The most important financial event of this decade will be called "crossover." That's the point at which solar energy becomes cheaper than fossil fuel energy.
Crossover will transform energy economics. It puts a thumb down on energy prices. When costs for exploiting a fuel source go above the crossover price, that fuel source becomes uneconomic, as solar cell production scales to meet it.
My point is that not all these efforts are doomed to failure, that one, or more, will succeed in transforming solar economics. GE and the Department of Energy expect crossover with fossil fuels to occur in 2015 or 2016, depending on energy prices and changing technology.
Solar Costs Continue to Plummet
Despite the performance of solar stocks over the past two years, the fundamental cost of installing solar power continues to fall rapidly. Long term, this is great for the industry and should drive sales and eventually (surviving) solar stocks higher in the future.
The question is, when will we pass grid parity, and when will demand be self-sustaining? The answer may surprise you.
People often talk about grid parity as the point when solar will become truly competitive, but few realize that we're approaching and passing that point in certain areas of the world already. Germany has become so efficient in installing solar modules that the average system now costs $2.24 per watt, an incredible number considering 70% of installations are residential. So, what does this mean for the competitiveness of solar on a per kW-hr basis?
I have created the table below to put the cost numbers I've given into context. The calculation I used to figure out cost per kW-hr assumes a 25-year life, a 10% annual return on investment, and the capacity factors I've used give a range of outputs depending on sunlight conditions. These are conservative assumptions, and the return on investment number probably overestimates the cost of solar at current rates.
Even without any subsidy the cost structure in Germany would lead to nearly grid parity in most of the world, showing tremendous upside. But it isn't module cost that will help us reach this cost in the U.S.