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Italy set for grid-parity as PV gathers pace, says study

Italy will be Europe’s trail-blazer for cost-competitive PV, with an average 100kW commercial rooftop system on track to reach dynamic grid-parity (DGP) in the country as soon as 2013, claims a new report.

The speed at which PV cost-matches conventional fossil-generated power will vary significantly across the EU, depending on factors such as the average wholesale price of electricity and the level of solar irradiance.

But rooftop-based systems are broadly on a trajectory to reach DGP by mid-decade in sunny European markets like Italy and Spain, and across the continent by 2019, according to a new report from the European Photovoltaic Industry Association (EPIA).

DGP is defined as the moment at which long-term revenues from a PV system (without a feed-in tariff) are equal to the long-term cost of simply buying electricity off the grid.

Revenues include the savings generated by self-consumption, as well as the sale of excess electricity flowed back into the grid.

Trailing Italy, commercial systems are forecast to hit DGP in Spain in 2014, followed by Germany and the UK (2017) and France (2018).

Smaller residential systems of 3kW and below will trail commercial installations in terms of reaching DGP by a year or two in all major countries except France, which has placed particular importance on the domestic market.

Ground-mounted PV arrays of 2.5MW and larger will reach generation-value competitiveness (GVC) in Italy in 2014, followed by France and Spain (2015), Germany (2017) and the UK (2019), says the EPIA.

GVC is the point at which building a utility-scale PV array makes as much sense for an investor as building a combined-cycle gas plant.

In addition to Italy’s bountiful sunshine, solar companies there benefit from the country’s relatively high wholesale electricity prices, which averaged €76 ($107)/MWh last year – compared to €42/MWh in Spain.

The increasing competitiveness of PV will be spurred principally by two factors: the falling price of PV components and the steadily rising price of electricity, which will itself be underpinned by the EU’s cap-and-trade scheme.

Across Europe, system prices are expected to fall 36%-51% over the next decade, with the cost of PV electricity declining from €0.16-€0.35/kWh last year to €0.08-€0.18/kWh in 2020, according to the report.

The price of modules – which typically account for more than half the cost of a PV system – is predicted to continue on its historic downwards curve, whereby prices fall by one-fifth every time the cumulative volume sold globally doubles.

The price of modules in Europe averaged €1.20/W in July 2011, compared to €4.20/W in 2000. The only time prices briefly rose was in 2005, during an industry-wide polysilicon shortage.