Geoff Styles (“Can Solar Compete?“) observes two reports from MIT’s Technology Review: one from August 2009 that says cost reductions achieved in the solar power industry “have made solar power cheaper than the natural-gas-powered plants used to produce extra electricity to meet demand on hot summer days,” and another from the September/October 2009 issue saying “power produced by silicon-based photovoltaics is about five times as costly as that generated from fossil fuels.”
Note that, strictly speaking, there is not an inherent conflict. The August claim compares solar to peaking units – naturally the most expensive (per MWh) generators used to make power – while the September/October claim could be seen as comparing solar to baseload or an overall average for fossil fuel generation.
After running through some numbers, Styles writes:
In this simple comparison, at least, it appears that today’s best solar technology is still somewhat more expensive than the fossil-based power it’s likely to be displacing in a typical power grid, … I’m skeptical that simple economies of scale beyond those already achieved could deliver that kind of improvement any time soon. That might explain the necessity for a 30% federal tax credit or grant on solar installations, along with generous state-level incentives and renewable portfolio standards–mandates on utilities for a targeted level of renewable power. Absent these, much of today’s solar activity would probably grind to a halt.
A story in the Austin American Statesman explains the role played by subsidies:
Zabreznik smiled and described how he thinks solar power finally makes sense — not environmentally, but financially.”I’d like to say I’m one of those people who put in solar because it’s good for the environment,” said Zabreznik, 36, a marketing manager turned stay-at-home dad who lives in a new, environmentally-friendly development being built at the former Mueller airport site in Austin. “But I didn’t do it for the environment; I did it because it’s a good deal now.”
… But they acknowledge that their efforts make financial sense only because the federal and city governments will cover most of their costs, meaning that other people’s tax dollars and utility fees are making their solar ambitions possible.
A little later in the story, some details on just how much those subsidies matter:
[Aman] Jain, a financial analyst, created a financial model and discovered that at today’s prices and technology, a solar array would cost a homeowner $4,000 to $7,500. An array would pay for itself in about seven years, he calculated, a finding that he said surprised him.
Those numbers persuaded Zabreznik to make the investment….
Zabreznik says he will pay $5,500 to $7,000 out of pocket, depending on what he and his contractor can negotiate. But the total cost of his array is actually $47,250, according to his contractor, Texas Solar Power Co. Rebates from Austin Energy and federal tax credits cover about 80 percent of the bill.
“Without the subsidies, it’s not remotely worth it,” Jain said.