The Elusive “Break-Even” Point for Alternative Energy

How did my lovely, talented, infinitely kind and caring wife end up with a schlub like me? Luck, I guess. I like to think she made an investment in her future (and one amazing son later, I’d say the ROI was fantastic!).

And that’s the quandary the smart grid/alternative energy market finds itself in, whether it’s grid parity or the “break-even” point for solar panels. The customer spends a bit more up front for the promise of future savings. If they’re willing to make that investment.

But how far out are these break-even points? The consumer might recoup the costs of an A-19 LED bulb fairly quickly (I certainly have), but what about industrial photovoltaic cells? How long before you’re in the black? Unlike marriage, this initial commitment shouldn’t last a lifetime.

Energysage.com projects the average solar payback period in the U.S. as 6-8 years, with large disparities based on the cost of electricity, finance factors, technical performance, and state and federal subsidies.

And the latter is extremely volatile – this hardly needs mentioning, but the political climate can dramatically shorten (or prolong) break-even points for alternative energy. But politics don’t exist in a vacuum (despite how out-of-touch most politicians are) – if throwing money at subsidized solar panels had absolutely no adverse effects on the economy, we’d all have them on our roofs tomorrow.

But in the very near future (some would say now), the price of alternative energy will be even with fossil fuels and legacy technologies. According to GTM Research, 20 US States are currently at grid parity – when “the levelized cost of solar energy falls below gross electricity bill savings in the first year of a solar PV system’s life” – and a total of 42 states will reach that milestone by 2020 under “business-as-usual” conditions (Power Systems Design’s home state of Maryland is one of the 20 qualifying states).

Frankurt, Germany-based investment bank Deutsche Bank predicts that up to 80% of global solar systems will achieve grid parity by this year! The firm noted that unsubsidised rooftop solar electricity runs about $US0.13-$US0.23/kWh (as of 2015), which was already below the global cost of electricity in many markets.

“The economics of solar have improved significantly due to the reduction in solar panel costs, financing costs and balance of system costs,” their report notes. “And further cost falls over coming years will come from improved panel efficiencies, and falls in balance of system costs due to scale and competition.”

And we’re already seeing huge efficiency gains for photovoltaic cells. Several years ago, commercial solar panels barely eked out 10% efficiency, while the most efficient cells today top 22%. Several months ago, Japanese chemical manufacturer Kaneka Corporation unveiled a solar cell with a record-breaking 26.3% conversion rate. It’s not commercially available yet, but considering the gains we’ve seen in the last couple years, higher efficiencies (on your rooftop or at the office) are inevitable.    

In the very near future, solar – and other technologies with an unforeseen “break even” point – might shed the “alternative” label and just be an extremely viable form of energy.

PSD