There was a huge response to our article on Wednesday, summarising the UBS report on how a boom in un-subsidised solar installations would cause a revolution in energy markets. Most people wanted more details of how UBS arrived at their calculations, so we’ve decided to share more of their report on what makes solar PV – and battery storage – such a compelling proposition to households and businesses, even without subsidies.
There are two principal pieces to the equation – the falling cost of solar and battery manufacturing on one side, and the rising cost of grid-based electricity on the other. UBS estimates the total cost of installed solar PV (including inverters and balance of systems costs) has fallen by well over half in the last few years, and will continue to do so, while grid prices (ironically including the cost of renewable subsidies) have risen and will continue to do so.
“In combination, we see this as a game-changer for the competitiveness of solar systems,” the UBS energy team writes. “Private households and commercial users will be able to save on their electricity bills if they install a solar system – without any benefits from subsidies.” As we noted yesterday, just on economics, it said every household in Germany, Italy and Spain should have a solar system by the end of the decade.
UBS says unsubsidised solar systems are now at break-even but, on its estimates, the payback time of unsubsidised solar systems will shrink to some five years for commercial installations and some 10 years for residential rooftops by 2020. It says the economics work in Germany, Italy and Spain, even if financing might be a problem for the latter economy.
As an example, UBS gave the cost of a family-home rooftop solar system (4kWp) in Germany at today’s prices (€7,400 fully installed) – which amortised over 20 years equated to €450 a year. Without subsidies, a solar system’s profitability depends almost entirely on the amount of solar power directly consumed by its owner (rather than sold back into the grid with a feed in tariff).
UBS estimates a 4,500kWh household with a 4kWp PV system should be able to reduce its electricity purchases from a utility by 30 per cent without significantly changing its consumption habits. In southern Germany, such a household would save around €380 on its electricity bill, which would otherwise amount to some €1,260. Another €80 of income results from the sale of excess electricity if a price of 25 €/MWh is assumed. In the example above, it would already be worth installing a PV system, as the combined cost would be slightly smaller. It says solar PV systems will become even more attractive as retail tariffs continue to rise, and solar costs continue to fall.
As well, the increase in unsubsidised solar PV capacity will ultimately lead to higher electricity prices, because the demand reduction will force utilities to spread the grid investments and cost of the renewable subsidies over a smaller base. But as grid prices rise, households will respond by increasing their self-consumption rate.
They could do this by co-ordinating the timing of energy-intensive processes, aiming at increasing the self- consumption rate of a PV system, in the same way utilities offer time-of use meters. Solar developers are already offering such technology. And/or they could add a battery storage system, which UBS describes as the other big game changer in the energy game.
UBS says storage technologies allow the owner of a solar PV system to further cut electricity purchases from utilities: either because they can store solar PV power not immediately consumed, or they could charge the battery on low rates overnight for use in the morning or at other time.
UBS notes that According to different field tests suggest a battery with a capacity of 3kWh allows a 4,500kWh household with a 4kWp PV system to lower its electricity consumed from the grid by 50-60%. (Note that this graph below is for Germany).
By Giles Parkinson – published in Renew Economy
Read the full article here