Unsubsidized utility-scale solar electricity will not only become cost-competitive with gas by 2025, but it will actually work in concert with it. This is the conclusion of a Lux Research analysis of 10 global regions. The researchers believe that increased gas penetration will benefit solar by enabling hybrid gas/solar technologies that can accelerate adoption and increase intermittent renewable penetration without expensive infrastructure improvements.
The levelized cost of energy (LCOE) from unsubsidized utility-scale solar closes the gap with combined cycle gas turbines (CCGT) to within $0.02/kWh worldwide in 2025, the Lux analysts state. Solar’s competitiveness is led by a 39% fall in utility-scale system costs by 2030 and accompanied by barriers to shale gas production—including anti-fracking policies in Europe and a high capital cost in South America.
“On the macroeconomic level, a ‘golden age of gas’ can be a bridge to a renewable future as gas will replace coal until solar becomes cost competitive without subsidies,” said Ed Cahill, Lux research associate and the lead author of the report titled, “Cheap Natural Gas: Fracturing Dreams of a Solar Future.” “On the microeconomic level, solar integrated with natural gas can lower costs and provide stable output.”
The analysts created a bottom-up system cost model and analyzed LCOE to evaluate solar, gas, and hybrid technologies' competitiveness under different gas price scenarios across 10 regions around the world through 2030. Among their findings:
Gas price remains a key factor. Solar can be competitive with natural gas as early as 2020 if gas prices are between $4.90/MMBtu and $9.30/MMBtu, depending on the solar resource. In the likely scenario of gas prices above $7.60/MMBtu, solar will be broadly competitive by 2025 in all 10 regions.
Solar system prices fall to $1.20/W. While electricity price from natural gas is driven by cost of fuel, price of solar power is driven by system capex. Utility-scale thin film leads the pack with installed system prices that fall from $1.96/W in 2013 to $1.20/W in 2030, primarily due to increasing module efficiencies.
Subsidized-to-unsubsidized transition will be turbulent. Turmoil is imminent because standalone solar will not yet be competitive when subsidies start expiring in markets like China, the U.S. and Japan. Companies will need to diversify geographically and transition to areas with fewer gas resources – or develop hybrid systems that take advantage of low gas prices.