Price Distortions And Opportunities

Photovoltaic (PV) is the fastest-growing renewable energy source, a reflection of the decline of module prices – from $76 USD per Watt peak (Wp) in 1977 to $0.35 USD in 2017. This collapse in prices was initially driven by technological improvements and then accelerated as a result of attractive feed-in tariffs, economies of scale, and Chinese competition. Meanwhile, feed-in tariffs followed the drop in module prices: 1 kWh of PV energy generated earned $0.40 USD in 2005, while it currently earns $0.08 USD/ kWh in most OECD countries. Beginning in the planet’s sunbelt, country after the country reached grid parity in the last couple of years, i.e. solar power became as cheap as power from the grid (production cost + transport and levies). This process has gone even further. In India, Chile, and the Middle East, PV plants get paid as little as $0.03 to $0.04 Cents (USD) per kWh generated, which is only slightly more than the price of dirty coal power.

While the average price of PV power is already low, certain conditions in the spot market can drive them even lower, sometimes into negative territory. The very nature of wind and solar power, the drivers of renewable growth, puts pressure on the existing power infrastructure and has severe consequences for national grids and price structures. Power input fluctuates with the weather and sunlight and leads to overcapacities on sunny afternoons or scarcities during calm nights. In other words, the massive expansion of wind and solar creates opportunities for extremely low prices per Kwh.