As much as some people look forward to the Rapture, people in the renewable energy space look forward to “the crossover.”
The crossover is the point in time where the costs of solar energy fall below the price of fossil fuels.
The importance of this point can’t be over-estimated, because costs will keep falling after that point.
Solar energy will become the cheap energy, then the cheaper energy, then the cheapest energy, reaching a point where it costs less to harvest solar energy than to dig up stuff to burn.
Mark Little of General Electric now thinks we can reach this first crossover in three-to-five years. He’s basing his estimate on the price now charged for grid energy in Connecticut, where GE is based. That’s 18.1 cents per kwH. Little estimates solar costs at 15 cents per kwH in 2016.
Getting solar below the price of fossil energy is one thing. Getting it below the cost of fossil energy is something else. Once we reach that point, renewables can quickly become the dominant energy source because of economics, not politics.
The way we get from today’s prices to tomorrow’s isn’t just through technology, as much as I like to write about it. It’s through scaling.
Companies like GE can scale production. Installers like SunPower will be able to scale installation as oil companies like Total buy-into them. Total’s successful bid for 60% of SunPower was at a 44% premium to its market price. The French oil company is expected to complete its acquisition in 2013.
This is the first deal of its kind. As the crossover approaches it is certain not to be the last.
Analysts continue to predicate their studies of renewable energy installations on subsidies, sparked or stalled by the prospects of climate change legislation, but serious money is being invested in anticipation of the crossover, not government intervention.
Right now the renewables sector is called “highly politicized” by analysts, but once the crossover happens – whether it’s in 2016 or 2017 most agree it’s out there – the political controversy will be over.
It’s the energy industry’s crossover that’s the most important one of all.