The Solar Opportunity Awaits

by John Farrell.

U.S. grid parity chart
U.S. population at grid parity chart.

The coming of solar grid parity offers an opportunity for millions of Americans to go solar affordably. But it also means a potential transformation, a democratization of an electricity system long dominated by centrally-controlled utilities and centralized ownership and production of electricity. When solar can undercut grid electricity prices, it may also undercut this 20th century system of centralized ownership, bringing economic sunshine and self-reliance to communities along with solar electricity.

This is the third of five parts of our Rooftop Revolution report being published in serial. Read Part 1 or Part 2. Download the entire report and see our other resources here.

Millions of People, Thousand of Megawatts

When solar grid parity arrives, it won’t mean that everyone can go solar. The most likely participants in the residential sector will be folks who own their own home. Even then, there will be some homes whose roof is unsuitable for solar power for one reason or another (e.g. shading). The following analysis takes the year of solar grid parity for the nation’s largest cities and translates it into megawatts of solar power potential.

We used the following assumptions to calculate the residential solar rooftop potential for each metropolitan area:

  • Only non-vacant, owner-occupied properties were considered. Nationally, about two-thirds of homes are owner-occupied and not vacant, with major metropolitan areas varying from 50 to 70%.1
  • We estimated approximately 1,000 square feet of total roof space per home.
  • We assumed that only 27% of this space (in the aggregate) would be suitable for solar, based on national studies of rooftop solar potential.2
  • We assumed that 1 kW of solar could be installed for every 100 s.f. of suitable roof space.

With these assumptions, we can use our previous analysis of the year of solar grid parity (based on the average residential retail electricity rate) to estimate the potential capacity of solar power that could be installed on home rooftops at grid-beating prices each year until 2027.

A very conservative solar megawatt grid parity estimate

The above chart is quite conservative. For one, the data only reflect the 50% of Americans that live in the largest 40 metropolitan areas. Additionally, we used average grid prices and did not factor in time-of-use pricing or “economic grid parity.” Finally, residential solar is only a fraction of the total solar market. In California, the largest U.S. solar market, residential solar represents approximately 30% of the installed capacity in the California Solar Initiative program.3 Thus, the grid parity potential numbers above are a fraction of the actual solar potential when considering commercial and public sector property as well as communities smaller than the 40 largest cities.

Additionally, rooftops aren’t the only place for solar, and the availability of other locations could further expand the grid parity opportunity. The following infographic illustrates the opportunity for solar over parking lots, near highways, and underneath existing transmission lines. It still doesn’t factor in solar placed on the ground near existing buildings.

solar land space

Jobs and Economic Development

Solar provides an unparalleled economic opportunity for local power generation and local economic benefits. Each megawatt of solar power generates as many as eight jobs and $240,000 in economic activity, and most solar power projects can be built right next to or on top of the building that will use the electricity.

Previous studies by the National Renewable Energy Laboratory indicate that locally owned renewable energy projects multiply the job and economic benefits of renewable energy projects.

With a potential for 30,000 megawatts of residential solar in the next 6 years, communities across the country could gain over a quarter of a million jobs and create over $18 billion in economic activity.

Value to the Electricity System

There’s also ample evidence that distributed solar power has much greater value to the grid than simply electricity output. The delivery of power during peak periods (covered by time-of-use pricing) is just one element. The ability of solar to avoid transmission access charges, supplant long-distance power sources, reduce stress on the distribution system during peak power events, and hedge against fossil fuel price fluctuations can vary from $0.03 to $0.14 per kWh. Solar also has environmental benefits (relative to existing power production) that provide additional value.4

Local Ownership Boosts Economic Benefit of Renewables

The following chart illustrates how utilities are recognizing the value of solar power, illustrating the willingness of a municipal utility to pay more for local solar power because of its various grid and local economic benefits.

