Solar expected to be cost-competitive with natural gas by 2025

Share

Analysts at Lux Research have published a report that predicts solar power will be cost-competitive with natural gas by 2025.

The report – titled Cheap Natural Gas: Fracturing Dreams of a Solar Future – also reveals that unsubsidized, utility-scale solar electricity may even benefit from an abundance of cheap natural gas, enabling hybrid gas/solar technology to blossom and increase the rate of renewable energy penetration without the need for expensive infrastructural upgrades.

After analyzing 10 global regions, Lux Research found that utility-scale solar energy is likely to close the gap of the levelized cost of energy (LCOE) with combined cycle gas turbines (CCGT) to just $0.02/kWh by 2025.

The forecast was made based on a predicted 39% fall in utility-scale PV system costs by 2030, increasing solar’s competitiveness in a time when anti-fracking sentiment in Europe and high capital costs in South America will begin to hinder shale gas production.

Solar systems are predicted to fall to just $1.20/W, with utility-scale thin film enjoying something of a boom as module efficiencies increase and system capex expands. Meanwhile, the analysts predict, electricity prices from natural gas will likely top $7.60/MMBtu by 2025, leading to greater cost-competitiveness for solar.

PV prepared?

However, Lux Research predicts that the transition from subsidized to unsubsidized solar – particularly in the leading markets of China, Japan and the U.S. – will be turbulent, owing to the fact that standalone solar is unlikely to be cost-competitive with gas when the subsidies come to an end. To prepare for this likely scenario, companies should begin developing hybrid systems that are able to take advantage of low gas prices, suggest the analysts.

"On the macroeconomic level, a ‘golden age of gas’ can be a bridge to a renewable future as gas will replace coal until solar becomes cost competitive without subsidies," said Lux Research associate and lead author of the report, Ed Cahill. "On the microeconomic level, solar integrated with natural gas can lower costs and provide stable output."

Rather than fracturing the future of solar, Lux Research believes that improved output of shale gas may in fact act as a stepping stone for solar’s future growth, provided solar companies plan for the challenges that gas may pose to their industry.

A recent report by Frost & Sullivan, in which the analysts also predicted the future for the global energy market, suggested that shale gas would have a sizable impact on the world’s future energy supply, with China and Europe sitting on huge reserves of shale that could, potentially, trigger a new age in gas-driven growth.

What this might mean for the solar industry is anybody’s guess, but Lux Research at least posit a future where solar not only survives in the face of a cheap gas onslaught, but actively thrives.