A British international development company claims the real cost of solar-plus-storage systems in emerging economies could be up to 80 percent cheaper than current estimates.
London-based Crown Agents said the perceived high capital cost of PV and storage is acting as a deterrent to investment by multilateral agencies, but this perception is based on outdated technology assumptions.
Agencies and donors are basing investment decisions on a rough cost of anything from $5 up to $10 per watt of PV power, said Jordan Fast, senior technical adviser and partnerships manager at Crown Agents.
“Even a year and a half ago, donors were still operating on quite a traditional, lead-acid-based, 'dumb' solar technology model, spending a lot of money in doing so,” he said.
These systems tend to be oversized to cater for inefficiencies in design, adding to installation costs.
Because the systems are larger and bulkier than they need to be, said Fast, “they require independent, climate-controlled buildings to house the battery banks in, and large structures to hold the PV panel arrays.”
But newer, more efficient and better integrated systems with lithium-ion batteries are easier to install and could fit into existing buildings, Fast said. This could bring costs down significantly, perhaps to as little as $2 per watt.
Another factor in cost reduction: Microinverters make it possible to conduct detailed load assessments to make sure solar-plus-storage systems are better matched to actual power consumption patterns.
Modern solar-plus-storage technology could potentially also last much longer than older systems, Fast said, with lifespans of up to 25 years yielding a levelized cost of energy (LCOE) that is competitive with diesel generation in many areas.
The LCOE for new off-grid or grid-tied distributed solar-plus-storage could come down to less than 20 cents per kilowatt-hour, compared to 60 cents per kilowatt hour for small diesel and petrol generators, according to a report published by Crown Agents.
These figures are conservative, said Fast, assuming diesel is priced at around $1 to $2 a liter. But in some locations, the price of diesel can be as high as $4 a liter. And the 20 cents per kilowatt-hour LCOE is for a $3- to $4-per-watt system, he said.
“With a $2- to $2.50-per-watt system, we can get down to 16 or even 15 cents per kilowatt-hour, over 10 years,” he said. “Then you start to compete with the grid.”
Crown Agents is looking to validate its cost analysis with a rollout of distributed energy systems across a dozen health centers in Zimbabwe.
The rollout, which is due to start soon, will mostly feature 4-kilowatt solar systems tied to 5-kilowatt-hour lithium-ion battery packs. It should start yielding results in the first quarter of 2018.
Kate Hargreaves, foundation program director at Crown Agents, said she hopes the results will stimulate greater investment in solar-plus-storage across emerging economies.
“We want to change the mindset of our regular donors, like the World Bank and the Asian Development Bank,” she said.
Fast commented: “There are still a lot of negative attitudes toward solar. The default response to solar is, ‘It’s not reliable, it doesn’t work, it’ll last a couple of years and it’s very expensive.’ We’re trying to help change that narrative.”
Benjamin Attia, research analyst for global solar markets at GTM Research, confirmed that solar is becoming increasingly competitive with other forms of generation worldwide.
GTM Research data shows that the annual average cost per watt of solar modules has declined 73 percent since 2011. PV outpaced all other fuels in new capacity additions globally in 2016.
GTM Research estimates that cumulative installed solar capacity will overtake cumulative nuclear capacity this year.
"Competitively priced solar is one of the cheapest forms of new electricity in the world, and nearly 80 countries have or are setting up competitive procurement programs for PV," Attia said.
"In off-grid applications in particular, solar leads as a low-cost, modular solution, especially for lower tiers of access."
