NEW DELHI -- Solar power is cheaper in many parts of Asia than electricity from liquefied natural gas, meaning photovoltaics don’t need subsidies to compete with fossil fuels.
The market for costly plants built to supply electricity at peak daytime hours could collapse, while distribution utilities which shut out rooftop solar projects that reduce demand for grid power will drive consumers to start storing energy in batteries, according to the report. The rise of solar may begin to depress fossil-fuel prices within the decade.
“All of the above eats away — at the margin — at oil and gas demand,” analysts Michael W. Parker and Flora Chang said in the report. “It competes with oil, kerosene, diesel and LNG in developing markets.”
Solar’s penetration into the $5 trillion global energy trade is still too small for it to disturb pricing in any market, they said. However, it’s a technology that’s set to get bigger and cheaper, whereas fossil-fuel extraction costs will keep rising, according to the report.
Solar accounted for only 0.17 percent of energy in 2012. Within a decade, it may begin to displace a significant share of oil and gas supply and start to depress prices, according to the report.
“Global energy deflation would become inevitable,” they said. “Technology with a falling cost structure would be driving prices in the energy space.”
If oil and gas producers start to expect a world of deflating energy prices, they may be less inclined to sit on large reserves and may begin pumping faster, according to the report.
Copyright 2014 Bloomberg
Lead image: Solar panels via Shutterstock