Value of Local Solar Power to Palo Alto MUNI

Key to PA

Democratizing the Electricity System

Perhaps the greatest benefit of the solar grid parity opportunity will be its political impact. As millions of Americans become self-reliant energy producers, it will create an enormous constituency for continued support of distributed renewable energy development and distributed solar in particular. As an illustration, the following residential rooftop solar installation might have the capacity to produce 3 kW of electricity, but the two adults likely to live in the residence represent two solar voters.

solar 3kw roof

References

  1. 2010 American Community Survey 1-Year Estimates. (Census Bureau, 2010). Accessed 12/8/11 at http://tinyurl.com/7ndxhg4.
  2. Paidipati, Jay, et al. “Rooftop Photovoltaics Market Penetration Scenarios.” (Navigant Consulting, Inc., for NREL: February 2008). Accessed 8/13/08 at http://tinyurl.com/6qplow.
  3. Applications by Sector. (California Solar Statistics, 1/10/12). Accessed 1/11/12 at http://tinyurl. com/86a7awr.
  4. Farrell, John. Distributed Solar Power Worth Far More Than Electrons. (Institute for Local Self-Reliance Energy Self-Reliant States blog, 4/12/11). Accessed 1/13/12 at http://tinyurl.com/3tqmerh.

This article, The Solar Opportunity, is syndicated from Clean Technica and is posted here with permission.

Global Solar PV Installations Will Double, Hit Grid Parity By 2020

by Silvio Marcacci

.

Worldwide Solar PV Installed Capacity and Revenue chart via Navigant Research

Continually declining solar photovoltaic (PV) prices will continue to power an international market surge, with annual installations doubling by 2020 en route to grid parity around the world.

This bright outlook shines through Navigant Research’s most recent Solar PV Market Forecasts and estimates solar PV will be cost-competitive with retail electricity prices without subsidies in nearly every electricity market by 2017.

Even though each international energy market presents different conditions for solar PV’s growth, Navigant expects overall solar energy costs  to continue falling while overall installations and industry revenue keep climbing.

Low Solar PV Costs Unlock Grid Parity

Solar PV panel oversupply and government incentives have combined to send costs spiraling down to often unsustainable levels in recent years, sparking market consolidations and bankruptcy. According to Navigant, module costs fell from $4 per watt in 2006 to as little as $1 per watt in some markets by 2012, and will continue declining between 3%-8% per year to reach a global average of $1.50-$2.19 per watt by 2020.

This dramatic price decline has also made solar PV appealing to developing nations and an entire new class of homeowners and businesses. Under Navigant’s outlook, new annual installations of solar PV will double from 35.9 gigawatts (GW) new capacity in 2013 to 73.4GW in 2020.

“Lower prices for solar PV modules are opening up new markets for distributed PV, while also helping the technology reach grid parity more quickly in high-cost retail electricity markets,” said Dexter Gauntlett, Navigant analyst.

New Markets, New Revenue, Surprising Trends

And all those new installations will also bring much more revenue, often by new markets. Navigant estimates annual worldwide solar PV revenue will pass $134 billion by 2020, led by growth in the Asia-Pacific region. Of course, China will dominate worldwide growth, and is expected to pass 100GW installed solar PV capacity by 2020.

But if China’s solar surge is predictable, the type of installations is not. Distributed generation, while an exciting prospect for resiliency, is expected to account to less than half of all installations in 2014 and non-distributed systems (greater than 1 megawatt in size) will represent more than half the worldwide market through 2020.

The shift away from non-distributed generation is somewhat surprising, considering major markets like Germany and China are retooling their financial incentives toward on-site installations while solar leasing companies like SolarCity and SunRun offer homeowners the option for rooftop solar with little or no upfront investment and many states tweak policies to free the grid for small-scale solar systems.

But perhaps this shift is best seen in context compared to the total growth of large systems. Navigant previously estimated distributed solar installations would reach $118 billion by 2018 – meaning small solar PV will keep growing, just not as fast.

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This article, Global Solar PV Installations Will Double, Hit Grid Parity By 2020, is syndicated from Clean Technica and is posted here with permission.

About the Author

Silvio Marcacci Silvio is Principal at Marcacci Communications, a full-service clean energy and climate-focused public relations company based in Washington, D.C.

