Cost of solar power

There is no one cost for solar power. The actual cost depends on a number of factors – region, technology used, scale, whether it is rooftop or ground mounted, and more. As a result, as of Sep 2015, the solar cost per KWh without subsidies could vary between 5 cents/kWh to 15 cents/kWh on a levelized cost basis!

Affordability of solar power

While the range of the solar cost per KWh is 5-15 cents, in most cases, solar costs upwards of 10 cents/kWh.The question is, is this cost affordable?

Depending on who you ask, solar power is either affordable or unaffordable. In order to make solar more affordable, the concept of subsidies was brought in.

Need for subsidies

Until 2014, the cost of solar power was higher than the cost of grid power for most regions in the world, be it for the industrial or the residential sector. As a result, many governments gave subsidies to spur the growth of solar power adoption.

Solar prices have dropped by more than fifty percent in the last few years. Somehow, subsidy rates have not gone down proportionately. Most Governments took to generous subsidies to promote the Solar Industry. But these now weigh down the budget of each of these countries from which they are provided.

People from the industry themselves acknowledge the need for subsidy cuts in order to hasten decision making. Germany went back on their subsidies a couple of years back and it has not hampered the growth of the PV sector there. Removal of subsidies has helped in greater competition and standardisation in the German PV market and has effectively cut solar costs.

Cost of solar power without subsidies

Various Governments throughout the world are currently considering slashing subsidies because they feel that the Solar Industry has come a long way enough to stand on its own now. And that leads to the big question! Can the industry survive without subsidies? The following aspects needs to be considered while answering this question./

  • Cost effectiveness of solar energy depends on various factors, chief being, what it is compared against. Let’s look at a graph that compares unsubsidized renewable energy costs against conventional sources in some areas and markets in the U.S. From the below graph provided by a financial advisory firm ,Lazard, it is pretty evident that solar power has an edge over several other energy sources, like diesel power and coal based power in some areas.. The solar utility-scale sector based power definitely seems more viable than many other energy sources.
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    Source:ExtremeTech

  • Cost effectiveness of unsubsidized solar energy depends on where you live. In a sunny state like California, with high utility rates and with loads of sunshine, solar power even without subsidies is already cost effective against, say, diesel power. On the contrary, let’s say if you are in Texas, wind power will definitely be favoured over solar power.
  • It also depends on what kind of a consumer you are. In a country like India, solar energy without subsidies comes to around nine rupees per unit. There are states in India where commercial enterprises are charged Rs.9.2/unit as electricity tariff rate. For these enterprises, going solar makes sense.

Broadly looking at how cost effective Solar Power is, Energy Experts believe that complete independence from subsidies is right now not possible for most countries barring a few. But according to them, we are very much on track for a subsidy-free sustainable Solar Industry. Most Industry Experts are of the opinion that by 2020 we should be good to go without the subsidies.
Did You Know?

Subsidies are not limited to solar or renewable energy alone. Globally, the International Monetary Fund estimates that fossil fuels, even after all these years, benefit from direct and indirect subsidies amounting to £3.4 trillion a year!

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