The Future of Solar PV

Fruit_and_Nut_Case wrote: »

From another thread:

This got me wondering. Will there ever come a time when installing a PV system will be cost-effective just from the potential electricity savings, regardless of any FiT payments in place? How low can the price go and how expensive can an imported kilowatt get in the next few years? Speculation anyone?

Hope you don't mind me boring you with my speculations, but I did have a go at this a year or so back.

I figured the cheapest installs (and potentially compulsory) would be on new builds (savings on scaffolding, roofing work and perhaps multi-roof discounts). This would also mean that the cost would probably be added onto the mortgage. But if not, it's still a good way to account for the cost of capital (lost interest if you use savings).

I then set up some repayment mortgage spreadsheets with the aim of them reaching zero after 25 years. This therefore gives a monthly (and yearly) cost which when divided by generation, gives a cost per kWh.

If that cost can be matched by income (export plus leccy savings) then it becomes viable.

[1. Assuming we are looking for the first systems to become viable, I've divided costs by 4,000kWh pa.
2. In all cases I also added an additional £1,000 to the debt after 12 years for a replacement inverter. However, latest information suggests that on average, they may last longer than this.]

Results:

£5k @ 5% = 9.75p
£5k @ 4% = 8.91p
£4k @ 4% = 7.32p

At the moment if we assume (for simplicity) 5p export and 15p import, and a 66% : 33% split, that gives an average income figure of 8.33p.


The next step though is to work out where prices will go, and if FiT will be reduced to zero.

So long as wind and nuclear are getting a subsidy of about 5p/kWh above market price, then it would be tricky to reduce FiT below that level, so that would add 5p to the income figure. Or to look at it another way, what affect will all of the supply cost changes have on the market price, well ....

Nuclear, wind (on-shore) and large scale PV are all heading for a CfD cost of approx £100/MWh beginning of next decade. (The CfD tops up the market price, currently around £50/MWh (5p/kWh)).

We are also seeing now an end to the cheapest (dirtiest) coal plants, and can expect more to shut, or convert to biomass (subsidised). This will push generation over to gas, which already costs more than coal. There is also a chance of a carbon tax.

All of these factors should push leccy supply price towards 10p, and therefore import prices towards 20p. If that happened, then the income from a PV system would rise by 5p/kWh (with both export sales and import savings rising 5p). To avoid double funding, FiT would no longer be valid for these calculations*.

Income on the PV system would now change to 13.33p/kWh sticking with the 66% export : 33% import figure.


Yet another way of looking at it, is to turn it upside down. Take the potential income, and look at what amount folk would be willing to invest to 'get it'.

So with an annual income of £533 (4,000kWh * 13.33p), what install cost would entice folk to invest in PV?

Mart.

* A FiT may remain regardless to promote domestic PV since distributed generation has cost savings on the grid network, lower losses, positive encouragement, education etc etc. and also attracts demand side investment monies.

Martyn1981 wrote: »

2. In all cases I also added an additional £1,000 to the debt after 12 years for a replacement inverter. However, latest information suggests that on average, they may last longer than this.]

Do you not think that by 10-12 years inverters will be either a fair bit cheaper, or there will be more options with inverter and storage hybrid systems which further confuse the economics?

The difference in annual generation between the UK and sunnier climates is perhaps less than many would expect.

For example PVGIS using its defaults for a south facing 4kW system at Bath gives 3570 kWh/year. Malaga in Spain gives 6520 kWh/year.

OK Malaga gets 1.8x more generation than Bath, but given how fast PV prices have been dropping Bath can't be many years behind Malaga in £/kWh... How many years back does one have to go for PV prices to be 1.8x what they are now? Not so many.

The other thing that will really make a difference is economical storage, which seems to be coming sooner rather than later. Once it's possible to store and then use solar electricity at its full value (ie not dump it to a hot water cylinder, replacing gas at 5p/kWh) then the economics will change radically.

Ed

The other thing is that it's not just about the efficiency of a given panel.... PV-T panels seem to be getting more traction, storage is a possibility... I wonder if there are other developments which might improve things further, in different ways.