Solar panel installations might surge in the next two years as the cost of generating electricity from the sun approached that of coal-fuelled plants, industry executives and analysts said yesterday.

Large photovoltaic projects would cost $1.45 (R9.75) a watt to build by 2020, half the current price, Bloomberg New Energy Finance estimated.

The 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 close to grid parity,” said Canadian Solar chief executive Shawn Qu.

“In many markets, solar is already competitive with peak electricity prices, such as in California and Japan.”

Chinese companies like JA Solar, Canadian Solar and Yingli Green Energy are making panels cheaper, fuelled by better cell technology and more streamlined manufacturing processes. That would put solar energy 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,” New Energy Finance chief executive Michael Liebreich 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 of solar photovoltaic systems would almost double to 32.6 gigawatts by 2013 from 18.6GW last year, New Energy Finance estimated.

Manufacturing capacity worldwide has quadrupled since 2008 to 27.5GW a year, and 12GW of production will be added this year. Canadian Solar had about 1.3GW of capacity and expected to reach 2GW next year, Qu said.

“You have to get better at it as well,” said Bill Gallo, the chief executive of Areva’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 cost about 7c a kilowatt-hour compared with 6c for natural gas and 22.3c for solar photovoltaic energy in the final quarter of last year, according to New Energy Finance estimates.

Comparisons often overstated solar costs because they might take into account the prices paid by consumers and small businesses that installed roof-top power systems, instead of the rates utilities charged each other, Qu added.

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

Rooftop solar installations would become cheaper too, the executives said.

“System costs have declined 5 percent to 8 percent (a year), and we’ll continue to see that,” said SolarCity chief executive Lyndon Rive. – Bloomberg