grids. They can help avoid having to expand the grids. And then there's the question of system integration. How do you feed more energy from renewable sources into the existing grid? What would the electricity supply system have to look like if it were based on regenerative energy only?

Interview: Gero Rueter / nh
Editor: Sean Sinico