Tuesday, 14 June 2011

The Cost Of PV Generation 1990-2040

Future Cost Of PV Generation

This is an interesting little graph. If the assumptions are correct, it indicates that, sometime over this decade, the cost of PV generation will become comparable to that of peak power fossil fuel based generation systems. Sometime over the next decade, the cost will become competitive with the bulk production of electricity from fossil fuels. Should that happen, in reasonable quantities, then we will have started to make serious progress towards finding renewable alternatives to fossil fuels.

When that happens, we can expect the demand for PV systems to soar. Initially, soaring demand will give rise to a very profitable installation sector. One could argue that we are in that territory now. However, if the market is allowed to respond, new suppliers will enter the arena, attracted by the profits to be made. This injection of competition will serve to start lowering the long term installation cost as supply grows to meet that demand. This is exactly what happened for the supply of Satellite Dishes, and there is no reason why it could not happen for PV installations. 

In the meantime, the role of technology is to move the curves one way or another. For example, a breakthrough in PV technology could have the effect of lowering the generation cost so that Solar becomes competitive with fossil fuels sooner rather than later. As the market grows both in size and competitiveness, the way to achieve a profitable future will be to innovate newer technologies to generate more kWh per £ spent on installation. Like this, we enter a virtuous in which innovation lowers installation cost, which makes the technology more attractive compared to other methods of power generation, which then creates an innovation premium.

This is one possible way out of our reliance upon fossil fuels.


© The European Futures Observatory 2011

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