Residentialsolarwill be cheaper than grid electricity in New York, London and Munich well before it becomes so in sun-drenched Johannesburg, according to new research.
In fact, behind-the-meter solar already makes financial sense in New York and Munich, found a study published last month by the Centre for Climate Finance & Investment at Imperial College Business School in London, U.K. And it will achieve grid parity in the British capital from 2020, said the authors.
But in Santiago, Chile, rooftop or industrial-scale solar will not be cost-competitive with grid supplies until 2025. In Bangalore, India, it will take until 2030. And in Johannesburg, South Africa it will take even longer.
“This modeling…shows the perhaps counterintuitive result of a lack of strong dependence on mean annual insolation for the point in time at which break-even happens,” wrote the authors.
The researchers based their findings on a novel conceptual framework looking at cost-competitiveness between grid supplies for residential or industrial customers and on-site solar on its own or coupled with daily battery storage.
They modeled scenarios for Johannesburg, London, Munich, New York, Santiago and Bangalore. Grid parity was harder to achieve in sunnier locations because of relatively low electricity prices and a higher cost of capital.
On the other hand, Munich, with high electricity costs and cheap capital, emerged as the leader in what the authors termed “firm power parity,” or when “a system of technologies can provide an energy service at the same or lower cost than conventional service providers.”
By 2030, the researchers predict that residential solar in Munich -- on its own and with storage -- will be cheaper than grid supplies. By the same year, PV on its own will be cheaper than the electricity industrial users can get from a utility.
Munich is the only city of the six surveyed where PV and battery storage will be economically viable by 2030, though.
Residential PV on its own will be cost-competitive in all locations except Johannesburg, while industrial solar alone will make financial sense in London, Munich, Santiago and Bangalore -- but not New York.
Charles Donovan, one of the study’s authors, said further work would be needed to see when PV, perhaps coupled with seasonal storage, could beat wholesale electricity on price.
“We focused on the near term, but we expect, in time, to fill out the matrix in its entirety,” he said.
This additional work would likely complement research into 100 percent renewable energy scenarios by experts such as Professor Mark Jacobson of Stanford University.
“In most countries, you’re going to need a significant over-build of the capacity of renewables,” Donovan predicted, “and storage is going to have to play some role in leveling that back out.”
The research so far showed it was not ideal to have all this storage deployed at residential scale, though. “There is a good amount of investment that needs to be made in the network,” Donovan said. “It doesn’t make sense for us to be trying to cover that intermittency ourselves.”
Yet, the research also showed that utilities in many countries could soon see a real threat of partial or total grid defection. In a press release, Imperial College warned of “major disruption to U.K. utilities by 2030.”
It is far from clear, though, whether falling PV and storage costs will in fact lead to mass grid defection, not least because consumers rarely respond to pricing signals in the way economic models anticipate they will.
Today, for instance, early adopters are buying into solar-plus-storage in many places where the business case for energy self-consumption is shaky at best.
And at the other end of the spectrum, “even when you’ve got something that is economically attractive, like switching [electricity] supplier, half the population isn’t doing it,” noted Jon Slowe, founding director of the consulting firm Delta Energy & Environment.
To get consumers hooked on distributed solar, “It needs to engage customers in a way the energy sector has failed to do so far,” Slowe said.
This does not mean utilities can rest easy, he said. Other companies could disrupt the market, giving consumers a cheaper, smarter way to acquire energy. “Our advice to utilities is based on the premise that this will happen whether you do something or not,” said Slowe.