The economics of solar power - McKinsey Quarterly - Public Sector - Economic Policy

The economics of solar power - McKinsey Quarterly - Public Sector - Economic Policy: "The economics of solar power
Don’t be fooled by technological uncertainty and the continued importance of regulation; solar will become more economically attractive.

JUNE 2008 • Peter Lorenz, Dickon Pinner, and Thomas Seitz

Source: Climate Change Special Initiative
Energy, Resources, Materials, Environment article, solar power
In This Article

* Exhibit 1: Within three to seven years, solar energy's unsubsidized cost to end users will approach the cost of conventional electricity in a number of markets, including parts of the United States (California and the Southwest), as well as Italy, Japan, and Spain.
* Exhibit 2: Installed global solar capacity will grow by roughly 30 to 35 percent a year, from 10 gigawatts today to about 200 gigawatts in 2020.

A new era for solar power is approaching. Long derided as uneconomic, it is gaining ground as technologies improve and the cost of traditional energy sources rises. Within three to seven years, unsubsidized solar power could cost no more to end customers in many markets, such as California and Italy, than electricity generated by fossil fuels or by renewable alternatives to solar. By 2020, global installed solar capacity could be 20 to 40 times its level today.

But make no mistake, the sector is still in its infancy. 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.

What’s more, solar power faces challenges that are common in emerging sectors. Several technologies are competing to win the lowest-cost laurels, and it’s not yet clear which is going to win. Rapid growth has created shortages and high margins for early players, such as the silicon refiners Dow Corning, REC Solar, and Wacker, as well..."