Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future

Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future Volume 1 photovoltaic solar energy 1 10 – vision for photovoltaics in the future

E Despotou, Formerly of the European Photovoltaic Industry Association, Brussels, Belgium

© 2012 Elsevier Ltd

1.10.1.3.1 PV module prices

1.10.1.3.2 PV system prices

1.10.1.4 Electricity Prices

1.10.2.1 PV as a Mainstream Power Source in Europe by 2020 and Beyond

1.10.2.2 US and Canadian Markets Slowly Taking Off

1.10.2.3 Japan Has a Moderately Ambitious PV Target for 2020

1.10.2.4 The Rise of Sunbelt Countries

1.10.2.5 Global PV Installed Capacity Could Reach More Than 4500 GW by 2050

1.10.3 The EPIA Vision for 2050

1.10.3.2 A Dynamic Vision on PV Competitiveness and Grid Development

1.10.3.3 Necessary Steps to Unlocking PV Potential

1.10.3.3.1 Ensuring the gradual competitiveness of PV

1.10.3.3.2 Ensuring necessary infrastructure adaptations

1.10.3.3.3 Ensuring evolution of grid management practices and innovative market design

1.10.3.4 Policy Recommendations for a Bright 2050 Future

1.10.4 Future Changes in Electricity Systems

1.10.4.1 Managing Variability

1.10.4.2 From Centralized to Decentralized Energy Generation

1.10.4.5 Decentralized Storage

1.10.5 Future Market Segmentation

1.10.6 Future Share of On-Grid/Off-Grid Applications

1.10.6.1 Extending the National Grid

1.10.6.2 Providing Off-Grid Solutions

1.10.6.3 Coupling Mini-Grids with Hybrid Power

1.10.7 Future Technological Trends

1.10.7.1 The Evolution of PV Module and System Prices

1.10.7.2 Cost of Electricity Generation

1.10.8.1.1 Develop a long-term vision with precise milestones

1.10.8.1.2 Set up a supportive regulatory framework

1.10.8.1.3 Send the right signals to consumers

1.10.8.2 Investments in Technology and in PV Projects

1.10.8.2.1 The importance of a sustained PV cost reduction

1.10.8.2.2 Delivering research results in line with focus areas already identified

1.10.8.2.3 Financing necessary R&D investments

1.10.8.2.4 Encourage investments in Sunbelt countries

1.10.8.3 Grid Infrastructures Adaptations

1.10.8.3.1 Making necessary changes in the power distribution system

1.10.8.3.2 Adapting the transmission system

1.10.8.3.3 Financing infrastructure needs

References

Gas PV Wind

Biomass Large h

ydro

Small h

ydro

WasteNuclear

Geother

mal Fuel oil Tidal & w

ave

20 000

15 000

10 000

5 000

0

15 602

−1550

−5 000

13 323

9295

Decommissioned

4056

573 405 208 200 149 145 25 25 0 0

1.10.1 Photovoltaics Today

1.10.1.1 Markets

Solar photovoltaic (PV) electricity is on the road to becoming a mainstream energy technology and is currently the fastest-growing renewable energy source in Europe, with a rise in installed capacity of almost 13 000 MW over the past year (see Figure 1), which is the second largest capacity increase in Europe just after gas By the end of 2010, more than 28 GW were being installed This corresponds to the electricity production of two coal-fired power plants or to the electricity consumption of 10 million households

in Europe or half the current electricity demand in countries such as Greece

Almost 40 GW were installed globally by the end of 2010 (see Figure 2), which corresponds to 50 TWh electricity generated While these numbers are encouraging, solar PVs have the potential to achieve more In fact, solar PV has a critical contribution to make to the three pillars of the European Union’s (EU) energy policy: competitiveness, energy security, and sustainability

In the future, should the right conditions be in place, solar PV could satisfy up to 12% of the EU’s electricity needs Achieving that desirable goal would cut down emission of 192 million tons of CO2 per year, an important contribution to the EU’s climate goals Ultimately, boosting the share of PVs in the electricity market will yield huge environmental, social, and economic benefits for Europe However, to achieve a real paradigm, shift is needed Policy-makers, regulators, and industry need to work together to drive