Grid Parity, Low LCOE Driving 34% Global Renewables Capacity by 2030

by Silvio Marcacci

When it comes to global electricity generation, coal is still king – but not for long

Fast-changing economics mean renewable energy worldwide will represent 34% of all installed capacity by 2030, according to the World Energy Perspective: Cost of Energy Technologies — a report from the World Energy Council (WEC) and Bloomberg New Energy Finance (BNEF).

Global levelized cost of electricity graph via World Energy Council
Global levelized cost of electricity graph via World Energy Council

The report finds many clean energy technologies are already cost competitive with fossil fuels and only getting cheaper, echoing another analysis that found US wind and solar costs fell 50% since 2008. As a result, fossil fuel’s slice of the world energy pie is projected to fall fast, from 67% in 2012 to 40%-45% in 2030.

Falling Renewable LCOE Powers Clean Energy Surge

Vast differences in the cost of building and generating power exist across the globe, but one trend is clear – the levelized cost of electricity (LCOE) continues to fall for mature renewable energy technologies, placing them close to grid parity with fossil fuels. In addition, the cost of producing power from renewables fall continue at a rate related to the level of usage, a trend known as the “experience curve.”

Our study finds that although fossil fuels continue to dominate, renewable energy and the investment appetite for them are growing.

With wider deployment the price of renewables will fall, reducing the risk for investors, and we expect to see greater uptake over the years. — Guy Turner, Chief Economist at BNEF.

The WEC report uses several cost metrics exist to evaluate power generation including capital expenditures, operating expenditures, and capacity factor, but LCOE stands as arguably the most important indicator of renewable energy’s value because it’s the only one that evaluates the total lifecycle costs of producing a megawatt hour (MWh) of power.

LCOE is best explained as the price a project must earn per MWh in order to break even on investment and considers cash flow timing, development and construction, long-term debt, and tax implications to equally evaluate all energy technologies on an equal basis in terms of their actual costs.

But most importantly, LCOE underlines the ascendance of renewable energy across the world – especially wind and solar.

Wind Power Gusts Ahead

Wind power has already become the largest non-hydro renewable electricity source and is projected to more than triple from 5% of global installed capacity in 2012 to 17% by 2030, breezing past large hydropower. From 2000-2010 global onshore and offshore wind capacity increased 30% per year, reaching 200GW installed in 2010.

Onshore wind LCOE by region
Onshore wind LCOE by region graph via World Energy Council

Onshore wind’s LCOE has fallen 18% since 2009 on the strength of cheaper construction costs and higher capacity factors.

Turbine costs have fallen nearly 30% since 2008, outpacing the traditional experience curve.

The LCOE for onshore wind is cheapest in India and China, running between $47-$113 and making well-sited wind farms in these countries among the cheapest in the world – an incredibly important factor considering their surging demand for power is currently being met by coal.

The LCOE picture isn’t as clearly defined for offshore wind, as 95% of the world’s 4GW installed offshore wind capacity is located in European waters.

By 2020 installed capacity growth in Asia will surge, offsetting Europe’s dominance with 40% of all installed annual capacity – China alone will have 30% of all new capacity. As more offshore wind comes online in different markets, LCOE will become clearer.

Solar’s Remarkable Shine

But if wind’s LCOE drop has been steady, solar energy’s has been meteoric.

The WEC reports feed-in tariffs and plummeting photovoltaic module prices make solar competitive with most forms of power generation – in some markets with expensive power, like Germany, businesses with installed solar now find using their generated power more profitable than selling it to the grid.

Solar power LCOE over time chart via World Energy Council
Solar power LCOE over time chart via World Energy Council

As a result, solar power’s worldwide capacity will absolutely boom, growing from 2% of installed capacity in 2012 to 16% by 2030. China and Japan will be biggest beneficiary of solar’s rise, with China set to exceed 50GW installed solar by 2020.

