The per watt price of installing solar photovoltaic systems should reach parity with the grid by 2020, according to a study by Navigant Research.
Navigant forecast is based on the assumption that PV module prices and installation costs will continue to decline at a much more conservative range of 3 percent to 8 percent per year from 2013 to 2020, compared to more drastic price declines in previous years. By 2020, solar PV systems will be installed in the range of $1.50 per watt to $2.19 per watt throughout the world. If this price range is realized, solar PV will largely be at grid parity, without subsidies, in all but the least expensive retail electricity markets, according to Solar PV Market Forecasts Installed Capacity, System Prices, and Revenue for Distributed and Non-Distributed Solar PV.
According to the report, this scenario is the result of three main trends:
Firstly, module costs dropped from roughly $4 per watt in 2006 to, in some cases, below $1 per watt in 2012. Furthermore, the installed price of solar photovoltaic power systems in the United States fell substantially in 2011 and through the first half of 2012, due largely to a steep decline in the cost of solar modules, according to an annual PV cost-tracking report produced by the Department of Energy’s Lawrence Berkeley National Laboratory. Lower prices are opening up new markets for distributed PV while also helping the technology reach grid parity more quickly in high-cost retail electricity markets, Navigant says.
Secondly, in distributed solar PV markets, innovative financing options are emerging that will make the technology available to more homeowners. Solar leasing companies such as SolarCity and SunRun are offering homeowners the option to have solar PV installed on their rooftops with little to no upfront investment, Navigant says.
Finally, Navigant expects governments to set ambitious targets ans rein in financial incentives for solar. Like most energy technologies, solar PV is reliant on incentives from the government in some part of the value chain. As solar PV technologies have become more cost-effective, and amid a backdrop of government budget cuts, many governments are reining in popular feed-in tariffs in leading markets. Germany, Italy, and China have all retooled their FITs, often placing greater emphasis on onsite generation, to prevent an overheated market. The industry is fully aware that lucrative financial incentives will not be around forever. As a result, many companies see 2017 (the year after solar PV investment tax credits expire in the United States) as the year that solar PV will be able to stand on its own without subsidies in most major markets, Navigant says.