Solar power in the EU is very close to reaching "grid parity" – the same cost price as fossil fuels such as oil and coal – according to renewable energies expert Sven Teske. For that reason, stable feed-in tariffs are needed to ensure market certainty, he told EurActiv in an exclusive interview.
Sven Teske is Greenpeace International's renewables director. He was also a contributing author to the UN's recent Intergovernmental Panel on Climate Change (IPCC) report on renewable energy, and co-editor of this year's European Photovoltaic Industry Association (EPIA) report on the prospects for solar photovoltaics.
He was talking to EurActiv's Arthur Neslen.
In February, your EPIA report painted a fairly rosy picture. You predicted that with a paradigm shift, investments in solar technology could double to over €70 billion by 2015. But since then, feed-in tariffs have been cut across the EU – and further afield. Do you still think that a doubling of investment is likely in the next four years?
Let's say a doubling of capacity is very likely. PV has been a victim of its own success because cost reductions have been much quicker than predicted, so feed-in tariff cuts do not necessarily lead to lower market figures. Sometimes, even more has been installed to a lower price.
Our solar generation reports always had very high estimates, and we were always criticised for being too rosy. Since 2001, the real market figures have overtaken us for ten years in a row. I think we can justify this doubling of capacity at least – maybe even investments – due to the fact that the majority of the EU countries, or within the majority, solar photovoltaics (PV) will hit grid parity in the next years.
Do you welcome the cuts to feed-in tariffs across Europe?
Not in general, but if it is to lower demand in step with market prices, that is absolutely OK. We see problems in the Czech Republic where it has been done retroactively, or in Italy where the process is very unclear, or in Germany, where the cuts were sort of OK but they discussed it for months and were unclear.
On and off market development is not very healthy. We'd rather combine a long-term feed-in tariff scheme with market volume and a cost reduction curve –and then not touch it for a number of years. But we see that feed-in tariffs will soon be a good mechanism to lower electricity prices because if we touch grid parity, solar PV will produce at lower prices.
Your report says that some countries could reach grid parity by 2015. Which ones?
We will reach grid parity in Spain, Italy, France and Germany. That's pretty clear. In Austria and Switzerland, time will tell due to the fact that the market there is very, very small; the system costs more than in markets, where there is already vertically large volume.
What about countries like Bulgaria and Britain, where the proposed feed-in tariff cuts are quite substantial?
At least in the southern part of the UK [we should achieve grid parity], because the solar regime is close to that in north Germany – or sometimes even better. But we don't think we'll make it in Scotland. In Bulgaria, the price and consumer reach is too low. If household consumer prices increase – and they probably will – then we'll come close.
How close are we to grid parity across the EU?
Five, maybe six years; and therefore we urge governments not to change their policy too many times. We are almost there and what we need is a stable feed-in tariff policy, so that we can actually have a stable market without higher feed-in tariffs.
We will need a low feed-in tariff for the next few years to ensure that we have market certainty, but guaranteed feed-in prices in the future are the main task.
The main focus should be on allowing all electricity to be fed into the grid at a certain minimum price, even if it's lower than the market price. You just need something reliable.
What are the biggest obstacles to grid parity?
The biggest obstacles to parity are grid regulations, because at a certain percentage of market penetration, the solar industry needs to go beyond just producing electricity or the panels which produce electricity, and connect them to the grid. The PV industry needs to take over responsibility for electricity production itself in terms of when do they feed electricity into the grid? If the PV industry wants to achieve a larger market penetration, they need to be involved in storage capacity as well as peak demand delivery.
Management of PV systems will be the next big challenge because without it, utilities will say “Okay, you can produce under the market price but we'll charge you double for the back-up power you need at night” and then grid parity is gone. It is an artificial figure because it's the current consumer price, and if utilities charge more for back-up power, then grid parity is out the window again.
So if this is a smart grid and 'connectivity across national borders' issue, is that something that the solar industry has the financial or regulatory clout to do alone?
No, I think it's a shared responsibility. The PV industry needs to go into technical solutions for short-term storage management of the remote-controlled load systems, and towards smart grids. The regulatory framework is obviously a different issue, so policymakers need to shift their grid regulations from centralised to decentralised policies – and the policy mechanisms are very different.
I'll give you an example. If there is a bonus for consuming electricity outside a feed-in tariff at peak demand times, then a lot of people will shift their demand to peak times. As a result, we'll actually have a higher peak and then PV's savings benefit will be gone. If demand peaks because of incentives to shift your use into peak times, when you generate more, then the peak savings effect is gone. So those policy mechanisms must be well thought-through before they are established, which requires insight into how they work.
