Solar beats oil and gas price in EU

It's official – the short-term price of solar is lower than coal or gas in Europe.

With the UK-based Sunday Telegraph newspaper yesterday reporting fears over a shortfall in European gas supply, a Brussels and London-based thinktank last week confirmed the historic development in Europe, based on the price of carbon.

The Sandbag thinktank reported the carbon price determined by the EU's 13-year-old Emissions Trading Scheme – together with the rising wholesale prices of fossil fuels – has ensured solar, as well as onshore wind, are more economically viable alternatives.

And with that assessment based on last Thursday's EU closing price of €20.42/tonne ($23.72), the trend has continued into this week, with the carbon price rising to €20.55 at Friday's close.

The Sandbag figures cite lowest bids of €38/MWh from recent wind and solar PV auctions in Germany against a carbon price which, combined with the raw fuel prices gives year-ahead generation costs of €46/MWh for coal generation and €49/MWh for “bridge” fuel gas.

European gas reserves drained

And the report goes on to state that those fossil fuel generation costs will be underestimates as they fail to factor in undeclared variables such as transport costs, operations and maintenance, investment costs, waste product disposal and pollution measures.

The Telegraph yesterday reported gas wholesalers are sending shipments east because the commodity commands a significantly higher price in east Asia, leading to fears over supply in Europe, after reserves were depleted by the bitterly cold weather at the start of the year that brought the “beast from the east” storm.

Sandbag's analysts expect the EU carbon price – determined by a cap-and-trade system of carbon allowances which can be sold between emitters – to hit €25/tonne by the end of the year and €35 next year, especially with the ETS being revised to better factor in climate change impacts.

With Germany this year preparing to draw up a timetable for the phase-out of coal, it appears there has never been a better time to invest in renewable energy, rendering the U.K. government's decision to place its faith in nuclear and fracking for gas even more perplexing.