PV mass penetration, fostering technological progress, and cost reductions as well as creating a predictable regulatory environment that attracts investments in the EU

Figure 1 Power generation capacities added in 2010 at EU 27 Source: EPIA analysis [2]

Australia Rest of the world

5%

Rest of Europe 2%

South Korea 2%

Spain 9%

USA 6%

Italy 10%

Japan 10%

Germany 43%

1% Belgium

2%

China 2%

France 2%

Czech Republic 2%

Figure 2 Global cumulative installed capacity 2010 Source: EPIA analysis [2]

With the Renewable Energy Sources Directive, 2009/28/EC [1], the EU has set the goal to reach 20% of EU energy demand satisfied by renewable energy sources by 2020 PV can play a major role in achieving this objective, provided the Member States realize the potential of the technology and set ambitious targets for its deployment

PV technology is no longer just a gadget, or a device for powering space satellites, or useful only for small applications in remote areas It is becoming a significant part of the energy mix In Spain and Germany, the average annual contribution from PV to electricity generation is more than 2% of the total However, with the right combination of regulatory framework, market conditions, and solar irradiation, PV can provide much more For example, in the Spanish region of Extremadura, PVs made up 15% of the electricity mix of the yearly average of 2010 (with peaks up to 25% during summer) Thus, it has been proved that PV can compete with other generation sources

Figure 2 demonstrates that Germany still represents the majority of the global market with 43% share If we add up Italy and the rest of EU countries, Europe keeps by far the market leadership Events such as the Fukushima disaster could potentially give an additional push to the PV market development for the years to come with a more important contribution

1.10.1.2 Technologies

Crystalline silicon (c-Si) technologies have dominated the market for the last 30 years Amorphous silicon (a-Si) technology has been the choice most widely used for consumer applications (e.g., calculators and solar watches) due to its low manufacturing cost, while c-Si technologies have been used mainly in both stand-alone and on-grid system applications

In c-Si technologies, monocrystalline and multicrystalline are produced in equal proportion, but the trend is moving toward multicrystalline technology Ribbon c-Si has a small market share that exists today less than 5%

In the thin-film technologies, a-Si has lost some market share in the last decade, whereas other technologies such as CdTe have seen their market share to grow from 2% to 13% over the last 5 years [2]

Technologies such as concentrator PV, organics, and dye-sensitized solar cells are starting to enter the market and are expected to see an important growth in years to follow, with ∼6% market share expected in 2020

1.10.1.3 Competitiveness

PV competitiveness will be achieved before the end of this decade both from consumer and power-generator perspectives in most European countries In addition, supported by smart, sustainable regulatory policies, PV will be an increasingly more desirable part

of the energy equation and constitute a vital part of Europe’s energy mix

The competitiveness of PV electricity depends on the evolution of PV modules and system prices, as well as the cost of electricity generation The following subsections explain the main drivers of the evolution of PV toward parity with conventional electricity producers and beyond

1.10.1.3.1 PV module prices

Over the past 30 years, the PV industry has achieved significant and swift price reductions The price of PV modules has been reduced

by 22% for every doubling of the cumulative installed capacity (see Figure 3) The decrease in manufacturing costs and retail prices

of PV modules and systems (including electronics and safety devices, cabling, mounting structures, and installation cost) has been possible thanks to the achieved economies of scale and acquired experience Extensive innovation, research and development, and political support for market development have also been important drivers of cost reduction

The ‘module’ price has fallen from about 75% of the total system price to between 50% and 60%, depending on the module efficiency, and is expected to further decrease down to 40% by the end of this decade

1.10.1.3.2 PV system prices

The cost of solar PV is decreasing constantly across all segments: residential, commercial, and industrial installations as well as large ground-mounted power plants In Europe, the price of PV systems has dropped 65% in the last decade

The inverter, which represents ∼15% of the total system price for a PV installation, has seen a decline in price similar to the one shown by PV modules

Installation costs vary depending on the maturity of the market and type of application For instance, with current technical improvements from new generation mounting structures, installations can be built faster and more efficiently