How effective have the lobbying efforts of gas and other non-renewable industries been in gaining the ear of policymakers this year?
Traditionally, the nuclear and coal industries have been the most aggressive lobbyists but now the gas lobby is picking up. It's relatively aggressive, especially on shale gas, which does not play a huge role in Europe yet but potentially could – at the expense of renewables. From a purely technical point of view, the natural gas industry – excluding shale gas – and the renewable industry could potentially be strategic allies but unfortunately this is not yet the case.
In Spain, the gas lobby went straight for the renewables industry, and we are concerned about that. They are gaining ground a bit but the renewables sector needs to strike back and get more of a grip on policy. At the end of the day we need a complete renewable supply, and gas can be a bridging fuel but not a long-term solution.
What effect has Fukushima had in this regard?
The nuclear industry is now very clearly a thing of the past and the renewables sector needs to seize that momentum to jump into the gap. In Germany, out of 127 nuclear reactors, only six are currently supplying the grid. Eleven are off-grid. But we still have electricity here, no problem.
The renewables industry now needs to fill the gap quicker than projected. But I'm very convinced that we can deliver and that will have a major effect. We can actually phase out coal quicker because I expect that a new wave of innovations will accelerate the expansion of renewables still further, and we will actually be able to phase out fossil fuels faster. It is the opposite effect of what some lobbyists tell us – that a nuclear phase out will have a negative effect on CO2 reductions.
But you said that the gas industry had been faster off the mark than the renewables sector in reacting to Fukushima. The recent EGAF report was clearly part of a lobbying push. Do you think that right now, gas and shale gas in particular are well positioned to benefit from changing energy supply patterns after Fukushima?
Well there is a fat chance that this will happen, which is not what we want. Basically you're telling us to be stronger. We'll do our best but they're very well positioned and have far more staff than us.
In the US, the IEA report last month didn't seem to envisage a substantial share of solar power in the energy market in 2035. Do you think that they were mistaken?
The US solar market is a huge market that is almost silently growing. It has a 22GW pipeline project over the next few years, and the same with the wind industry. I assume that wind, PV and concentrated solar power will grow much faster than many people estimate. Because of its decentralised planning and nature, it is harder to get an overview of what's going on, and renewable power in the US is clearly underestimated. But I'm convinced that it will grow a lot faster than predicted.
Grid integration and forecasting of power demand and power supply are more and more needed. The buzzword right now is smart grids, but new players are coming into the power sector, software companies like Google, and maybe Apple and Microsoft, who will bring a new dynamic.
Is it true that if just 1% of the Sahara was covered with solar panels, it would power the world's electricity?
Of course those calculations are right. It just shows what the potential is, in theory. But I wouldn't recommend generating it all in one spot, because you would still have to export it globally and there would also be a security problem, and transport and technical problems. But every country could power their entire energy demand a few times over with local renewables.
I am one of the lead authors of the energy scenarios chapter in the new IPCC report which came out last week, and we discovered that most countries can supply their current energy demands from between five to 50 times over, from local renewable sources. So a mix of different renewables would enable every country to run not just their electricity, but their entire energy needs. Every country has different sources.
I don't think that the UK will become completely solar powered. It will probably run on wind and waves. That makes sense. You can use solar power in the UK but not as the main source.
Do you see the revolutions sweeping the Middle East as offering hope for a more sustainable energy future, because they are shaking up policymaking horizons?
That's a very good question. I actually don't know. I've just been in Abu Dhabi at the IPCC event, and there's a lot of talk about this in the region, but besides some flagship projects, I don't really see a large take off yet. There are some positive signs but no more.
If you added up all the announcements of concentrated solar power projects in Egypt, they would have 120% renewables already. What really counts are connected systems – not announcements – and there have been relatively few of those.
There has been a lot of talk about Turkey powering Antalya completely by solar power though, and a new 100MW plant which would be one of Europe's largest.
Turkey seems to be a step ahead already because it is not just talking, it seems to be materialising. Turkey also has very good wind resources. If the announcements materialise, then Turkey will be one of the new leading countries in this technology. We very much hope that this happens and Turkey takes a flagship position in the region.
With feed-in tariff cuts spurring some companies to make solar investments abroad, do you expect Europe to continue to account for 70% of global solar energy market?
I don't think that the role is really under threat right now but potentially Europe could maintain and accelerate the market. Its global market share and percent will probably drop because we see a rising market in the US and in China, which will significantly increase the overall global market.
I also think that Japan will change policy, with the current debate on the nuclear phase out. Ten years ago they were one of the rising stars in East Asia but then they dropped the ball. Today, they're potentially a rising star again because of Fukushima.