PRICE OF SOLAR POWER APPROACHING WIND - WALL STREET BETTING SOLAR

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17 may 2013

COLUMN-Solar power costs closing in on wind

By Gerard Wynn, Thu, May 16 2013

LONDON, May 16 (Reuters) - Solar panels were cheaper than wind turbines for the first time last year in certain markets, per unit of capacity, and are rapidly closing a remaining gap in the full cost of power generation.

Until now, wind power has been the leading low-carbon alternative to oil, coal and gas, outside large niche markets such as Germany, which has seen a huge ramp-up in installed solar.

But that could change, with deep implications for the health of both industries if one substitutes the other.

As soon as this year, solar could for the first time surpass wind in annual global installed capacity, given an expected contraction in the wind market.

The full costs of wind power generation remain less than solar because of higher productivity and lower installation costs, but those advantages are eroding rapidly given current trends in equipment prices, with a glut of Chinese-made solar panels sending prices tumbling.

OVER-CAPACITY

Both sectors have struggled to shake off over-capacity, but in different ways, and with different outcomes for prices.

In solar power, over-capacity is largely a result of global commoditisation of the finished modules and the influx of cheap Chinese producers, which now dominate the market. (See Chart 1)

The result has been bankruptcies and continuing, sharp falls in solar panel, or module, prices.

In wind, over-capacity is a result of subsidy cuts and lower energy demand in western markets following the financial crisis, coupled with competition from low gas prices in the United States and a stagnating Chinese market.

But wind turbines are heavy, complicated pieces of moving machinery in which sales depend on local servicing.

They have not become commoditised, and three western producers lead the world market: Vestas, GE and Siemens. (See Chart 2)

The result of over-capacity has instead been a variety of cost-cutting strategies, including idled production, while prices have remained stable.

AVERAGE PRICE

Recent manufacturing data show that average selling prices for solar panels, or modules, are now lower than wind turbines per watt in some markets.

For example, one of the world's leading turbine makers, Denmark's Vestas, reports average selling prices for the first quarter of this year at 1.04 euros ($1.34) per watt.

That compares with solar module prices among leading manufacturers at $0.7-$0.8 per watt last year.

The pace of module price falls means that these will also rival wind turbines in lower-priced Chinese markets this year. (See Chart 3)

The short-term price trajectory for each suggests that solar modules will continue to fall, although much more slowly than previously, while wind turbines remain flat.

Because of their far bigger size, wind turbines are still cheaper to install per watt.

The installed cost of wind is around 1.25 euros ($1.61) per watt, according to a recent report by the trade body the Global Wind Energy Council.

Data for the installed cost for utility scale solar is hard to glean; Britain's Department of Energy and Climate Change reported a total installed cost for solar PV projects over 250 kilowatts as low as 1.2 pounds ($1.83) per watt as of March last year.

Full energy costs, per generated kilowatt hour, depend on performance and capacity factor as much as equipment and installation costs.

Again wind is cheaper but solar PV is catching up, with wide ranges depending on location.

Wind turbine manufacturers are targeting both incremental technology development in existing platforms as well as more fundamental advances, in particular towards bigger turbines for the offshore market.

Linear growth is expected in the market share for turbines larger than 3 MW, reaching half the global market by 2020, according to Madrid-based turbine maker Gamesa.

In the case of solar module makers, the technology focus has been steady improvements in the efficiency of conversion of sunlight into electricity.

ANNUAL MARKET

It is plausible that the annual solar market (meaning new installed capacity) this year will leapfrog wind for the first time.

Wind turbine makers report a global market of around 48 gigawatts installed last year, but expect that to drop following a slump in orders in 2012.

Vestas new orders halved last year compared with 2011.

Vestas quoted a forecast by independent research company Emerging Energy Research for a steep decline in the global turbine market to 39 GW in 2013. Gamesa has forecast a shallower decline, to 42 GW.

Meanwhile, the European solar trade body, the European Photovoltaic Industry Association, estimated last year's solar market at 31.1 GW.