1.10.1.4 Electricity Prices

Generating electricity from fossil and fissile fuels such as oil, gas, coal and uranium will become more expensive as supplies of these finite resources are exhausted The growing economic and environmental costs of these energy sources will also add to cost increases However, any quantification or potential indication on the electricity price increase at that time is considered as nonwise

It should be pointed out that conventional electricity prices do not fully reflect actual production costs Many governments still subsidize the coal industry and promote the use of locally produced coal by utilities through specific incentives Given the strong backing of conventional energy sources over the past several decades, it should be entirely reasonable to view financial support

(US$/Wp) 2010

100

Price-experience factor of 22%

10

1

MW c-Si LOW

c-Si HIGH c-Si TREND

TF

TF TREND

Figure 3 PV module price experience curve Navigant consultant and EPIA internal analysis [3]

aimed at making renewable energy sources such as wind and solar fully competitive as appropriate, considering the strong backing

of conventional sources over the past several decades

Competitiveness of PV electricity (often referred to as ‘grid parity’) for consumers can be defined as the specific moment in a country when the savings in electricity cost and/or the revenues generated by the selling of electricity on the market are equal to or higher than the long-term cost of installing and financing a PV system

Given the possible generation cost, “grid parity could be achieved progressively” across all market segments in Europe before the end of this decade In most European countries, PV will be accessible to everyone at affordable prices in only a couple of years The general rise in electricity prices as previously described, coupled with the reductions in the cost of generating PV electricity, is likely

to abridge the time needed for PV to become competitive

1.10.1.5 Policy Support

Over the years, the introduction of the feed-in tariff (FiT) support scheme has proven to be the most effective and efficient mechanism to kick off and help develop PV markets

This is not just the view of the PV industry; it is also supported by key reports from the European Commission (industry surveys

of 2005 and 2010) and The Stern Review on the Economics of Climate Change

Globally, more than 40 countries have adopted such a mechanism; in Europe, Asia-Pacific, and North America, these countries have adjusted the system according to their regional- and national-specific needs

FiT introduce the obligation by law for utilities to conclude purchase agreements for the solar electricity generated by PV systems The cost of solar electricity purchased is passed on through the electricity bill and therefore does not negatively affect government finances In markets where FiTs have been introduced as reliable and predictable market mechanisms, they have proven their ability

to develop a sustainable PV industry that in return has progressively reduced costs and moved the sector toward grid parity In order

to be sustainable, it is critical that FiTs be guaranteed for a significant period of time (at least 20 years), without any possibility of retroactively reducing them

FiT mechanisms remain a cornerstone for promoting the uptake of solar electricity in Europe

To be successful, a support mechanism should be

• temporary – required only as a gap-filler until solar PV reaches full competitiveness;

• paid by utilities, with costs passed on to all consumers – thus protecting the tariff from frequently changing governmental budgets and limiting the increase in consumer cost;

• used to drive costs down – annual reductions in the tariffs (only for newly installed PV systems) keep pressure on the PV industry to cut costs each year;

200 000

180 000

160 000

140 000

120 000

100 000

80 000

60 000

40 000

20 000

MW 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

NREAP 2020

• used to encourage high-quality systems – by rewarding people for generating solar electricity, not just for installing it, FiTs help owners keep output high over the entire lifetime of the system; and

• structured to encourage easier financing – by guaranteeing income over the lifetime of the system, a good tariff system encourages buyers to take out loans and simplifies loan structures for banks

1.10.2 Future Market Development

1.10.2.1 PV as a Mainstream Power Source in Europe by 2020 and Beyond

Figure 4 provides a comparison of different industrial scenarios and targets; more specifically, the three scenarios from the ‘SET For

2020’ study (covering 4%, 6%, and 12%, respectively, of the electricity demand in 2020) as well as the two scenarios from the Global Market Outlook [4] providing a shorter-term perspective until 2015 The cumulative target of the National Renewable Energy Action Plans (NREAPs) is also shown With only 84.38 GW in 2020 or 2.4% of the final gross electricity consumption, this target does not constitute a real lever for wide market deployment compared to the more ambitious PV industrial targets The Set For 2020 study [5] commissioned by the European Photovoltaic Industry Association (EPIA) and conducted by the strategic consultancy AT Kearney in 2008 highlights the potential for PV in Europe up to 2020 With the right regulatory frameworks

in place, properly defined financial conditions and grid improvements including the introduction of smart grids, storage, and e-mobility, PV could reach up to 12% of the electricity demand in Europe by that time

