Solar energy in Europe will be 10 times cheaper than gas by 2030 — here’s how

Gas will still be a part of the mix but only to address exigencies.
Ameya Paleja
Solar panels

Energy prices In Europe are at an all-time high. While the situation is not expected to last forever, even after gas prices reach some degree of moderation, the cost of generating power using solar photovoltaics will drop so low that it will be 10 times cheaper, a report from an energy research company said.

Europe has always relied on gas-fired power stations for its energy demands. The geopolitical tension over Ukraine has resulted in Russia dropping its gas exports, which have directly impacted the region's energy cost.

According to a report by Oslo-based Rystad Energy, the spot prices for gas at the Title Transfer Facility (TTF) gas hub in the Netherlands were an average of US$46 per Megawatt-hour (MWh) in 2021. The TTF pricing is a reference point for Western Europe's gas prices and has risen sharply after the conflict in Ukraine this year. The TTF pricing at the time of the report was US$134 per MWh, a steep increase of 187 percent.

Europe prepares for gas-fired winter

As winter months roll in, Europe is likely to face a tough time again. Gas prices may not reach the highs of US$330 per MWh as they did in August, but with the conflict showing no signs of abating, Russian gas exports are unlikely to increase, and Europeans will have to pay more for their heating needs.

Even amidst high energy prices, Europe's energy production from gas has increased by four percent this year as the region needs to cope with a drop in energy output following nuclear generation facilities going offline. As rivers dried up in summer, hydroelectric power generation also suffered and gas compensated for these losses.

After the New Year, though, the situation is expected to improve as nuclear power plants in France will be back in operation and add 30 GW of energy to the grid. As 2023 comes to a close, renewable energy capacity in the form of solar and wind farm installations is expected to supply another 50 GW of energy.

Solar to become cheaper than gas

Over the next few years, as European countries look at installing more renewable energy capacities to reduce their carbon emissions, the average capital cost of these installations will drop to US$1.3 per Watt, the report said.

The TTF gas price is expected to stabilize by the end of the decade and may drop to US$31 per MWh. The Levelized cost of energy (LCOE) from gas would reach about US$150 MWh at this price. While this might sound cheap in comparison to what consumers in Europe are paying today, it will still be three times as much the LCOE from solar facilities, the report added. For gas to remain competitive as a fuel, its prices would have to drop to US$17 MWh, which the report calls "unthinkable" in the current scenario.

If European decision-makers spend money on building renewable energy capacities that could kick off in just a couple of years, instead of paying high gas prices currently, as much as 100 GW of new energy generation capacity could be added as early as 2025. In just three more years, this capacity would reach 333GW and generate enough power to replace that provided by gas-fired plants currently.

Europe could still retain gas in its energy mix to meet its necessities or solve the intermittency problems of renewables, especially during the winter months. Nevertheless, it would free Europe from its current pain due to supply issues.

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