Is solar a "long enough lever"?As 2013 begins, the world has installed about 100GW of solar panels. Roughly 2/3 is in Europe, with 32GW of capacity located in Germany, and 17GW in Italy. Since only 40GW of solar existed at the end of 2010, 60GW was installed in 2011 and 2012.
Solar panels currently cost around $0.65/watt wholesale, down from $1/W this time last year and $1.85ish/W this time in 2011 (and ~$4/W in 2008). Multiple sources report the installed cost of solar in Germany below $2/W. (Because of generous and uniform subsidies Germany is considered the largest and most efficient solar market.) The US solar market installed 3.2GW in 2012--less than half what German installed--and recent press reports cite a large solar project (i.e. over 500MW permitted but as yet unbuilt) sold to a power company owned by Warren Buffet for ~$4/W. Other recent reports say the First Solar is planning via First Chile (a company it just purchased) to build a 30MW solar plant in Chile in 2013 at a cost of $2.50/W (w/o subsidy). [It was not clear if a profit margin is included in this "cost".]
Recent reports say China plans to install 10GW in 2013 (double what it installed in 2012), which would likely make it the largest solar market. Given that labor is much cheaper in China than Germany, and that Germany is already under $2/W, it seems certain that the installed cost for China will be under $2/W--possibly by a lot.
The second 100GW of installed solar will cost less than $2/W (on average)--which is remarkable since just 2 years ago the panels themselves cost nearly $2/W (and 5 years ago the panels cost $4/W).
What does sub $2/W solar mean going forward?
1) The Sun is a unique power source, in that the amount of solar power available to Earth is roughly 1000 times all the energy we currently use, and we will never run out of it. 2) Demand for power is highest (and therefore most valuable) during the day when solar provides power. 3) Typical solar panels are expected to last 20 years, although good solar panels have been shown to produce ~90% of their original power after 20 years--which means solar panels may last 30-40 or even 50 years (albeit at a declining fraction of their original power).
Using the 20 year assumed lifetime and 1000 sun hours/year, $2/W installed implies a cost of ~$0.10/kWh for solar power (ignoring financing). Many countries get 1200-1300 sun hours/year (some prime locations get as much as 1800-2000), certainly most of the world's population lives in regions that get at least 1200. If you get more sun, or your panels last say 25-30 years, then $0.10/kwh (including financing) is an upper limit on cost.
The point to all this is that sub $2/W installed, solar can supply as much power/energy as desired, when it is most desired for no more than $0.10/kwh, and potentially as little as $0.05/kwh (excellent sun or 40yr+ lifetime). Best of all (for consumers at least) this is already happening...it is real in Germany and in China right now!
This reality is shaped by several changes which happened in the past 10 years. First of all Europe, and Germany especially, decided to offer solar power production a generous and uniform subsidy (which it has steadily decreased), and secondly China decided to generously subsidize the manufacture of solar panels to the point that capacity to make panels now significantly exceeds demand. Finally solar power is a small fraction of our power supply (~2% gross global capacity, <0 .5=".5" been="been" date.="date." effective="effective" effects="effects" have="have" its="its" marginal="marginal" means="means" to="to" which="which">
But there are clear indications in Germany that solar is decreasing the price of peak power, and hints that it may even be lowering the average cost of power--mostly one hears the squealing of utilities that see their traditional peak power profit centers crumbling as result of readily available solar reducing peak demand. Solar on the grid lowers the peak from what it would have been without the solar available, which means peak prices are lower. (without solar, that last bit of peak power would have been supplied by an expensive peeker plant) While this is most noticeable at moments of peak power demand, it occurs to a lesser extent throughout the day, taking lots of nibbles out of the non-solar aggregate demand.
Although solar is still a small fraction of all the power generated in Germany (3% in 2011, likely 4% in 2012) throughout the year, it is having an outsized effect by producing the most valuable power (thereby reducing the demand for otherwise valuable non-solar power)...Solar is a lever, and it is moving Germany's power markets, by reducing the daytime demand utilities see. Just as a small change in the amount of oil available will often lead to large swings in the price of oil, so too a small amount of solar can lead to large shifts in what utilities can charge for their non-solar power.
This should be celebrated by consumers and environmentalists, but it will no doubt cause heartburn for utilities dependent on fossil fuels, and their suppliers. Over time, assuming solar can continue to be installed for under $2/W, this will cause increasing financial havoc at utilities that don't themselves invest in solar. It won't happen all at once, but considering how quickly solar has become affordable, it will happen faster than most utility executives expect.
If one believes that climate change is a clear and present danger to our planet, then there is hope that (given the recent past and already real present) solar may be a long enough lever to move the planet into a safer, more sustainable future, in the next couple decades.0>