By 2030, 10%-14% of energy capacity in Europe will be from solar, research by Roland Berger shows. This is the result from the continued cost reduction of the solar technology combined with the increased uptake of the technology residentially. According to the consulting firm, this will have wide ranging consequences for centralised utilities, changing their role from delivering energy to providing access to electricity capacity.
In a recent research report from Roland Berger, titled ‘Solar PV’, the strategy consulting firm considers the development of solar over the past decades as well as the level of up-take expected globally and across Europe in the years to come. The firm finds that the technology may come to be as disruptive to the utilities sector as fracking has been to natural gas.
The photoelectric effect, the uptake of photons to drive electron movements within certain materials was proven in 1839, before finding practical applications in space-flight as solar panels in the 1950s. Scientist soon adapted the technology in renewable sources. In the years since, the technology has reached a point where the world’s nominal installed capacity totalled 177 GW in 2014. Each year, this capacity grows by about 40 GW. The majority of the capacity is installed in Europe, which has more than 50% of the capacity share, followed APAC and China. While the Chinese capacity remains relatively small compared to that of Europe, the latter is cutting back solar capacity to focus on wind. As a result of which, China may be able to significantly improve its level of installed capacity.
One of the consequences of the development of solar technology towards maturity is that the price per KW has decreased significantly over the past decades. Residential customers saw the price drop 15% yearly from €3.27 per watt to €2.00 per watt, while commercial producers have seen a drop of 23% annually, from €3.14 per watt to €1.46 per watt.
The total (system) cost, however, differ greatly between countries. The 2013-cost of watt in China was €1.04 with around equal costs between the collector and the balance of system* (BOS). Germany and Italy also enjoyed low cost systems, at €1.60 per watt. The US, however, paid s a hefty BoS fee, making the total per watt cost at €3.55.
As the technology continues to reduce in cost, and with the potential to integrate the generated energy with the national grid, more and more residential customers are taking advantage of the long term benefits of the technology. For many households, the decision to buy a solar PV panel is often made with the aim of reducing their energy costs. According to Roland Berger, a large share of the solar market is set to be the deployment of rooftop panels. Especially for Europe, a big portion (72%) of its capacity will come from residential generation, compared to 50% for China.
To understand the potential development of the technology, a number of players have made projections regarding the uptake over the coming decades. Many of the projections are pessimistic, where the uptake of solar remains well below 10% of the total energy mix in Europe by 2040.
According to the consultancy, as a result of the quickly lowering cost profile in Europe and the uptake of the technology residentially, the total energy capacity from solar in Europe will hit 12% or 147 GW by 2030. The high level of solar power generation, especially in Germany, Greece and Italy, is set to meet the base load demand (at low power consumption times) by 2025, and could potentially exceed peak load demand by 50%.
This will change the nature of the energy game in Europe: “Solar PV will change the utility industry. The utilities’ role of centralised production will evolve from delivering volumes to providing access to electricity capacity. The intermittent nature and decentralised production of solar PV will require them to improve in the areas of matching demand and supply and ensuring supply security. Maintaining balance and a functioning grid capable of dealing with multidirectional power flows and power trade will change the nature of the network companies.”
* The balance of system (BOS) encompasses all components of a photovoltaic system other than the photovoltaic panels. This includes wiring, switches, a mounting system, one or many solar inverters, battery bank, and battery charger.