Unsubsidized solar power could become cost competitive with natural gas in about a decade – inexplicably due to the proliferation of inexpensive natural gas, a report says.
It’s sounds like a paradox, but that’s a conclusion of Lux Research, a spin-off of the venture capital firm Lux Capital, published today in “Cheap Natural Gas: Fracturing Dreams of a Solar Future.” The report is sunny on solar power’s future, because the proliferation of inexpensive natural gas could serve as a bridge fuel that makes a ramp up of renewables possible without requiring major infrastructure improvements.
That would help utility-grade solar penetrate the energy mix in multiple regions, it found. Lux says that solar will reach price parity with natural gas turbines by 2025.
“On the macroeconomic level, a ‘golden age of gas’ can be a bridge to a renewable future as gas will replace coal until solar becomes cost competitive without subsidies. On the microeconomic level, solar integrated with natural gas can lower costs and provide stable output,” said Ed Cahill, the report’s lead author and research associate.
Lux Research has made the assumption that there will be a significant drop in the cost of utility grade solar power systems and barriers to scale gas production through environmental regulations in Europe and high capital costs in South America. However, there are currently no signs of a shale gas production slowdown in the United States, which is now the world’s largest producer of natural gas, a major job growth engine.
Meanwhile, renewable energy consumption is also surging. Solar power and wind power usage have grown 267% and 538%, respectively, in the United States in less than a decade following the “green revolution” brought on by the American Recovery and Investment Act, which is better know as the Stimulus. The same transition is happening worldwide: the International Energy said that renewables would account for a quarter of world energy production by 2016, in a June report. There is intermittent penetration.
Don’t expect an entirely seamless transition to renewables like solar power. Lux Research's report noted: “Turmoil is imminent because standalone solar will not yet be competitive when subsidies start expiring in markets like China, the U.S. and Japan. Companies will need to diversify geographically and transition to areas with fewer gas resources – or develop hybrid systems that take advantage of low gas prices.”
(image credits: Lux Research, Wikipedia Commons)