Renewable energy companies are approaching the point where they can generate electricity at a price competitive with fossil-fuels without subsidies, the biggest wind and solar manufacturers said.
Suntech Power Holdings Co. Chief Executive Officer Zhengrong Shi said solar will reach parity with fossil fuels on electric grids by 2015. Vestas Wind systems A/S expects its turbines to compete without incentives “in the coming years,” said Peter Brun, head of governmental relations.
“Wind in some cases already is, or can in coming years, be fully cost-competitive with fossil fuels,” Brun said yesterday by e-mail from the World Economic Forum in Davos, Switzerland. “Fossil-fuel prices will continue to rise, and that increases the competitiveness of new technologies. We are preparing the whole industry for getting off the subsidy-need.”
Caught between oversupply and tumbling prices, the companies are reminding governments that their products are taking the biggest share of new power generation and increasingly rivaling oil and gas. That’s pushing green growth up the agenda as Germany and Japan close nuclear reactors and President Barack Obama defends U.S. support for renewables.
New electricity generation from the wind, sun, waves and biomass drew $187 billion in 2010 compared with $157 billion for added capacity from natural gas, oil and coal, according to Bloomberg New Energy Finance, the first time investment in renewables has exceeded that of fossil fuels.
“Renewables are the energy of the future, and there’s been a larger investment in renewable energy than conventional energy,” said Steve Sawyer, secretary-general of the Global Wind Energy Council in Brussels, who first attended Davos in the early 1990s as a lobbyist for Greenpeace when clean energy companies were tiny.
Subsidies to renewables totaled $66 billion worldwide in 2010, according to the most recent figures from the International Energy Agency. Incentives must be retained to meet existing targets of diversifying the energy supply, the Paris-based group said.
Power from solar panels costs more than triple natural gas, according to levelized cost of energy data from New Energy Finance. Onshore wind is close to parity with coal, and about a quarter more pricey than gas.
Solar power will be “very competitive” within a decade, and in some places, it’s already near “grid parity,” meaning it can compete without subsidies, Trina Solar Ltd. Chief Executive Officer Jifan Gao said in an interview in Davos. He spoke through an interpreter.
“We see costs coming down and manufacturing efficiency being improved all the time,” said Gao, whose company is the fifth biggest maker of silicon-based solar panel. “In places like Australia, this year they will reach grid parity; next year Italy will, and in 2014 regions like California.”
Gao’s comments support those of Suntech’s Shi, who told Bloomberg television that with government support, the industry has made “tremendous progress,” and solar prices have been cut in half in a year.
“We believe that by 2015, there will be around 50 percent of countries where it reaches grid parity,” Shi said.
Brun at Vestas said that the cost of wind power is “site-specific” and that the technology may reach grid parity in the breeziest areas by 2020. He declined to say where. Governments and the industry should consider re-allocating subsidies to turbines in areas with lower wind speeds, and offshore, where winds are stronger and costs are higher, he said.
With incentives for wind and solar power under threat in the U.S. and the European Union as governments tighten budgets, Davos serves as a forum for industry executives to remind governments of the need to promote renewables as part of the effort to stem climate change, said Tulsi Tanti, chairman of Suzlon Energy Ltd., India’s biggest wind-turbine maker.
“Davos is the one place the most important decision makers of the world -- be it government or business -- converge,” Tanti said in e-mailed answers to questions. “The most crucial issue this year will be to argue for policy certainty despite the economic environment.”
In the U.S. the wind industry is threatened by the loss of a tax credit which expires at the end of this year. Vestas has said it may fire 1,600 U.S. workers if the credit isn’t renewed, and Obama in his State of the Union Speech on Jan. 24 urged Congress to “pass clean-energy tax credits.”
“I will not walk away from the promise of clean energy,” Obama said.