Even without substantial changes to the electricity distribution and transport system, scenarios in which PV provides 4% and 6% are possible Achieving the 12% scenario will require addressing the capacity to distribute PV electricity across Europe, as well as the issue of storing part of the generated electricity (locally with decentralized storage solutions and more in large storage systems such

as pumped hydro storage facilities) and of using more demand response from customers

But even with those three scenarios – 4% (with 130 GW installed), 6% (195 GW), and 12% (390 GW) – the full potential is not reached PV installations could rise even more in the decade following 2020, depending on the changes in the general electricity framework The conditions for overtaking the 6% threshold of penetration will remain the same before and after 2020 Without any improvements in the current production, transportation, distribution, and consumption of electricity and in market design, the 6% mark will remain a maximum value

However, this 6% mark may be overtaken if electricity systems evolve toward higher shares of renewable energy, adequate demand-side management (DSM), decentralized as well as large-scale storage, and smart inverters for PV systems that are able to provide services to the network (such as short-circuit current or reactive power production), and smart network management Once the adequate technical framework is in place, and with the right political decisions, PV can continue its growth of PV in the power generation mix By 2050, the share of PV could reach between 19% [6] and 27.5% [7] in the EU In most cases, 2050 targets

Figure 4 Market forecasts compared to ‘SET For 2020’ targets and NREAPs Source: EPIA analysis [2]

take high shares of renewable energy sources in the power generation mix into account, ranging from 80% to 100% The difference between these scenarios depends on technological choices, how the evolution of electricity networks will be shaped, and how the market segmentation of PV will evolve

1.10.2.2 US and Canadian Markets Slowly Taking Off

US markets remain largely untapped considering the size of the country and its potential for PV With its vast open spaces, high electricity demand, and strong correlation between demand peaks and PV production, everything is in place for rapid deployment

Current PV capacity in the United States was higher than 2.5 GW at the end of 2010 – <10% of the installed capacity of the EU Despite limited solar irradiation compared to the United States, Canada has continued the increasing PV uptake observed in 2009 An additional 105 MW capacity was connected to the grid in 2010 The province of Ontario is clearly driving the market due to a relatively generous FiT even though local content provisions have been introduced requiring developers to source at least 60% of their products and resources from Ontario-based goods and labor Japan requested consultations with Canada through the World Trade Organisation (WTO) regarding Canada’s measures relating to domestic content requirements in the FiT program Industry associations vigorously oppose those provisions as they do not permit the establishment of a level playing field for global competition

Around 200 MW are already foreseen for installation in 2011, all located in Ontario EPIA considers that the Canadian market could reach up to 4.1 GW cumulative installed capacity by 2015 under a Policy-Driven scenario

According to the EPIA scenarios, by 2020, the potential for PV in the United States and Canada could be between 77 and 144 GW

In the highest-case scenario, the United States and Canadian markets together would reach 14 GW of installed capacity per year

By 2030, this could rise to between 285 and 460 GW and for 2050, the total installed capacity for PV in the United States and Canada could reach up to 980 GW

1.10.2.3 Japan Has a Moderately Ambitious PV Target for 2020

Once the world PV leader, Japan has slid down in ranking due to its disruptive policy support Before the dramatic events of March

2011, the Japan PV market was progressing, with “990 MW installed in 2010” and positive forecasts for the years to come The

28 GW target defined for 2020 looked reasonable and achievable with a manageable increase in market volumes Besides the residential systems that represented more than 95% of the market, ground-mounted installations were also expected to grow EPIA believes the lack of power generation following the destruction of many power plants will push forward PV development in the coming years The rising electricity demand during the summer for air-conditioning could also favor PV as a preferred energy source in order to solve the current lack of power generation capacity in the short and medium terms

