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Solar Power May Already Rival Coal, Prompting Installation Surge

California Solar Farm
Mountains stand beyond solar modules at the Southern California Edison (SCE) solar array in Porterville, California. Photographer: Ken James/Bloomberg

Solar panel installations may surge in the next two years as the cost of generating electricity from the sun rivals coal-fueled plants, industry executives and analysts said.

Large photovoltaic projects will cost $1.45 a watt to build by 2020, half the current price, Bloomberg New Energy Finance estimated today. The London-based research company says solar is viable against fossil fuels on the electric grid in the most sunny regions such as the Middle East.

“We are already in this phase change and are very close to grid parity,” Shawn Qu, chief executive officer of Canadian Solar Inc., said in an interview. “In many markets, solar is already competitive with peak electricity prices, such as in California and Japan.”

Chinese companies such as JA Solar Holdings Ltd., Canadian Solar and Yingli Green Energy Holding Co. are making panels cheaper, fueled by better cell technology and more streamlined manufacturing processes. That’s making solar economical in more places and will put it in competition with coal, without subsidies, in the coming years, New Energy Finance said.

“The most powerful driver in our industry is the relentless reduction of cost,” Michael Liebreich, chief executive officer of New Energy Finance, said at the company’s annual conference in New York yesterday. “In a decade the cost of solar projects is going to halve again.”

Installation Boom

Installation of solar PV systems will almost double to 32.6 gigawatts by 2013 from 18.6 gigawatts last year, New Energy Finance estimates. Manufacturing capacity worldwide has almost quadrupled since 2008 to 27.5 gigawatts, and 12 gigawatts of production will be added this year. Canadian Solar has about 1.3 gigawatts of capacity and expects to reach 2 gigawatts next year, Qu said.

“You have to get better at it as well,” said Bill Gallo, CEO of Areva SA’s solar unit. The French company could shave another 20 percent from the cost of making its concentrating solar thermal technology, and the same proportion from building and deploying plants, he said.

Electricity from coal costs about 7 cents a kilowatt hour compared with 6 cents for natural gas and 22.3 cents for solar photovoltaic energy in the final quarter of last year, according to New Energy Finance estimates.

Comparisons often overstate the costs of solar because they may take into account the prices paid by consumers and small businesses who install roof-top power systems, instead of the rates utilities charge each other, said Qu of Canadian Solar.

“Solar isn’t expensive,” he said “In many areas of the solar industry you’re competing with retail power, not wholesale power.”

Rooftop solar installations also will become cheaper, the executives said.

“System costs have declined 5 percent to 8 percent (a year), and we will continue to see that,” SolarCity Inc. CEO Lyndon Rive said in an interview. The Foster City, California-based company is a closely held installer and owner of rooftop power systems.

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