U.S. solar field foresees cost parity with coal, gas

SAN DIEGO (Reuters) - U.S. producers of solar power will no longer need federal subsidies within eight years because by then solar power will cost less than electricity generated by conventional power plants, industry players said this week.

The U.S. government recently extended tax breaks for wind and solar producers for another eight years. They are set to expire in 2016.

Solar power, which contributes less than 1 percent of U.S. electricity generation, has been growing rapidly in the United States but remains reliant on state and federal subsidies to make it competitive versus power plants that run on coal or natural gas.

“We designed the eight-year tax credit extension very purposely,” said Rhone Resch, president of Solar Energy Industries Association. “We believe that at the end of that time, solar will have achieved grid parity, which means simply that we will be the lowest-cost source of retail electricity in almost all 50 states.”

Julia Hamm, executive director of Solar Electric Power Association and chair of this week’s Solar Power International conference in San Diego, agreed.

“What I’m hearing down on the showroom floor say is that their goal is for 2012, and some by 2015,” said Hamm, referring to the 425 exhibitors at the San Diego Convention Center.

“In the areas where utility retail prices are the highest, within five years you will see grid parity,” said Ron Kenedi, vice president of Solar Energy Solutions Group for Sharp Corp, one of the largest makers of solar cells and rooftop panels.

Kenedi said regions that now have the lowest-cost power will be on par with solar within eight years because coal and natural gas prices will not come down in the face of increased demand in developing China and India, even if much of the globe goes into a major economic slump.

Matt Cheney, chief executive of MMA Renewable Ventures, a San Francisco-based unit of Municipal Mortgage & Equity LLC, said that point can be made simply by looking at the 163 percent rise in 2008 coal prices, spurred mainly be foreign demand for U.S. coal. Coal, traditionally the cheapest form of power, now contributes about half of the electricity generation in the United States.

Many of the nearly 20,000 industry professionals at the San Diego conference say that a larger solar industry would lower the price of solar cells for utility-scale concentrator photovoltaic plants.

Santiago Seage, chief executive of Spain’s solar unit of Abengoa, said U.S. generation prices will be higher than most in the solar industry forecast.

“We are all overly optimistic and to tell you the truth, I couldn’t care less because fossil fuels will increase carbon dioxide emissions which will finally have a price, even in the U.S. That will mean that when you compare solar with fossil fuels, it will be competitive,” he said.

“But if you are talking the price per kilowatt, we will never see single-digits again, fossil fuels or in solar,” Seage said.

Editing by Matthew Lewis