The WEC’s forecast for solar power is incredible, but even this outlook is underestimates solar’s clean energy potential, because it only includes projects above 1 megawatt in capacity – completely ignoring the spread of small-scale rooftop solar and the rise of distributed generation

Solar power LCOE by region graph via World Energy Council
Solar power LCOE by region graph via World Energy Council
Fossil Fuel’s Achilles Heel: Operational Costs

In spite of falling renewable costs, fossil fuel generation is still cheaper in most regards, except for one – the price of operation.

The WEC notes that once renewables are built and online, their costs are mainly marginal operational and maintenance expenses. Compare that to fossil fuels, whose costs are volatile and subject to change from factors like commodity price swings and external costs like carbon pricing and pollution.

This trend is most clearly seen in developed nations like Western Europe, America, and Australia, where the WEC says the potential for significant amounts of new coal generation to come online is low.

Today, developing nations buck this trend and coal is a growing generation source in Brazil, China, and India. In fact low capital costs make China the cheapest country to generate power from coal, less than half the LCOE in Europe or the US.

Coal LCOE by region chart via World Energy Council
Coal LCOE by region chart via World Energy Council

But the tide is starting to turn, evidenced by growing concerns about air pollution in China and the development of carbon markets in many of the world’s developing economies where fossil fuels have dominated generation.

Grid Parity For Renewables Fast Approaching

Put it all together, and it’s clear to see global energy economics are changing fast.

While coal still dominates global electricity production, renewables are catching up with net investment growing seven-fold from 2004-2011, outpacing fossil fuels for the second year in a row in 2012. And as more renewables come online, their costs continue to fall faster and faster from larger economies of scale.

The cost of most technologies, and most dramatically that of solar PV, is coming down with production scale-up in many areas of the world.

With such growth, grid parity will become reality in the coming years. — Dr. Christoph Frei, World Energy Council Secretary General

This article, Grid Parity, Low LCOE Driving 34% Global Renewables Capacity by 2030, is syndicated from Clean Technica and is posted here with permission.

About the Author

Silvio Marcacci is Principal at Marcacci Communications, a full-service clean energy and climate-focused public relations company based in Washington, D.C.

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Deutsche Bank Predicting Huge Distributed Solar PV Uptake

This post originally published on RenewEconomy by Giles Parkinson

Energy analysts at Deutsche Bank are predicting a huge surge in the uptake of ‘distributed solar’ PV in the United States, the world’s biggest economy and electricity market, saying solar PV installations could rise 7-fold in coming years and lift overall solar PV capacity to nearly 50GW in the US by 2016.

U.S. solar installations through 2016. Image courtesy of Deutsche Bank.
U.S. solar installations through 2016. Image courtesy of Deutsche Bank.

The expected boom in ‘distributed solar’ [which are those installations that are placed on homes and commercial businesses] is based on predictions that 1) solar PV module prices will continue to fall, 2) grid prices will continue rise, and 3) innovative financing options will provide ample and cheap capital.

The US solar market has been dominated by utility scale installations to date — with comparatively little rooftop solar.

But Deutsche Bank estimates that in 2015 and 2016, annual installation rates in the US will jump to 12GW and 16GW, meaning it will likely overtake China, Japan and Germany for the most annual installations.

It says total US solar capacity will grow to 50GW under this scenario (Germany is currently at 35GW but slowing, while China aims for 35GW by 2015) and Deutsche Bank says up to 30GW of US installed solar capacity will come from distributed generation.

We believe 2015 will be a key inflection point for solar power in the United States,” Deutsche Bank analysts say.

The economics are already compelling in 20-30 percent of US states and we expect this to improve as soft costs (balance of systems) come down and potential customer awareness begins to ramp.

The Deutsche Bank scenario suggests the US will become the biggest solar market in the world.

And while 50GW [of solar] will only represent 2% of the country’s total power generation by 2016, its impact on the incumbent electricity market could be considerable, as former Energy Secretary Stephen Chu, NRG CEO David Crane, Duke Energy boss Jim Rogers and Jon Wellinghoff, the chairman of the Federal Energy Regulatory Commission — among many others — have predicted.

deutsche-us-solar-install
U.S. solar installations through 2016. Image courtesy of Deutsche Bank.

