UBS: the falling costs of solar power and battery storage combined with increasing use of electric vehicles means the end of large power plants–faster than you might think.
Already this year we’ve reported on several major investment banks and analysts that argue the future is solar power. First there was Goldman Sachs (Goldman Sachs sees a solar future for the U.S.–and that has nuclear utilities running scared), then Barclay’s (Nuclear industry wins short-term victories, but losing long-term battle), then Bloomberg (Bloomberg sees a renewable-powered future), then Citigroup (Citigroup: The revolution will not be televised).
Now the giant multinational investment firm UBS has joined the march toward a clean energy future.
In a letter to its clients, UBS says flat out: “It’s time to join the revolution.”
Right now, the payback period for installation of rooftop solar plus battery storage is about 12 years. That means that after 12 years, the homeowner’s electricity is essentially free.
But by the end of this decade, UBS states, the payback period will be six to eight years. And by 2030 it will be a mere three years. At that point, it would be silly for anyone not to install rooftop solar.
Driving this trend is not just the falling costs of solar panels and installation. UBS says a huge factor is electric vehicles (EVs). According to UBS,
“The expected rapid decline in battery cost by (more than) 50 per cent by 2020 should not just spur EV sales, but also lead to exponential growth in demand for stationary batteries to store excess power. This is relevant for an electricity mix with a much higher share of (volatile) renewables.”
UBS asserts that the reason utilities are missing the trend–to their ultimate detriment–is that they’re not looking at the issue holistically.
“Our proprietary model shows it is the combination of the three that makes solar fully competitive and that has the potential to bring disruptive changes to the electricity sector.
“Here are the maths: One can leverage the EV purchase with an investment in a solar system and a stationary battery. By doing so, one can optimize the self-consumption of solar power and minimize the “excess waste” of solar electricity.
“And what also may matter to many EV buyers: The electricity used to drive the car is carbon-free. The combination of and EV + solar + battery should have a payback of 7-11 years, depending on the country-specific economics. In other words, based on a 20-year technical life of a solar system, a German buyer should receive 12 years of electricity for free (purchase in 2020).”
Although the UBS report is focused on Europe, this graphic from Union of Concerned Scientists shows that “grid parity”–when solar becomes as cheap as getting power from a utility–isn’t far away for most of the U.S. either.
The UBS letter to its clients is focused on Europe, where it says the payback period will drop fastest in countries with the highest electricity costs, including Germany, Spain and Italy. But there is no reason the same wouldn’t be true in the U.S. and just about anywhere else.
As for the future of large nuclear and fossil fuel power plants? “Large-scale power generation, however, will be the dinosaur of the future energy system: Too big, too inflexible, not even relevant for backup power in the long run,” UBS writes. “By 2025, everybody will be able to produce and store power. And it will be green and cost competitive, ie, not more expensive or even cheaper than buying power from utilities.”
August 27, 2014
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