It forecasts the market this year at 28-47 GW, a wide range which especially reflects some uncertainty over the level of European solar subsidies.

Either way, the solar market will probably pass wind this decade.

That has implications for the speed of growth for each and the fortunes of equipment manufacturers, as well as for the cost of low carbon power.

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Wall Street firm makes record bet on rooftop solar power

Daniel Cusick, E&E reporter, ClimateWire: Friday, May 17, 2013

Wall Street is betting a half-billion dollars that consumer demand will continue rising for rooftop solar panels that allow home and business owners to generate their own on-site power and possibly even sell a few unused kilowatt-hours back to their neighbors.

In the largest financing agreement of its type to date, Goldman Sachs said yesterday it would provide more than $500 million in lease financing to help build thousands of distributed solar projects under a partnership with SolarCity of San Mateo, Calif.

SolarCity is the nation's largest full-service provider of residential rooftop solar systems, with tens of thousands of panels installed in 14 states, mostly on the East and West coasts as well as Colorado and Texas.

The firm, listed among the nation's most innovative companies in 2012 by Fast Company magazine, has been riding a wave of rising consumer interest in renewable energy and on-site power generation while also reaping the benefit of technology improvements and falling costs for solar equipment.

With the new influx of cash from Goldman Sachs, SolarCity should be able to widen its market by helping more home and business owners install solar panels with no upfront costs. The arrangement will also help make solar power available to a variety of other users, including schools, churches, municipalities and nonprofits, the company said in a statement.

One key to SolarCity's success is its use of third-party financing, which allows home or business owners to install solar panels on their property at no cost under a lease or power purchase agreement (PPA) with the developer. SolarCity owns the equipment and sells power to the property owner at a competitive rate, offsetting his or her normal utility bill.

Financing a 'low-carbon energy future'
Excess power not directly consumed by the host home or business is routed back to the grid, where it can be sold to other consumers under utility net metering programs, according to the company.

The Goldman Sachs financing has already enabled about 26 megawatts of new solar generation to be deployed, according to SolarCity officials, and the remainder is reflected in a recent announcement of 158 MW of new projects that will be made available for financing under the company's SolarLease or Solar PPA programs.

"The Goldman lease financing will make affordable solar electricity available to more types of homeowners and organizations," Jimmy Chuang, SolarCity's vice president of structured finance, said in a statement. "We expect to be able to expand our offering to a broader customer base by lowering the credit requirements even further in future financings."

Stuart Bernstein, Goldman Sachs' global head of clean technology and renewables investment, said that the firm has a target of financing or investing $40 billion in renewable energy projects over the next decade and that SolarCity's efforts to widen the customer base for solar panels "will help us move toward a low-carbon energy future."

Nearing 'parity' with other fuels
While Goldman's investment sets a new benchmark for large banks looking to expand their renewable energy portfolios, it is not the only major Wall Street firm operating in the sector. Among the other major banks with dedicated renewable energy or clean technology investment arms are Bank of America Merrill Lynch, Citigroup, Morgan Stanley, Wells Fargo, U.S. Bancorp and Credit Suisse.

According to a recent market analysis from Bloomberg New Energy Finance, annual investment in clean energy is expected to increase from $189 billion in 2012 to between $470 billion and $880 billion in 2030, depending on a variety of factors, including possible regulation of carbon dioxide. Solar photovoltaic and solar thermal will account for the largest share of the investment, followed by onshore and offshore wind power and biomass, according to Bloomberg.

And a recent analysis by Citigroup evaluating the shale gas and renewable energy markets made clear that renewables are no longer a niche market made up of expensive boutique fuels, but actually compete with traditional fuels in some markets and will become an increasingly important part of the electricity generation mix going forward.

"The perception of renewables as an expensive source of electricity is largely obsolete, given the huge cost reductions achieved in recent years," the analysis states. "Residential solar PV has already reached 'grid parity' in regions of high solar insolation, with much of the world set to follow by 2020."


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