European solar beats spot prices even with storage

From RenewEconomy:

The levellised cost of solar PV has fallen so far that all across Europe it is now beating spot wholesale electricity prices, and even with the addition of two hours’ storage it is still beating spot prices in some countries.

Those are two of the findings of a new report from Christian Breyer, professor of solar economy at Finland’s Lappeenranta University of Technology, who has wrapped up new data and forecasts and reinforced the view that solar PV is by far the cheapest form of bulk energy in many parts of the world, and is still competing with the addition of storage.

The title of his paper “Impact of weighted average cost of capital, capital expenditure, and other parameters on future utility‐scale PV levelised cost of electricity” is unwieldy, but makes two essential points – one is about the plunging cost of solar, and with it storage, and the second is about the speed of these cost reductions, which are leaving most established energy institutions and policy makers floundering in its wake.

The first observation centres around the levellised cost of electricity from solar, and the rather astonishing conclusion that the LCOE of solar PV – even with a heavy weighted average cost of capital of 7 per cent – ranges from €24/MWh in Malaga (Spain) to €42/MWh in Helsinki (Finland).

This graph below shows how the LCOE in various countries (it varies according to solar resource, local costs, etc) beats the average spot price across the continent, and by a considerable margin in sunny countries like Italy and Spain.

It even beats the spot price in Germany, which – thanks to its more than 40 per cent share of renewables – has the lowest spot price of any major market, including nuclear France.

And having already produced a 90 per cent reduction in costs over the last decade, the study predicts more cost reductions to come, with the range falling to  €14-24/MWh in 2030 and €9-15/MWh in 2050. Again, the actual number would depend on the weighted cost of capital, and increasing the nominal WACC from 2 to 10% doubles the LCOE.

LCOE for solar vs spot (=wholesale) prices.
Even in high latitude Finland, solar is cheaper than average power sources

MWp stands megawatts of peak power.  Since capacity factors over the whole day are lower, adding 50 MWh of storage to 50 MWp of solar arrays is in effect equivalent to adding more than one hour of storage.  The same applies to 100 MWh; that's more than two hours.  With Finland's spot price of €45/MWh, by 2030, solar plus storage will have reached grid parity.  In the UK, grid parity will be reached in 2025, in Munish by 2030.  And these are the northern, high latitude places.  In lower latitudes, solar + storage is already there.

So far, most European renewable investment has been in wind.  Clearly solar+storage is also becoming attractive.

Breyer notes that market prices of PV modules and systems have developed so fast that it is difficult to keep up. And that means that policy makers are making decisions without being properly informed about the potential of these technologies.

“This is of utmost importance since the debate on how to react to the ongoing climate crisis and the necessary transformation of the energy system towards 100% renewable sources demand urgent measures and political decisions based on realistic information on the potential of different technologies,” Breyer writes.

“The societal tipping point for tackling the climate crisis may have been passed right now due to the global Fridays for Future movement of the youth all around the world with support by scientists, so that it can be hoped that fast and massive measures will be encouraged in the short term to midterm. This should be done on a best possible data basis.”