Cost and competitiveness indicators

Rooftop Solar PV

Executive Summary

Solar photovoltaics (PV) are one of the most dynamic renewable power generation technologies, with improvements in technology and increases in the scale of manufacturing continuously driving down costs.
Solar PV deployment has grown at an annual average compound rate of 44% between 2000 and 2016, from
0.8 gigawatts (GW) to 291 GW. Solar PV modules have high “learning rates”¹ of between 18% and 22%
depending on the period analysed. With the rapid growth in deployment, module prices have declined by
around 80–85% between the end of 2009 and 2016.
Between 2010 and 2016, the global weighted average total installed cost² and the levelised cost of electricity
(LCOE) of utility-scale solar PV projects fell by 65% and 67% respectively.
Although utility-scale solar PV projects regularly make headlines for record-low prices, small-scale
rooftop solar PV systems represent an important part of the market and are bringing the benefi ts
of modern electricity services to households that previously had no access to electricity, reducing
electricity costs on islands and in other remote locations that are dependent on oil-fi red generation,
as well as enabling residents and small businesses to generate their own electricity.
The International Renewable Energy Agency’s (IRENA’s) regular PV cost and competitiveness indicators will
highlight the growing competitiveness of rooftop solar PV and its potential to economically meet the electricity
needs of households in diff erent markets, as well as its potentially disruptive nature for utilities.
The IRENA Solar PV Cost and Competitiveness Indicators series compares solar PV costs
to electricity rates� The aim is to help policy makers track the rapid improvements in the
competitiveness of renewables� With rapidly falling PV costs (IRENA, 2016), there is a clear need for up-to-date analysis of the evolving competitiveness of solar PV in diff erent markets. The Solar PV Cost and Competitiveness Indicators (hereafter referred to as “the indicators”), developed by IRENA, complement our cost analysis of utility-scale renewable power generation technologies by informing governments, policy makers, regulators and others about recent trends in the competitiveness of rooftop solar PV. The goal of the indicators is to aid decision makers in designing, adopting or sustaining renewable energy policies to support solar PV deployment. The indicators initially will focus on the residential segment but eventually may be extended to the commercial rooftop segment.
The indicators are based on a simple and transparent analysis of reliable cost and performance data. The
indicators consist of three key components: 1. PV installed cost trends in diff erent countries (and
locations within a country, where data are available). 2. The “eff ective electricity tariff ” when the solar PV
system is generating based on local retail electricity tariff s, including time-of-use tariff s where in place,
calculated as a weighted average of the tariff in force while solar PV is generating.³ 3. The location-specifi c LCOE of solar PV systems based on local irradiation and installed costs.
Notably, the IRENA indicators are not an attempt to identify the direct economic or fi nancial benefi ts of solar
PV in the market segments examined, either for the owner of the solar PV system or for the utility.⁴ In particular, the
indicators exclude the impact of any support measures for solar PV. The exception would be if net metering is
in place with a selling price set at the electricity tariff schedule for that customer, and the balancing period was
annual.⁵ As a result, the actual economics of rooftop solar PV systems for individuals and businesses are in most
cases better than the indicators presented here, although this relies on net metering being in place with a selling
price based on the electricity tariff , not at lower levels, as is the case in Germany for instance.
To aid readers in understanding the relevance of the indicators, the support policies in place in diff erent
markets are highlighted in this report. This gives an understanding of the scope of support policies in the
markets examined, but not of their quantitative impact on the financial situation of individual investors.
Rather than show the impact of support policies on the attractiveness of solar PV to individual investors, the
indicators are designed instead to show policy makers the evolution of the cost trends of solar PV systems in
diff erent markets and to compare these to the eff ective electricity tariff faced by residential rooftop solar PV
homeowners at the time of solar PV generation. They thus provide an indicator that allows policy makers and
others to track competitiveness trends.
Future editions of this report may examine how support policies from the individual perspective impact the fi nancial
attractiveness in diff erent market segments. However, even analysis of this nature would still require a range of caveats, because it would include assumptions for individual investors that would not necessarily be representative of the range of individual investor circumstances.⁶
The costs of electricity from residential rooftop solar PV are falling rapidly� In just over six years, these costs have fallen 45% for cities in California and 66% in German cities� This is evident from median levelised LCOE⁷ estimates for residential solar PV in cities in these two large, developed electricity markets between Q1 2010 and Q2 2016.
In the US state of California, in the metropolitan areas examined, the LCOE of residential solar PV is estimated to
have decreased by an average of 45% between Q1 2010 and Q2 2016 (Figure ES 1). Over the same period, the
estimated median LCOE in Germany declined by 66%.
This rapid reduction saw the median LCOE of residentia solar PV fall below the average eff ective electricity tariff
that applies to these residential customers in six out of the nine cities analysed in this report. In those six cities,
the median LCOE fell from between 75% and 104% higher than the average electricity tariff (in Munich and Cologne
respectively) in Q1 2010, to between 3% and 37% lower in Q2 2016 (in San Diego and Munich respectively).

Fuente: IRENA

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