Growth will certainly resume afterward, whatever the outcome of the current events, meaning that Japan will continue to be one

of the leading PV countries worldwide

The Japanese government, through the New Energy and Industrial Technology Development Organization (NEDO), has released its targets for 2020 (with a target upgraded from 14 to 28 GW) and 2030 (rising to 53 GW of PV installed capacity) A plan for 2050 is foreseen as well

The electrical utilities plan to build 140 MW PV power plants in 30 locations across Japan by 2020 By 2010, they had already announced the construction of 30 plants for a total installed capacity of 100 MW This shows that the final market share for utilities could be higher than foreseen Japanese utilities will probably take a lion’s share of large installations Indeed, their experience in the electricity market makes them natural competitors with large project developers This is less obvious for residential and commercial installations in the current context; however, it is highly conceivable to see utilities acting as intermediaries, for example, through virtual power plants to control the incoming millions of small rooftop installations

1.10.2.4 The Rise of Sunbelt Countries

Outside the main existing markets, PV potential in the world is expected to grow rapidly in the coming decades, reaching between 17% and 21% of the world electricity demand according to the most favorable scenario in 2050 (Figure 5) The difference between both the scenarios will come from the possible gain in efficiency in energy consumption in the 40 coming years

Worldwide, the PV penetration could reach 4670 GWp of cumulative installed capacity (4.67 TWp) by 2050 in the highest scenario (Figure 6) This represents a total electricity output of 6747 TWh yr−1 This represents a reduction in CO2 emissions of 4.05 billion tons by the year 2050, compared to the current power generation mix

The term ‘Sunbelt’ refers to countries located in the sunniest latitudes, within the region of 35° north and south of the equator While most are developing countries, lowering the price of PV will make this technology more and more competitive with conventional power generation sources According to the development scenario, PV potential in Sunbelt countries could range from 60 to 250 GWp Sunbelt countries would then represent 27–58% of the forecasted global PV installed capacity by 2030

Amount of solar pv electr

80

70

60

50

40

30

20

10

0

Year Paradigm shift scenario – energy [r]evolution (energy efficiency) Paradigm shift scenario – reference (iea demand projection) Accelerated scenario – energy [r]evolution (energy efficiency) Accelerated scenario – reference (iea demand projection) Reference scenario – energy [r]evolution (energy efficiency) Reference scenario – reference (iea demand projection)

OECD Pacific + SK

Middle East

3 000 000

2 500 000

2 000 000

1 500 000

1 000 000

500 000

0

China India Developing Asia (except SK) Latin America

North America Transition countries Rest of Europe

EU 27

2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049

Year

Figure 5 Amount of solar PV electricity as a percentage of world power consumption Source: EPIA and Greenpeace (2011) Solar Generation 6 Brussels,

Final.pdf&t=1328180025&hash=76fb49badbaaffeaee2999bbff6bd977

Figure 6 World PV penetration by region until 2050, it shows that by 2050, under a Paradigm Shift scenario over 4500 GW of PV installed worldwide is

1.10.2.5 Global PV Installed Capacity Could Reach More Than 4500 GW by 2050

According to EPIA statistics, global PV installed capacity reached almost 40 GW at the end of 2010 PV could in the near future compete with conventional energy sources as a mainstream energy source

In 2010, PV had a record year, adding 13 GW installed capacity in the EU to reach almost 17 GW global annual installations The growth of PV is not constrained by raw material availability or by the industry’s ability to handle growing demand Even if temporary shortages occurred in years of heavy demand, the PV industry can cope with double-digit growth

1.10.3 The EPIA Vision for 2050

Solar PV energy will, as part of a mix, participate in the “transition toward a 100% renewable European electricity sector by 2050.”

