Solar power in Spain: now for just 3.8 cents/kWh and up

Another paradigm shift unfolds

In locations with ideal conditions solar power is now cheaper than wind energy.

Evaluation of major global tenders over the past few years impressively demonstrates the rapid decline in the cost of PV, but the best values can only be achieved in regions without customs constraints that unnecessarily raise the price of the technology. With prices starting from 2.4 US cents/kWh, solar power is now in the middle of its learning curve, and it is likely that PV will become even less expensive and more globally available in the medium-term. A comparison of the results of tender processes for solar and wind energy plants with the 35-year tariffs the government set for the Hinkley Point C nuclear power plant in the United Kingdom, granted without a tender process, demonstrates that there is no longer any economic justification for nuclear power. And there is even a wide enough price margin to build storage systems capable of providing flexible capacity.

Drastic cost reductions now feasible

A levelized electricity cost of 3.8 cents/kWh yields a tidy return of 6.5% IRR over 25 years.

Implementing the project requires a power purchasing agreement (minimum term 10 years) with one of the country’s power companies and a clear legal framework for the design of the electricity market. The legal conditions must be linked – especially in Spain – with clear, irrevocable legal guidelines. A new feed-in tariff funded by consumer surcharges or government budgets (like the ones in the Spanish boom year of 2008) is not needed. Tenders would only make sense as a way of limiting the expansion of solar energy in Spain. But why would anyone want to do that if power can be exported and sold – given adequate connection points with the French national grid – to other countries in the common European grid?

In Spain, these low price points offer an opportunity for power generation that is both inexpensive and environmentally friendly, while keeping more than 75% of value creation (including installation and importation of modules) in the domestic market. Added to that are the potential exports.

Massive economic opportunities for southern Europe

Southern Europe is one of the best locations on the planet for solar power. Although the annual insolation values are not quite as high as they are in the deserts of North Africa, the Arabian Peninsula, or the highlands of South America, southern Europe offers other advantages.

  • For one thing, Southern Europe is part of Europe, with countries that are politically and economically stable, in spite of all the dire prophecies. At the same time, they have significant solar potential to meet their own energy demands cost-effectively.
  • Export opportunities: this is especially true for Spain, which has huge, sparsely-populated sunny regions. There are significant economic development opportunities for these areas, with the option of exporting cheap solar power.

For Italy, the Balkans, Bulgaria and Greece, inexpensive PV power also offers massive economic opportunities. For instance, supplying Greek islands with electricity has long been possible using a combination of solar power and storage systems. This can be done far cheaper than the diesel-generator production method used up to now. Diesel generators are not economical, and prices for electricity on the islands are tolerable only with the help of massive federal budget subsidies. This is a vicious cycle that costs an already beleaguered Greece a huge amount of money every year, which could be better spent on developing the country. This is where an EU action plan could come in to immediately create new, long-term jobs, while at the same time providing inexpensive electricity without the need for subsidies. And this would get cheaper with each passing day because component prices for PV panels and particularly for storage systems continue to fall.

“Southern Europe as a solar power exporter and self-supplier” – a message like this with a bold EU action and investment program could provide new impetus to the EU, in addition to economic benefits and positive effects in the countries involved. Bold actions instead of persistent fears about the currency and refugees would be sure to send a strong signal for a positive future in the EU.

To expand the grid, we need an EU capable of action

In place of the tiresome and punitive tariffs on PV panels from China, the EU should set to work creating structures and formulate a clear commitment to modifying and expanding the grid to make it capable of power exportation and the regional exchange of solar and wind power. After all, the only way to ensure the economic feasibility of transporting electricity from Southern to Central Europe is if adequate lines are in place. Solar and wind power will have to compete with electricity generated locally.

This concept can only gain traction if all of the components of the “southern export” scheme work together systematically and are capable of competing with, or sensibly complementing rooftop generation and storage in a country like Germany. Currently, decentralized development is occurring faster in central Europe, but a truly overarching EU energy transition must continue to be the common goal of the new energy economy.

Demands on the EU:

Create line capacity in the south: Instead of electricity highways in the North Sea, we need cables in the south to supply far cheaper solar power from that region.

Create clarity in the transmission jungle: We must establish clear rules for the pan-European transit of electricity that are binding for member countries.

Create clear regulations for the grid: It must be possible to produce power in Greece and sell it to a tulip farm in Holland based on freely negotiable contracts. In many countries of the EU such contracts are simply impossible.

Create clear market conditions in the solar market: Excessive import duties for solar panels from China must be dropped in favor of a cheap power supply in Europe. Currently, the EU is actively obstructing the development of the southern European states by artificially increasing the price of solar power in their own countries. benedikt Ortmann & Karl-Heinz Remmers