REC says "green parity" at least 3-5 years away

OSLO Mon Oct 11, 2010 8:48am EDT

OSLO (Reuters) - Norwegian solar group Renewable Energy Corp (REC.OL) said it will take at least 3-5 years for solar energy to become cost competitive with fossil fuel-based electricity, in part due to oil and gas subsidies.

Chief executive Ole Enger said producers of polluting fossil fuels received "several hundred billions of dollars" in subsidies worldwide, skewing the global energy mix toward carbon-intensive coal, gas and oil.

"It will take quite some years before we are competitive on a purely economic basis, without any subsidies to compensate for the subsidies already in fossil fuels," Enger told the Reuters Global Climate and Alternative Energy Summit.

"Even in the optimistic scenario, it will take 3-5 more years before we will reach green parity," said Enger, whose company's products range from polysilicon to solar modules.

New technology and ever-thinner layers of solar energy-absorbing polysilicon wafers mean the cost of solar power is falling relative to that of conventional energy and toward "green parity," or the level where the two would be equal.

Enger said that beyond Europe, industry did not pay for emitting carbon dioxide (CO2) -- the main greenhouse gas from human activities released by burning fossil fuels.

PRICING CARBON

"Even if you put a moderate cost on CO2, we would see solar energy already quite competitive without subsidies," said Enger.

But with the failure to produce a binding emissions target at the U.N. summit in Copenhagen in 2009, and nothing to suggest a looming deal between leading global polluters, the subsidy advantage ejoyed by fossil fuels was set to last, Enger said.

"Copenhagen failed, the United States and the rest of the world is not willing to adopt the EU (CO2 pricing) system. There is unfair competition because fossil fuels do not have to pay for CO2. From this perspective, it is fossil fuels which are subsidized much more than solar energy," he said.

Enger was upbeat about global solar demand in 2011 despite decreasing subsidy schemes in a number of key markets such as Germany. [ID:nLDE6931IW] He said European solar energy groups such as REC still enjoyed technological advantages over fast-growing Chinese rivals, especially when it came to polysilicon.

But in the downstream part of the solar market, or production of solar wafers and modules, lower Chinese labor costs helped their solar firms become "very competitive."

Enger said Chinese solar companies also enjoyed another advantage -- easy availability of funds from development banks.

"Their capital lines with development banks are quite impressive in terms of low rates and huge amounts of money. They (the banks) seem to be willing to live with the risks that you find very rare elsewhere in Europe or the United States," said Enger, adding Chinese banks "seem to be very decisive in making the solar industry a strategic one for China."

(Editing by Dan Lalor)