In the upcoming debate on the Energy Roadmap 2050, it will be important to focus on some areas where further developments of EU energy policy may still be necessary in order to fully harvest the benefits of a massive deployment of PV

in Europe:

– Remove barriers on the road to PV competitiveness by 2020 We need to ensure that gradual PV competitiveness will not be jeopardized by distorted market conditions The clear prerequisites for the creation of a transparent electricity market are a full functioning of Emissions Trading System (ETS) system from 2013 onward and progressive phasing out of all conventional fuel subsidies (with a complete phase-out by 2020) In order to facilitate the upcoming debate on the future European energy mix, EPIA suggests that the European Commission present a comprehensive staff working document analyzing the instruments currently used to finance all sources of energy alongside the 2050 Energy Roadmap This document should also serve to provide neutral and updated calculations on the costs of a range of energy technologies, based on transparent assumptions Other important elements for accelerating PV competitiveness include systematic streamlining of national administrative and grid connection procedures and appropriate funding of the European Industrial Initiatives

– Adapt the grid infrastructure at all voltage levels to allow a well balanced mix of renewables, including massive PV integration and storage The regulatory framework needs to evolve considerably in order to better incentivize distribution system operators (DSOs) to invest in the intelligent upgrade of European distribution grids Electricity storage infrastructures should also benefit from an appropriate regulatory framework Regarding the transmission level, EPIA supports the current debate on actions to be taken (development of Electricity Highways) as needed for the projected mix of renewables

– Promote smart management of networks and innovative market design With the rise of decentralized production and decentralized storage, a paradigm shift in grid management will also be required EPIA suggests that a task force gathering ENTSO-E, DSOs and renewable industry representatives should be created in order to exchange best practices on the integration of variable energy sources Market rules will also have to evolve in order to integrate more flexible and distributed power production in an economically optimal way

1.10.3.1 Introduction

The EU is at crossroads: in order to reach its 80–95% reduction of greenhouse gas emissions target by 2050, it will have to organize a complete shift in energy consumption and production As recently pointed out by the European Commission (COM (2010) 677), one important evolution of this transition will be “the increase in electricity demand” driven by the multiplication of electric applications and technologies EPIA believes that such a shift toward greater electricity consumption will only be sustainable if it relies entirely on decarbonized and indigenous energy sources that are accompanied by a very ambitious and sustained effort to fully tap into the remaining energy savings potential

Meanwhile, in order to ensure a progressive decarbonization of the energy sector, EPIA believes that clear milestones should be set up, such as an “ambitious 2030 binding target for renewables.” Such a shift in the energy system would reinforce Europe’s competitive advantage as a provider of clean technologies, lower our dependency on third countries’ supplies and support the creation of local green jobs PV already offers significant benefits to the future renewable electricity market As an indigenous energy source providing direct employment of over 300 000 people in Europe (Solar Generation 6, EPIA/Greenpeace, 2011), it represents enormous growth opportunities for many European companies in the international arena Building on an impressive track record in terms of reducing its levelized cost of electricity (LCOE) (PV module prices decrease by 22% each time the cumulated installed capacity doubles For more information on the huge potential for further

PV generation cost decline, please see PV Competing in the energy sector, EPIA, 2011), PV, with a further 60% LCOE reduction expected until 2020, will become a competitive technology offering energy at low cost in the timeframe until

2050 PV’s key assets include uncritical material availability, an existing voluntary take-back and recycling scheme (Via the

PV Cycle Association: www.pvcycle.org), minimal impact on land use and seamless integration in populated areas The technology also enjoys widespread popular support According to a recent Eurobarometer survey (October 2010), 8 out of

10 European citizens consider that solar energy will have a positive effect on their life in the next 20 years, ranking it at the top of a long list of innovative technologies

The recommendations presented here are based on a “dynamic vision of market and grid developments.” They are not aimed at proving that the transition to a decarbonized energy system is economically and technically feasible, as this has already been done (See for instance Roadmap 2050: a practical guide to a prosperous, low-carbon Europe (Europe Climate Foundation - April 2010)); rather they concentrate on areas where further development of the EU energy policy may be necessary in order to fully harvest the benefits related to a massive deployment of PV According to various studies, “this will correspond to between 19% and 27% of the electricity demand in Europe in 2050.”

1.10.3.2 A Dynamic Vision on PV Competitiveness and Grid Development

While PV prices are dropping fast and will continue toward this path, this document aims to draw a realistic future of PV going mainstream in Europe by 2050 In this context, two parallel elements are shaping PV development:

– The “progress on the competitiveness of PV” (often partially described as ‘grid parity’)

– The “integration of large PV volumes in the electricity networks.”

