Davos World Economic Forum 2012: Solar is already near “grid parity”

Feb 1st, 2012 | By | Category: Articles, Featured Posts

Scientists tell us that 2010 is likely to tie 1998 as the hottest year on record. The ice is melting. The seas are rising. The weather is behaving everywhere in new and ominous ways. Climate change continues, and worldwide efforts to confront climate change continue as well. One among many urgent questions raised by these continuing efforts is how best to avoid a collision between advancing trade and combating climate change. Such a clash seems increasingly likely, given the gridlock in global talks and the growing fears that competition will suffer if sweeping regulatory reforms are implemented during these hard economic times.

There is no way of avoiding linkage between trade and climate change. Economically, environmentally and, not least, politically these two significant areas of global concern are linked inextricably. Given this link, the world must somehow find a way to continue to lower barriers to trade while also combating climate change. The alternative is what some foresee as a “train wreck” – a rapidly approaching collision between the international rules that govern world trade and the national and international means being constructed and employed to confront climate change.

The energy related activities of the World Economic Forum focus on creating new insights, and a platform for stakeholders to act upon some of the most important energy issues. Current focus issues include:

  • New Energy Architecture – Many countries struggle to upgrade their energy systems to fully support current and future requirements of energy security and access, sustainability and economic growth. This work area looks into pathways to creating a more effective transition towards a new energy architecture.
  • Energy for economic growth – As the world struggles to emerge from a global recession and financial crisis, countries are looking for solutions to improve domestic economic performance and put people back to work. The energy sector constitutes a relatively modest share of GDP in most countries, except for those in which oil and gas income loom large. However, the energy sector’s impact on the economy is greater than the sum of its parts. Most importantly, almost none of the economy’s goods and services could be provided without it. Thus, stable and reasonable energy prices are needed to reignite, sustain and expand economic growth. The World Economic Forum is working in partnership with IHS CERA to release a new study on this topic.
  • Resource Scarcity – Conditions of both scarcity and abundance of natural resources – energy, metals, minerals, water, food and agricultural land – will have major implications for all stakeholders, particularly thanks to the increasingly powerful interconnections and dependencies between these resources. As increasing demand dynamics and the potential for restricted supply create multiple pressures globally in economic, social and humanitarian terms, it is critical for stakeholders collectively to seek a deeper understanding of the drivers of resource availability, potential scenarios of abundance and scarcity under different assumptions, and pathways for market- and policy-driven solutions. This is a cross-industry workstream engaging stakeholders from energy, agriculture, and resource extraction industries.
  • Energy Industry-Society relations: Building Trust –  towards improved relations between the energy industry and society. This focus area addresses the issue of how to increase trust in the  relationship between the energy industry and society. Expectations to the energy industry are multiple and changing,  many stakeholders argue there is an increasing gap between public expectations and the industry’s ability to deliver on those, an issue explored within our energy partnership.
What does it mean for photovoltaic industry and it’s contribution?  There is a bright side to the plunge in solar panel prices that has brought down some U.S. and German manufacturers which relied too heavily on subsidies for green energy – solar power costs have fallen faster than anyone thought possible.  The falls in prices for photovoltaic components, pushed down by economies of scale and fierce competition from China, have made solar nearly as cheap as conventional sources in Germany’s electricity grid.

Solar is already near “grid parity” and it can compete without subsides, chief executive officer from one of the industry’s top five manufacturers said

Solar power will be “very competitive” within a decade, and in some places, it’s already near “grid parity,” meaning it can compete without subsidies, Trina Solar Ltd. Chief Executive Officer Jifan Gao said in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “We see costs coming down and manufacturing efficiency being improved all the time,” said Gao. “In places like Australia, this year they will reach grid parity; next year Italy will, and in 2014 regions like California.” 

The cost of solar panels fell 47 percent last year as Chinese manufacturers boosted production. And now China may double its installations of solar panels in 2012, absorbing excess production.

Suntech Power Holdings Co. CEO Zhengrong Shi estimated the nation may add 4 gigawatts or more of panels, and Trina Solar Ltd. CEO Jifan Gao expects 5 gigawatts. That compares with about 2.2 gigawatts installed in the country in 2011, about double the capacity of the average nuclear reactor in the U.S.

“It’s a huge market,” Gao said. “Excellent companies with good technology, balance sheets and also brands will win out. A lot of companies without those advantages will be taken away.”
Those forecasts are more optimistic than the projections of Bloomberg New Energy Finance, which expects Chinese installations of 3 gigawatts this year and world demand from 25.5 gigawatts to 32.8 gigawatts.

Solar shares have rebounded in recent weeks, driven in part by politics in Germany, the world’s largest solar market. After adding a record 7.5 gigawatts of panels last year, more than double the government’s target, lawmakers proposed cutting subsidies. A meeting Jan. 25 ended without an agreement and solar stocks climbed.
In Britain, the government estimates that capping subsidies in December would have saved 1.5 billion pounds ($2.4 billion) over 25 years. A court ruled it illegal to end the support then, ahead of schedule, and developers are rushing to complete new solar plants that will earn the old tariff before officials decide when to scale them back.

Growing demand in China may also drive a solar recovery this year. “I’m hearing a lot from on the ground in China about how hopping demand has been,” said Aaron Chew, an analyst with Maxim Group LLC in New York. “China could surpass Germany” as the world’s largest solar market.

Source: The World Economic Forum

About: The World Economic Forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. The World Economic Forum encourages businesses, governments and civil society to commit together to improving the state of the world. Our Strategic and Industry Partners are instrumental in helping stakeholders meet key challenges such as building sustained economic growth, mitigating global risks, promoting health for all, improving social welfare and fostering environmental sustainability.

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