LONDON A widening shale gas revolution is killing the economics of renewable energy, even as falling costs allow wind and solar to overtake fossil fuels in niche areas, say energy executives and analysts.
Solar panel prices are down about 10 percent this year, but chasing a moving target as discovery of cheap shale gas spreads beyond the United States, experts told Reuters energy and climate summit.
Even big renewables investors, such as French energy company Total, see solar as a tiny part of the picture decades out, compared with gas. Total paid $1.4 billion for a majority stake in U.S.-based SunPower Corp.
"You have one energy that represents today more than 20 percent of the energy mix, and solar today is close to zero and will represent maybe 1 or 1.5 percent in 20 years from now," said Jean-Jacques Mosconi, Total head of strategy.
The trouble is that a new "golden age of gas," as the International Energy Agency dubbed it, has created massive over-capacity in a key rival fuel for power generation.
"The economic viability of a lot of the renewables are getting killed because we have too much gas in the world right now," said Jeff Currie, global head of commodities research at Goldman Sachs.
"It's made a lot of these other projects like solar and wind struggle in terms of their economic viability, and coal too."
Building new gas plants was half the price of new nuclear, and much cheaper than wind and solar, said John Rowe, chairman of U.S. power company Exelon Corp. Shale gas has especially suppressed prices in the United States.
Energy ripples from a Japan quake, where some countries are now rolling back nuclear plans after the Fukushima crisis, would favor coal and gas as much as renewables, said International Energy Agency chief economist Fatih Birol.
"When Germany say they are going to use alternative energy sources, I just don't see it, if you try to switch now to solar power it will cost them 20 times more," said Peter Csoregh at Robeco's Natural Resource equities fund, expecting instead greater use in Germany of gas, coal and imported nuclear.
Offshore wind may be in the same cost range as gas by 2015, said Joergen Kildahl, a board member at Germany's E.ON group, one of the world's biggest utilities.
But that did not include the cost of building back-up for the intermittent power source. "You need to buy the flexibility to balance your production. That's a big question mark," he said.
After steep price falls solar power is now close to being economic without subsidies -- called grid parity -- but only in niche areas including parts of California and Italy, sunny places with high power prices and fewer alternatives.
Falls in solar panel prices may flatten by 2013-2014, said Steven Chan, president of Suntech America, the North American unit of Chinese panel maker Suntech, who cited studies suggesting widespread grid parity with retail power prices by 2015.
Trina Solar, China's largest solar panel maker by value, was shipping modules at $1.50-1.55 now, down nearly 10 percent from a year ago, and expected prices at $1.40-$1.45 by year-end.
Industry module prices had fallen by about 10 percent in the first half this year and would fall a further 4-5 percent in the summer, said Frank Asbeck, chief executive of SolarWorld, Germany's second-largest solar company by value.
"(That) is when some Chinese players will run into difficulties," he added, referring to further price falls.
Analysts and renewable energy supporters often point to hidden costs in the case of fossil fuels and nuclear.
Fossil fuels, for example, produce carbon emissions whose damaging impact on the world's climate is not priced outside Europe. Rare accidents and waste disposal may not be fully costed in the case of nuclear power. Question marks have been raised over the impact of shale gas on water quality.
"It's essential that we provide a policy framework that provides a level playing field," said Rajendra Pachauri, the head of a U.N. panel of climate scientists.
-- Additional reporting by Nina Chestney, Vera Eckert, Barbara Lewis, Karolin Schaps and Muriel Boselli in London; Christoph Steitz in Frankfurt; Nichola Groom in Los Angeles; Alister Doyle in Germany; Eileen O'Grady in Houston; and Leonora Walet in Hong Kong