Taking these into account, PV deployment can be summarized in the following ‘three main phases’:

– Phase 1: The ‘pre-grid parity era’, when PV reduces cost but is not competitive yet, though its deployment does not require much infrastructure investment or coordination with other energy sources This is the case in most European PV markets today – Phase 2: The ‘transition to competitiveness’ of electricity prices in the residential, commercial, and industrial segments and wholesale prices in the ground-mounted segment, along with high levels of PV penetration This will require upgrading the grid infrastructure – first at the distribution level to cope with high level of decentralized power generation and then at the transmission level to ensure high reliability of the electricity network In this phase, grid upgrades are not only driven by PV penetration but also stem from a combination of different evolutions (i.e., European market integration, enhanced security of supply, rollout of smart grids, electric vehicles development and increase of decentralized power generation sources) In certain cases, PV penetration levels could increase faster than the transformation of the network

– Phase 3: ‘Full PV competitiveness’ in most European countries In this ‘paradigm shift era’, further penetration of PV is highly interlinked with other energy sources and it is dependent on infrastructure development Renewably generated electricity supports the shift toward progressive electrification of mobility

1.10.3.3 Necessary Steps to Unlocking PV Potential

EPIA suggests concentrating on the following ‘three objectives’:

– ensuring that the gradual competitiveness of PV is achievable with the implementation of a transparent, level playing field; – ensuring that the necessary infrastructure adaptations are undertaken on time in order to allow the optimal integration of PV and other sources of renewable power into the grid;

– ensuring that grid management practices are evolving according to the progressive integration of renewables

1.10.3.3.1 Ensuring the gradual competitiveness of PV

Several studies (See notably: Solar Generation 6, EPIA/Greenpeace, 2011 and PV – Competing in the Energy Sector, EPIA, 2011) using LCOE calculations already show that PV competitiveness will be reached in most European markets by 2020 But achieving this will require “well-designed and predictable national support schemes.” Apart from this, it will be necessary to regularly adjust the level of incentives over time in order to keep the return on PV investments within sustainable boundaries and to avoid speculative market overheat Moreover – as the RES Directive stipulates – if desirable, two or more neighbor countries could align their support mechanisms and realize joint projects

As PV reaches grid parity, a progressive shift from traditional support schemes such as FiTs to other models guaranteeing market access and predictable prices might be needed As this development is gradual and dependent on local solar conditions and national characteristics, the transition will likely be driven by the individual Member States

In the meantime, in order to reach competitiveness faster, it will be important to ensure a complete level playing field with other electricity generation technologies:

– The full “functioning of the ETS system should therefore be ensured from 2013 onward” in order to provide an efficient carbon price signal, which is an absolute prerequisite if a decarbonized energy system is to be achieved The excess of allowances from Phase 2 of the ETS system already identified by the European Commission (COM(2010) 265 final) should therefore not keep the price of CO2 certificates artificially low

– “All inefficient fossil fuels subsidies should be phased out in the medium term,” in line with the commitment taken by G-20 leaders in Pittsburgh in September 2009 A complete phase-out of subsidies for conventional fuels should be then achieved by

2020 at the latest ‘Transparency’ on subsidies given to all low-carbon technologies should also be ensured

– “Complex grid connection procedures and unjustified administrative barriers should be removed,” taking the varying practices in the different Member States into account (The PV legal project already compares the impact of the legal-administrative barriers across 12 European countries See the 1st PV Legal Status report, July 2010, www.pvlegal.eu) The PV Legal project should be used

as a supporting tool to streamline those procedures

Finally, sustained R&D efforts represent another key driver for a further decrease in the cost of PV systems In order to speed up the achievement of Phase 2, the whole PV industry is fully committed to co-financing the priorities identified in the Solar European

Industrial Initiative (See the Press release presented on 1 June 2010: http://www.epia.org/fileadmin/EPIA_docs/public/ 100601_Solar_Europe_Industry_Initiative_-_Press_Release.pdf): in order to implement the initiative, EPIA suggests that its finan­ cing needs “are correctly reflected in the next multiannual financial framework, in which a shift toward a larger financing of clean energy technologies should be included.”

