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Published on September 5th, 2013 | by Giles Parkinson

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Deutsche Bank Predicting Huge Distributed Solar PV Uptake



Originally published on RenewEconomy.

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 by 2016.

The expected boom in distributed solar – installations placed on homes and commercial businesses – is based on predictions that solar PV module prices will continue to fall, grid prices will continue rise, and 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 will jump to 12GW and 16GW, meaning it will likely overtake China, Japan and Germany for the most annual installations.

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

“We believe 2015 will be a key inflection point for solar power in the United States,” the Deutsche Bank analysts say. “The economics are already compelling in 20-30 per cent 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 will only represent 2% of the country’s total 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

“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 at 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 at grid parity in 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 per cent 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

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 per cent, or 47, if the ITC remained at 30 per cent. 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.

Screen-Shot-2013-09-04-at-8.44.06-AMDeutsche 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 to the right).

“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 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.

Screen-Shot-2013-09-04-at-9.36.21-AMFinally, 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 per cent 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.”

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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.



  • GEF

    Inevitable and essential residential standard that must focus on recycled materials and dry bright southern markets. Good work China.
    Noteworthy, the wind generation are deficient exploitation of metal and materials that requires immense consumptions of energy to produce, thus will slow to stop. Tidal energy on coastlines and energy from waste transformation are interior urban and industrial infrastructures objectives.

    • Bob_Wallace

      Bogus.

      Wind, along with solar, is booming worldwide.

      This “materials that requires immense consumptions of energy” horse poop is the latest fossil fuel anti-wind talking point.

      Wind turbines repay all the energy that goes into making them in 3 to 8 months.

      • GEF

        Its a positive advancement those wind and solar respects. Its not what we harness, its how its done! It is the year of the horse and your looking at the wrong end of it Bob! China’s invested 60 billion to export north american petro sector that walks hand in hand with the steel, titanium and aluminium metal producers to dig, transport, smelt, finish and transport again the skeleton of each one of them towers. Not to forget each wrench, computer and truck that services them..! How can wind turbines repay those holes in the ground and people that compromised for them?

        • Bob_Wallace

          I don’t understand the point you’re trying to make.

          China is building an economy. They need energy and for now they are using a lot of fossil fuels. But at the same time they are starting to install massive amounts of renewables and most likely will continue to do so in order to cut down on fossil fuel use/costs.

          As labor costs rise in China we are starting to see manufacturing being “reshored” – production moving back to the US. Add in rising shipping costs along with more automation and we’ll be making more in the US, not less. And if we’re smart enough to install a lot of renewables we’ll provide ourselves with more of a competitive edge via cheaper power.

          Put up a wind turbine and pay it off for the standard 20 year period. Get 10, 20 or more years of almost free electricity. No fuel costs.

          Install solar panels and pay them off in the standard 20 year period. Get 20, 30 or more years of almost free electricity. No fuel costs.

          This is smart, very smart investing. This builds us a solid future.

          • GEF

            That was my point below the fact we must REDUCE, reuse and recycle. Like it is not so much climate change that is the issue as natural and inevitable, it is our behaviour of consumption that must change! Energy is neither created or destroyed it is transformed. Why do consume endless time, words and watts on these exploitive tools if we can achieve the same discussion over a community meal or event?

          • Bob_Wallace

            Reduce, reuse, recycle and use sustainable inputs.

            The climate does “naturally” change. There are changes that happen over very long periods and sometimes that lead to a planet much too hot or much too cold for the sort of civilization we now enjoy.

            If it were left up to natural change we would have been fine for tens of thousands of years. But we’ve introduced “unnatural” change by over a hundred years of extracting and burning fossil fuels. We’ve screwed the pooch.

            We can minimize the hurt we are going to receive by cutting fossil fuel use as quickly as we can. And if we change how we consume both goods and energy at the same time we can improve our lives and leave a better future for those who follow.

          • GEF

            C’est correct! You know it. Welcome to our bi-polar civilization, homo sapiens’ frankenstein, a processes of economic models, fantasy based prejudice or one way growth trends!

            Amplified by our intrinsic survival instincts, self structured laws and protectionisms to reproduce, procreate yet exploit by exponent population explosion while accept or ignore our consequences and impacts upon what we depend as require most… a healthy integral earth ecology!

  • Wayne Williamson

    Wow…this article actually got me excited…the future is uncertain but I don’t see why the projections won’t become fact…

    • Ross

      It looks like easy money for the investors in yieldcos.

    • Omega Centauri

      I can imagine some showslowers. One is the end of net metering. This much solar really will upset the utility business model. Perhaps net metering will be whittled away from the high end down. I think in most states there is a limit on system size that requires the utility to provide net metering for -this mainly affects commercial and industrial sites. I would expect these limiting sizes to be reduced over time. I can easily imagine commercial building owners, capping the size of PV systems so as not to ever return energy to the grid. I.E. they may choose to install only as much nameplate capcity, as their daytime demand, and no more. So they will still be substantial net consumers.

      Another is if we don’t make much progress on BoS costs. Much of this is local (city/county government), and these folks might be vulnerable to lobbying from utility and fossil fuel interests. I sugest we keep our eyes open, and be prepared to fight.

      • Bob_Wallace

        I think net metering has to go away. It only works in a close to fair manner now because peak electricity is more expensive for utilities to purchase than is off-peak. Once there is adequate solar on the grid sunny hour demand collapses. It already has in Germany.

        If sunny hour demand is low and being met by end-user solar then utilities are put in the position of having to accept low value solar and pay it back kWh per kWh with electricity which costs them more to purchase.

  • UKGary

    I think it highly likely that Deutsche bank is right on this one – All it would take for much of the US to reach consumer grid parity for domestic, commercial, and industrial customers today without any subsidies or tax credits would be for soft costs to come down to levels commonly seen in Europe.

    Lightsource Renewable Energy LTD installed 133 MW of utility scale solar in Q1 2013 for an average cost of £1.35 per watt or around $2.05 per watt.

    http://www.pv-magazine.com/news/details/beitrag/uk–lightsource-adds-133-mw-of-pv-in-q1-2013-_100010973/#axzz2e38mEdvx

    Lark Energy reportedly installed a 33 MW solar farm in just 8 weeks for £35 million of £1.06 (approx $1.60 per watt)

    http://www.solarpowerportal.co.uk/news/lark_energy_develops_uks_largest_solar_farm

    and the average price of a 4 kW 16 panel domestic solar array is reported to be around £5,500 or £1.38 (approx $2.06 per watt)

    http://www.comparemysolar.co.uk/price-of-solar/

    These prices are without tax rebates which are not paid in the UK – rather the arrays are subject to 5% sales tax. (UK subsidies are based on power produced not capital spent).

    UK installed prices already are lower than the aspirational prices for the US in 2016 so it is not hard to see how these target prices might be achieved!

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