• National Grid expects further declines in cost of renewables
  • Outlook supports government's decision to slash solar support

Solar power in the U.K. may cost about the same as energy from conventional sources within 18 months, according to the nation’s grid operator.

“What this means is that you’ll no longer need a subsidy,” Andrew Bonfield, finance director of National Grid Plc, said in an interview. “Given the falling costs of solar panels and better penetration and manufacturing, people in our organization are estimating parity with other sources of generation in 18 to 24 months.”

The comments support Prime Minister David Cameron’s decision to pare back support for renewables, which even after cuts will cost 4.9 billion pounds ($7.6 billion) more than the Treasury has budgeted over the next six tax years. While solar developers say the cuts will devastate their industry, the costs of making and installing the units is falling rapidly.

Prices for solar photovoltaic systems have fallen 57 percent in the past five years, according to data from Bloomberg New Energy Finance. Solar energy in the U.K. is currently about 75 pounds per megawatt-hour, compared to 50 pounds per megawatt-hour from fossil fuels, Bonfield said.

Subsidy Cuts

The U.K. cut subsidies for the solar industry in April and July. Support programs for large and smaller-scale projects were canceled and ended early. Small-scale renewables developers will no longer be locked in to guaranteed power prices under the feed-in tariff program.

Not all sources of renewable energy will reach grid parity, Bonfield said. Offshore wind is very expensive, and the price of carbon may need to rise for electricity from turbines in the sea to ever reach the same levels as conventional sources, he said.

“Solar plus battery storage -- once the technology advances and the costs for battery storage comes down -- we will be in the sweet spot, ” he said.

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