1.10.3.3.2 Ensuring necessary infrastructure adaptations

Given the growing share of renewables in the electricity mix, “flexibility will be a key aspect of future power systems.” For PV to contribute actively to grid management and network stability, this implies different prerequisites for ‘infrastructure adaptations’: – During Phase 2, EPIA favors development of mobile (i.e., electric vehicles) and decentralized stationary storage as well as hydro capacities (large hydro for medium-term storage; pump hydro for short-term storage) Flexibility of the power generation mix (through

an increased use of electricity from natural gas, for instance) and quick ramp rates for balancing power reserves will also be essential – During Phase 3, the high PV penetration rate will make power balancing necessary on a larger scale This requires ensuring that existing infrastructures and market rules support the deployment of PV

The recent EC Communication on energy infrastructure priorities for 2020 and beyond offers valuable input for ensuring consistency of infrastructure development with EU energy priorities EPIA supports the Commission’s call to establish Europe’s leadership in ‘electricity storage’ at all voltage levels The focus on roll-out of ‘smart grids technologies’ is also significant since DSM and on-site generation will play a key role in balancing Europe’s electricity in the decades ahead

Concerning the transmission infrastructure, EPIA supports the idea presented by the Commission to prepare a “modular development plan for ‘Electricity Highways’.” In particular, as pointed out by the Commission’s Blueprint, interconnections in South-Western Europe would facilitate the transportation of PV electricity from the production to the consumption and storage centers This applies not only to the interconnection between Spain and France, but also to PV electricity flows from north Africa to Europe In addition, upgrades in countries that will be critical to south–north electricity flows (such as Italy or Spain) need to be strengthened In this regard, implementation of the Desertec initiative and the Mediterranean Solar Plan could represent promising frameworks for importing PV-generated electricity

The above-mentioned communication, however, neglects some necessary adaptations that will also have to be sorted out at the distribution level: “the biggest share of the investments needed in infrastructures will indeed have to be realized at the distribution level” (€400 billion) This is in line with International Energy Agency (IEA) calculations (World Energy Outlook 2010, table 7.2) according to which €489 billion will have to be invested in the distribution grid over the next 25 years in the EU The strengthening

of existing infrastructures will also constitute a challenge for the coming decades Although those investments are not mainly driven

by PV development, EPIA suggests that the EC, while taking due account of the responsibilities of each actor, proposes ways to better address these issues in the upcoming legislative and regulatory proposals “Incentives to help DSOs making the necessary investments,” in line with the upcoming findings of the task force on Smart Grids, ‘will be crucial’

1.10.3.3.3 Ensuring evolution of grid management practices and innovative market design

The rise of decentralized production together with decentralized storage will require a paradigm shift in grid management

As the utility methods of electricity production, management, distribution and transportation change, the role of aggregators will rise, transforming the approach of utilities and grid operators in the electricity market with a major shift in added value generation process A “closer cooperation between ENTSO-E, DSOs, and the renewable sector,” notably in the context of the network codes development process, will most probably bring mutual benefits

Higher PV penetration will also require “changes to market design and the optimization of renewable electricity deployment to the network.” Given the decentralized character of PV power and the large number of small installations involved, “aggregation strategies through, for instance, virtual power plants” combining different renewable energy sources on a large scale, will also have

to develop in order to facilitate market access for PV Moreover, the current supply and demand concepts will probably need to be refined to take storage and DSM into consideration in a market dominated by RES electricity

1.10.3.4 Policy Recommendations for a Bright 2050 Future

PV will contribute significantly to the shift toward a fully decarbonized European electricity sector by 2050 As a cost-competitive solution, its growing share in the energy mix will require adaptations to the grid infrastructure, both in physical and in managerial terms, as well as some evolutions in the market design

In order to ensure this bright future, EPIA underlines the importance of the following policy recommendations:

– Recommendation 1 Full functioning of the ETS system from 2013 onward should be guaranteed Excess allowances from Phase 2

of the ETS system should not keep the price of CO2 certificates artificially too low

– Recommendation 2 Progressive phasing-out of all fossil fuels subsidies via a thorough implementation of competition rules should be ensured in order to facilitate the creation of transparent electricity markets No subsidy to conventional sources of energy should be granted after 2020