Despite the recent drop in oil price, we expect solar electricity to become competitive with retail electricity in an increasing number of markets globally due to declining solar panel costs as well as improving financing and customer acquisition costs. Unsubsidized rooftop solar electricity costs between $0.08-$0.13/kWh, 30-40% below retail price of electricity in many markets globally. In markets heavily dependent on coal for electricity generation, the ratio of coal based wholesale electricity to solar electricity cost was 7:1 four years ago. This ratio is now less than 2:1 and could likely approach 1:1 over the next 12-18 months.

Electricity Prices are Increasing, Despite Nat Gas Price Swings
Peak to trough, average monthly natural gas prices have decreased ~86% over the past 10 years. Yet, during this time period, average electricity prices have increased by ~20% in the US. The main driver for rising electricity bill is that T&D investments which represent 50% of bill have continued to ramp and have accelerated recently. In 2010, T&D capex levels of for US Utilities ~$27B were ~300% higher than 1981 levels. We expect electricity prices worldwide to double over the next 10-15 years making the case for solar grid parity even stronger.

Solar System Costs Could Continue to Decline
The economics of solar have improved significantly due to the reduction in solar panel costs, financing costs and balance of system costs. Overall solar system costs have declined at ~15% CAGR over the past 8 years and we expect another 40% cost reduction over the next 4-5 years. Yieldcos have been a big driver in reducing the cost of capital and we expect emergence of international yieldcos to act as a significant catalyst in lowering the cost of solar power in emerging markets such as India.

Eoin Treacy's view

Here is a link to the full report. 

This is a fascinating report not least for its international scope and estimates of where solar has already reached grid parity. China is where solar has the greatest potential to impact power production for two important reasons. The first is that the world’s largest solar cell manufacturers are Chinese. The second is that China has some of the worst pollution in the world. 

g A documentary film released online over the weekend by Chai Jing, discussing the causes of China’s poor air quality, has gone viral with more than 120 million hits to date. If domestic Chinese people are as outraged at the total absence of environmental law enforcement as Mrs Treacy there is going to be a major discussion about the environment. 

China has the ability and funds to embark on a massive solar building program but the question remains whether it has the will. 

The Guggenheim Solar ETF broke out of a yearlong base in May 2013 and hit a medium-term peak a year later. It dropped below the MA with the fall in oil prices but has recovered somewhat over the last six weeks to push back above the 200-day MA. Provided it can find support above the $32 area on the next significant pullback, the benefit of the doubt can be given to the upside.