Sunday, April 16, 2006

With high prices for oil and gas, does solar energy not become cheaper?

By Joachim Grawe

In partnership with Energie-Fakten

As always, there is no simple answer:

  1. As an alternative for the preparation of hot water using oil or gas, solar collectors will become competitive in the short run, if the price for heating oil remains at the current level (or even increases) and when the gas price follows, based on the price fixing clause in customer contracts. This has already been announced.
  2. In Germany, solar collectors, in any case flat-plate collectors, do not suffice for heating in winter. Installing them in addition to an oil or gas heating facility means double investment. Despite higher oil prices, payback is long. Oil prices must rise significantly before the combined heating with oil and solar becomes economical.
  3. As for electricity production with solar energy (photovoltaics), the increase in oil price has no influence, and the likely increase in gas prices has probably little influence. This is because (light) heating oil is hardly used in power generation (share in 2004 electricity production: 0.2%). Natural gas, with 9.1%, has a higher share in electricity production. But the use of natural gas can be reduced, in favour of coal. Conversely, the share of gas can increase only to a limited extent, if (due to high prices) few new gas-fired power plants are constructed, and when the operating life of nuclear power plants is extended. The debate is open whether large-scale electricity generation from photovoltaics will ever become competitive, due to more attractive alternatives (also among renewable energy sources).

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This contribution was originally published on September 8, 2005 by Energie-Fakten.

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