Policies for the development of RES in the European Union - The Sustainability of Renewable Energy in Europe - page 76

3.3 Costs of RES in the EU

To compare the cost of the energy produced from RES and fossil fuels, the value of
the energy rather than private costs should be considered. The kilowatt-hour pro-
duced from RES has the same value and quality of that produced by fossil fuels;
the latter has hidden costs that are paid, often unconsciously, by the whole of soci-
ety. They should be given the environmental and social damage resulting from the
generation of energy from conventional forms, although it is difficult to give an
economic value to such damages.
The LCOE provides an estimate of the cost of electricity generation from a par-
ticular technology in US$/MWh. It includes the cash outflows for the initial invest-
ment (either via equity or from loans), interest payments in the case of financing,
operating costs, and maintenance costs (for biomass plants, there are cost of the raw
materials purchased). The LCOE is declining for most of the RES technologies as
wind, solar photovoltaic, and some biomass (Table 3.4 ).
The cost of photovoltaic energy is higher than that of other RES; however, in
the next few years it is estimated that a reduction in the cost of photovoltaic energy
production will be much higher than more competitive RES. The research in the
photovoltaic field has developed and continues to develop, essentially in two direc-
tions: the first is to use materials other than silicon and more complex devices to
increase the conversion efficiency of the photovoltaic cells, i.e., the ratio between
the generated electric power and solar incident; the second is to lower the cost of the
cell in order to make a more competitive cost of electricity produced. The invest-
ment cost and manufacturability of a photovoltaic system are the only factors that
determine the cost of photovoltaic electricity and are, in turn, strongly dependent on
the characteristics of the material used and the processes used in the manufacture
of the device or, in other terms, of conversion efficiency and the production cost of
the device itself.
Photovoltaic energy is produced by an expensive technology, noncompetitive
with traditional forms of electricity production from fossil fuels if not suitably sub-
sidized.
Anyway, over the past 40 years, the price of some modules for photovoltaic pan-
els has decreased due to the learning curve with an average rate of about 40 %. This
development was driven by both technological developments and market condi-
tions. It is interesting to note that between 2004 and 2008, the price of photovoltaic
modules has remained constant at about US$ 4 per watt peak. This happened despite
the fact that in the same period there were improvements in technology and the
companies had increased their production. The reason is that the expansion of the
photovoltaic market above all in Germany and in Spain, where the supports feed-in
tariffs have attracted investors, was accompanied by a reduction in the availability
of polysilicon over the same period, which reduced the production of silicon and
therefore influenced the pricing competition. The temporary reduction stocks of
silicon has led to an increase in investment in thin-film capacities in the same time
frame, so that the market share for thin-film modules is increased up to 2009 where
it reached almost 40 %. Between 2008 and 2012, there was a massive fall in the