Despite the recent drop in oil price, a report dated February 27 from Deutsche Bank sees solar electricity becoming competitive with retail electricity in an increasing number of markets globally, due to declining solar panel costs as well as improving financing and customer acquisition costs. That’s despite the recent drop in oil prices, the report notes.
Unsubsidized rooftop solar electricity costs between $0.08-$0.13/kWh, 30-40% below retail price of electricity in many markets globally. In markets heavily dependent on coal for electricity generation, the ratio of coal based wholesale electricity to solar electricity cost was 7:1 four years ago. This ratio is now less than 2:1 and could likely approach 1:1 over the next 12-18 months, the report says.
Peak to trough, average monthly natural gas prices have decreased about 86% over the past 10 years, the report continues. Yet, during this time period, average electricity prices have increased by some 20% in the US.
“The main driver for rising electricity bill is that transmission and distribution investments, which represent 50% of bill, have continued to ramp and have accelerated recently. In 2010, T&D capex levels of for US Utilities ~$27B were ~300% higher than 1981 levels. We expect electricity prices worldwide to double over the next 10 – 15 years, making the case for solar grid parity even stronger. The economics of solar have improved significantly due to the reduction in solar panel costs, financing costs and balance of system costs. Overall solar system costs have declined at ~15% CAGR [compound annual growth rate] over the past 8 years and we expect another 40% cost reduction over the next 4 - 5 years.”