We see solar becoming increasingly mainstream as it passes cost competitiveness with traditional forms of generation, the Deutsche Bank analysts write.

While we will likely see some utilities fight it every step of the way (because it threatens their business model), we expect system economics will ultimately win in the longer run and yearly installations will continue the general upward trajectory.

Deutsche Bank estimates that solar PV is [already] at grid parity in the 10 states in the US without additional subsidies. The key to this is the falling price of modules, and the growth of financing options, which benefit from a 30 percent investment tax credit in the US.

It estimates that the long term cost of electricity (LCOE) for rooftop solar is currently at 11-15c/kWh in the 10 states at grid parity, which compares to a retail price of 11c-37c/kWh.

If, as it expects, solar module prices continue to fall to around $2.50 a watt from $3/watt now, then the LCOE in the grid parity states (mostly states with the best solar resource) will fall to 8c-14c/kWh, and another 12 states will come into grid parity. (See graph below).

Screen-Shot-2013-09-04-at-8.42.45-AM
States already at Grid Parity and states poised to hit Grid Parity. Image courtesy of Deutsche Bank.

It notes that economies of scale make modules for commercial and industrial systems even cheaper, with systems estimates at $US2.50/watt for commercial and $2.25/watt for industrial. Both prices are before the benefit of the investment tax credit.

By 2016, the number of US states at grid parity for distributed solar would be 36 if the investment tax credit was reduced to 10 percent — or 47 if the ITC remained at 30 percent. It says that uncertainty over the extension of that credit could cause a boom in solar investment before the deadline expires in 2016.

Deutsche Bank’s focus on the cost of financing is the key, as it plays a critical role in which technologies will be “investable” in future years, as Bloomberg New Energy Finance pointed out in its assessment of the cost of renewables versus fossil fuels earlier this year.

Shift in the Levelized Cost of Electricity. Image courtesy of Deutsche Bank.
Shift in the Levelized Cost of Electricity. Image courtesy of Deutsche Bank.

Deutsche Bank says the growth and popularity of yieldco” type structures — and the fact that they make a lot of money for their investors — means that solar financing costs by will fall by 200-300 basis points, and would boost liquidity.

It says that every 100 basis point reduction in financing costs, results in 1 c/kWh reduction of LCOE (see graph).

We believe solar LCOE could potentially decrease from 10-16 c/kWh to 8-14 c/kWh as a result of wider acceptance of yieldco type structures, the analysts say.

Wider availability of financing options could provide project developers some cushion in a rising interest rate environment.

Another big factor is the increasing price of fossil fuels. Deutsche Bank estimates that 50GW of coal-fired capacity will be removed in the US, in coming years due to pollution and emission laws.

Some new power stations may be built to guarantee supply, but this would force the regulated price of electricity higher, and make solar even more competitive. “We view this as a positive,” it says.

Cost of photovoltaics (PV) in Germany compared to the cost of PV in the U.S.A. Image courtesy of Deutsche Bank.
Cost of photovoltaics (PV) in Germany compared to the cost of PV in the U.S.A. Image courtesy of Deutsche Bank.

Finally, the bank says the price path is already proven by what has happened in Germany, which until a few years ago was the biggest solar PV market in the world, and still holds the most by aggregate with more than 35MW installed.

We have seen dramatic reductions in system costs over the last decade and expect this to continue in the US.

We believe we can see 10-15 percent annual reductions in system cost/watt over the next several years, which should drive pure LCOE down to the 9-14 c/kwh range for potential grid parity states.

Historically, we have seen this play out, although we note that much of the reduction going forward will come from non-panel costs.

It says trends in German installation costs (shown above) show a clear down trend in a more mature industry.

We believe the US can continue its downward trend as systems become larger and soft costs couple with industry efforts towards standardization and efficiency gains to reduce the cost per watt peak before the ITC is reduced.

This article, Deutsche Bank Predicting Huge Distributed Solar PV Uptake, is syndicated from Clean Technica and is posted here with permission.

About the Author

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia’s energy grid with great interest.