How can companies and private households benefit from the falling levelized cost of electricity? Dr. Christoph Kost, Head of Group Energy Systems and Energy Economics at the Fraunhofer Institute for Solar Energy Systems ISE knows the answers.
He is the lead author of the study “Levelized Cost of Electricity – Renewable Energy Technologies”, which was published this year with new results. The study compares the present costs for conversion of different energy forms into electricity and gives a prognosis for the further cost development up to 2045.
Companies of any size should consider using PV systems, but there are two key factors that are very important when designing a system: the available roof space and usable surface and the company’s electricity demand. For optimal supply, it is important to consider the annual electricity demand as well as the load profile and assess how much electricity is used by the company and how much can be fed into the grid. As a rule, it is often more profitable to consume as much electricity as possible.
When integrating a battery storage system, the size of the system depends on the electricity demand and its future development. For example, it may increase as a company switches more and more to electric vehicles or as processes are electrified.
For private households, I recommend installing as many PV modules on the roof as possible. Electricity demand in the residential sector will also increase with electromobility and electric heating systems. That is why it is worth installing a rather powerful system with around 10 to 12 kWp in single-family homes.
Before contemplating the size of your battery storage system, you should install the largest PV system possible to cover as much of your on-site consumption as you can. I suggest getting at least a small 6 kWh storage device. For homes with a high electricity demand due to consumers such as heat pumps and electric vehicles, it is worth getting larger devices with 10 or 15 kWh.
It is important to think of rooftop PV and ground-mounted PV as separate segments, because even in the industrial sector, there is often not enough space available on company premises to accommodate large ground-mounted PV systems.
For industrial companies, the decision depends more on power consumption and peak loads. Battery storage systems can help shave peaks, which reduces grid charges. However, they are more complex and expensive, so they must be precisely matched to the load profile and electricity demand.
Ground-mounted PV systems typically feed all of the electricity they generate into the grid. But in certain cases, ground-mounted systems can supply companies via a direct line to meet a portion of their electricity demand. Since electricity prices decrease around midday, it makes sense to include battery storage systems in the plant concept to sell the electricity when prices are high or to use it subsequently when the company has a high electricity demand. It is a good idea to include storage capacity for at least two hours of discharge time, especially in large systems.
As we predicted in our analyses in 2010, levelized cost of electricity of PV and wind have fallen significantly over the last ten to twenty years. Over time, we added technologies such as battery storage systems to our analyses. In our latest publication, we included additional technologies such as hydrogen gas turbines, which are set to play a key role in the next ten to 15 years in Germany’s power plant park.
Our past estimates of the development of energy carrier and carbon prices differ from today’s because a decade ago, Germany had not yet decided to become climate-neutral by 2045. Over the years, we gradually updated and adjusted our parameters to reflect the changes in energy policy.
Why does your study suggest that the levelized cost of electricity of PV systems, even when combined with battery storage, will decline only moderately over the next 20 years? Will the systems not continue to be optimized to be more cost-effective?
According to our forecast, the levelized cost of electricity of PV systems will decrease by around 20 to 25 percent, which the chart below may not illustrate clearly enough. If module efficiency continues to increase and the costs fall from 0.05 euros to around 0.04 euros per kWh, which means a reduction of around 20 percent. Decreasing production costs and enhanced efficiencies of systems will further drive down the prices, so that they will be lower than current market prices.
In the chart, the minimum value of the magenta bar is seen to drop in 2035, while the maximum value increases. This is a surprising development and owed to a fact that the visualization fails to show. Systems built between 2025 and 2030 will initially run on cheap natural gas because there will not be any hydrogen available yet. Once hydrogen becomes more available from 2030/2035, these systems will be retrofitted and exclusively use hydrogen. New power plants built from 2035 will exclusively run on hydrogen, so there will not be a phase in which they burn cheap natural gas.
Actually, there is a lot of investment in combined PV and battery storage systems, and the market is growing quickly. There are numerous battery projects, whether in combination with PV systems, especially ground-mounted systems, or not. Meanwhile, the construction of flexible power plants is lagging behind. This shows where the action is.
As far as the development of wind energy is concerned, I expect a sharp increase from next year.
The cost of developing renewable energy projects in different European countries is now largely the same. Ten to 15 years ago, the cost of PV and wind was different in every country. In general, many European countries, such as Poland, have seen a sharp increase in the deployment of PV systems over the past two years.