McKinsey on the economics of solar

Business consulting firm projects robust growth for solar and grid parity in many locations by 2020

Posted by David Roberts at 3:54 PM on 24 Jun 2008

Read more about: energy | economy | renewable energy | solar thermal power | solar voltaic power

McKinsey has a great new analysis piece: "The economics of solar power." Overall it's extremely optimistic, saying that despite uncertainties around technology and policy, growth in the solar sector is all but certain to be robust.

Here's a interesting chart. The size of the yellow ball is the size of the solar market in TWh. The upper right of the chart is "grid parity" -- i.e., solar electricity selling for roughly the same price as fossil electricity.

Notice that several large U.S. markets -- California, Texas, New York -- are expected to reach grid parity by 2020. Note, however, that China, with a much larger total market, will not, largely thanks to cheap and unregulated coal in that country. Steps by the Chinese government to price carbon or otherwise discourage coal could bump that yellow dot up and to the right.

Here's another chart, showing the projected rise of solar PV installed capacity under fairly conservative "base-line" assumptions (including no breakthrough advances in thin-film, nanotubes, etc.):

A more aggressive scenario puts the 2020 capacity at well over double this number -- 400GW. Note here the role of government support in kickstarting a market that will continue to expand long after policy supports are removed.

Interestingly, McKinsey is much more bullish on PV than on concentrated solar (CSP). They base their preference on the many opportunities for fundamental technological breakthroughs in PV that bring efficiency up and price down. CSP, on the other hand, intrinsically relies on steel, glass, and other commodities that are unlikely to substantially fall in price.

Despite all the optimism, this robust growth in solar will still yield a relatively small cumulative total:

Even if all of the forecast growth occurs, solar energy will represent only about 3 to 6 percent of installed electricity generation capacity, or 1.5 to 3 percent of output in 2020. While solar power can certainly help to satisfy the desire for more electricity and lower carbon emissions, it is just one piece of the puzzle.

Lots more, including advice for utilities, component manufacturers, and governments, in the analysis itself. Worth checking out.

For story: McKinsey on the economics of solar
7 Comments | Post a Comment

Predictions

Any time we read predictions like that we need to remember we also have (collectively) a choice. If wanted solar to be a really big percentage of our grid, we could spend money on a scale comparable to our military, put a high price on emissions, or put in some really tough renewable requirements. It is not like it is set in stone how much solar we use, or how much wind power we install, or how much we improve energy efficiency.

It is not that either you or McKinsey would dispute this. It is just that it can get too easy to get into a mode of talking about the future as though it is fixed, and trying to read the tea leaves to figure out where it will go. We make the future, not exactly as we wish, but still what we do affects what happens. We know this, but we want to avoid letting it slip too far towards the back of our minds.

by Gar Lipow at 11:09 PM on 24 Jun 2008

Well said, Gar.

grist.org

by David Roberts at 11:24 PM on 24 Jun 2008

Yep Gar

Nice graph, but not a good prediction. I sense an ulterior motive. Perhaps they fear their business credibility would suffer if they predicted a large percentage from solar?

I think that's a fair assumption.

Grid parity by 2020 seems a bit too far out also. Given soaring fuel costs. And recent concentrating solar PV and furnace cogeneration and storage developments.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

by amazingdrx at 11:57 PM on 24 Jun 2008

Grid Parity

Check this out: "The solar industry's first 1GW production tool" ... two orders of magnitude more capital efficient than a high-vacuum process

by Ken Johnson at 1:19 AM on 25 Jun 2008

re: Predictions

on the subject of choices, and putting politics and vision to work with market support, this is from the economist's special report,

Whether [the clean energy] boom will happen quickly enough to stop the concentration of carbon dioxide in the atmosphere reaching dangerous levels is moot.

and so's this:

[An important] difference [between the coming energy boom and its recent predecessors] is that new information technologies tend to be disruptive, forcing the replacement of existing equipment, whereas, say, building wind farms does not force the closure of coal-fired power stations.

isn't that nice? everybody gets to keep making money.

by hapa at 4:27 AM on 25 Jun 2008
[ Parent ]

it's all about policy

it's one thing for policy not to heavily subsidize decentralized PV to the exclusion of all other options, but it's entirely another thing for it to grotesquely subsidize giant, remote utility-scale power of every kind, which is what's happening now.

how can rooftop PV ever get grid parity in CA when Bright Source gets to destroy 10,000 acres of OUR taxpayer-owned wilderness for each CSP plant for almost no money, plus suck 35 million gallons of OUR groundwater per year per plant (for free) plus get guaranteed cheap capital, plus guaranteed NIETC transmission lines, plus massive tax breaks, govt incentives and other perqs that all direct investment capital towards it as well?

meanwhile back at the homestead, we have to choose between small-and-shrinking CSI incentives, OR teensy feed-in tariffs, OR of course, losing our homes to eminent domain for the thousands of new miles of powerlines RETI is scheming, and sacrificing our open spaces/views to giant power plants.

Oh, and where can we get the money anyhow since HELOCs are all closed, lenders are denying everything, and nobody but SF and Berkeley have bothered with innovative lending programs? Since POLICY-DRIVEN DEMAND has kept prices high and has driven a lot of manufacturing to places where PV is wanted, we are not seeing the kinds of price drops predicted, so a basic system is still well over $20K.

We gotta get out from under this Corporatocracy frame of mind and at least pretend we still live in a democracy. Local PV is simply better than remote, utility-scale anything. For the planet, for the ratepayers, for our views, our ecosystems, our groundwater, our lives. let's push for policies that reflect that!

the greenest energy is that which you needn't ever produce.

by stopgreenpath at 9:14 PM on 25 Jun 2008

Solar energy in T�RKEY

Türkey has remarkable solar energy potential. But we can't use our this potential. in last five years, we have been applied some solar applications. you can find some special applications in http://www.unienerji.com , http://yekarum.sdu.edu.tr

Türkey has bigger potential than germany but germany has used solar energy more than us. I think, it's main reason is less promoting the development of solar energy in türkey than germany.

by unienerji at 1:03 PM on 26 Jun 2008

ADVERTISING POLICY

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