How Energy Is Produced - The Renaissance of Renewable Energy - page 116

resolved by combining PV with other energy sources, such as wind power, hydropower, or
biofuels. Costs per kilowatt-hour of PV power have fallen dramatically in the last twenty
years but remain higher than for most other renewable energy sources (see Section 6.14 ) . 13
As the scale of production increases, and efficiencies increase, costs will fall further,
but it is unlikely that PV will be viable without state incentives and subsidies in the near
future. Because the process of producing pure silicon is energy intensive, and many of the
elements used to dope the cells are rare, the material costs of PV will remain relatively
high. Assuming the PV market continues to grow at more than 35 per cent per year, the
cost of PV-generated electricity is likely to drop by more than 50 per cent to about 7.3 U.S.
cents (2005) per kilowatt-hour by 2020 (Arvizu et al. 2011b ) .
The holy grail for renewable energy is a factor known as 'dynamic grid parity'. This is
achieved when, in a particular market, the cost of producing power from a given energy
source is equal to the cost of buying electricity from the grid. According to researchers at
Padua University (Italy), solar PV will soon be cost-competitive in most parts of Europe.
PV grid parity is expected to be achieved first in the industrial sector and in the residential
sector between 2015 and 2020 (Cavallin et al. 2011 ; Didier 2011 ; Meneguzzo 2011 ) .
However, solar PV is still highly dependent on state subsidies and supports. These come
in two main forms: (1) laws that oblige electricity utilities to produce a specified fraction
of their electricity from renewable sources and (2) price supports, guaranteeing a certain
price for renewable electricity sold to the grid. The aim of these supports is to assist
the renewable sector, particularly wind and solar power, to reach a scale of production
that is competitive with conventional power production. According to a recent study by
the University of Arizona (Gowrisankaran et al. 2011 ) , if the share of PV in the U.S.
electricity mix were to rise to 20 per cent, the average cost per kilowatt-hour would be
less than 14 U.S. cents. Moreover, if externalities such as carbon dioxide emissions were
factored into the production costs of electricity, solar power would immediately become
more competitive with fossil fuelled power. This would, in turn, promote further expansion
of the solar sector, leading to greater economies of scale and reduced costs per watt.
Italy and Germany are two countries that have implemented generous price supports,
known as feed-in tariffs, for solar PVs. This has led to dramatic growth in the PV sector
in both countries. From 2000, when Germany first introduced feed-in tariffs, to 2012,
the country's PV capacity increased from 113 to 32,411 megawatts. In Italy, the growth
of the PV sector has been even faster. Just five years after the introduction of feed-in
tariffs in 2007, Italy's PV capacity had grown from 120 to more than 16,000 megawatts
(Eurobserver 2013 ) . This has had several consequences in the two countries. It has raised
the prospect of greater energy independence at a time when both countries' external supply