One important point I try to remind folks is that while the price of fossil fuels has risen dramatically these past seven years, the price of wind and solar is significantly lower. The question is, when might the cost curves converge?
Wind is already converging with electricity from fuel oil and is close to electricity from natural gas at times. But a wide gap remains between wind and coal electricity costs.
As for solar, the industry is growing and efficiencies are increasing, but it remains economically inefficient (based on today’s market with existing externalities), except in remote off-grid applications and when policy subsidizes its installation. A statement released recently by LDK solar mentions the potential of falling polysilicon prices in the 4th quarter of 2008. Many analysts think polysilicon costs could fall 75% from ~$400 per kilogram to ~$100 if the current shortage eases during the quarters ahead, enabling module prices to fall as much as 40%. Such a fall would bring solar prices within striking distance of grid parity and allow governments to lower subsidies, especially if fossil fuel prices continue their recent march upward.
Tomorrow’s EIA weekly oil report should provide some further direction for oil and gas prices, along with the potential formation of a tropical storm that could flow into the Gulf of Mexico, and any further escalation in the Russia-Georgia conflict that has already taken a few hundred thousand barrels per day off of the global oil market. We will see how these events develop.
Tags: fossil fuels, Oil, Solar, Wind