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Clean Power first-solar-PPA-predictions

Published on July 31st, 2014 | by Giles Parkinson

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Solar May Become Cheaper Than Wind In 5 Years

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July 31st, 2014 by  

Originally published on RenewEconomy.

One of the world’s biggest solar manufacturers and project developers, the US-based First Solar, has predicted that utility-scale solar costs in Australia will halve over the next five years, becoming cheaper than wind energy by 2020.

First Solar says this should mean that large-scale solar takes up an increasing amount of the capacity required to be built under the current 41,000GWh target.

However, First Solar’s prediction about costs are predicated on the renewable energy target not being removed or diluted in the interim, as is feared under the Abbott government.

First Solar argues that the RET is needed to encourage new projects and bring down costs. More than half the cost of a large-scale solar project, it says, comes from the cost of local of local suppliers and contractors. Without new projects, these costs cannot be reduced.

first solar PPA predictions

The graph above illustrates First Solar’s argument. The more solar farms that are built, the more costs can come down, and the less government support is needed. This will allow such projects, eventually, to be built without subsidy. In Chile, where electricity prices are even higher, and the sunshine is even stronger, this is already the case.

But First Solar says that rapid reduction in costs would not occur without a “market bridge” to bring technologies to commercialisation and maturity, particularly if the Clean Energy Finance Corporation and the Australian Renewable Energy Agency are also removed.

First Solar notes that little large-scale solar has been deployed so far in Australia. Indeed, as we noted last week, Australia now ranks 30th in the world in large-scale solar deployment, just behind energy giants such as the Dominican Republic, Mozambique and Puerto Rico.

First Solar’s cost profile – which confirms that of other independent analysts such as Bloomberg New Energy Finance – is interesting in the context of the current RET review, which appears to be driven as much by distaste of wind farms among Conservative politicians – such as Joe Hockey and Angus Taylor – as it is about economics.

First Solar says large-scale solar is useful to the energy mix because it produces energy when it is needed most, during daylight hours, and this has a strong correlation with peak demand and complements the profile of wind generation.

It also has strong community support. Solar farms can be located in areas with no competing land uses, are not as visible, and have no moving parts, use no water and produce no emissions.

And because of the excellent solar resource, and the modular, scalable nature of solar PV projects, they can be built where they are needed most within our electricity network.

First Solar built the country’s first utility-scale solar farm, the 10MW project at Greenough River in Western Australia, and is also building the 102MW Nyngan Solar farm and the 53MW Broken Hill solar farm for AGL, as well as a 3.25MW project for the University of Queensland at Gatton.

Australia’s next solar project, the 20MW Royalla farm built in Canberra under the ACT’s solar auction program, is soon to be commissioned by Spanish group FRV.

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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.



  • spec9

    Maybe, maybe not. But even if solar PV remains more expensive, solar PV is still very much needed. You need to have a variety of sources to minimizes the net intermittency aspects. And solar PV has advantages like the fact that almost any residential home can easily install it whereas small-wind turbines are generally not cost effective, can be noisy, can be more difficult to permit, can have turbulence issues, and will eventually require maintenance since they have moving parts.

  • Ronald Brakels

    Solar is already cheaper than wind in Australia. Has been for some time. This is because Australian solar is basically all point of use and nearly all generated by panels on the roofs of houses. Thanks to Australia’s high retail electricity prices there is no utility scale source of electricity, whether wind, coal, gas, or hydroelectricity that can compete with rooftop solar. Rooftop solar is pushing down the price of electricity during the day and reducing the incentive to build any new utility scale capacity, be it wind, solar, or fossil fuel. Improved efficiency is having a similar effect with demand for grid electricity fallen about 8% from its peak, despite Australia having the strongest economy in the developed world.

    • Ronald Brakels

      And it’s sunny here now as the skies are clearing up over Adelaide and the demand for grid electricity is dropping. This is the reality we have now. In a few years rooftop capacity will be much greater and it will continue to grow even if the current government does as much as it can to stifle this cheap, clean, distributed source of energy while supporting more expensive, centralized, coal plants.

      But it’s only a matter of how many people coal will kill before it dies. The Abbott government ended our carbon price last month, this month a brown coal plant closed down in Victoria. While only a small plant it is still a victory for human kind. The battle may be long or it may be short, but we will never build another new coal plant in Australia.

  • AssHat900

    Still can’t see why anyone is bothering with renewables when there are still piles of coal to burn.

    • Calamity_Jean

      I hope you’re joking. If you aren’t, you picked a good screen name.

    • Roger Pham

      Now, it comes to cost saving with renewables. Old King Coal is dethroned.

  • Dag Johansen

    I doubt it but remain cautiously optimistic. There have been huge price drops in recent years and I don’t think that pace can be sustained. But there are still some optimizations to be done.

    • Bob_Wallace

      Solar manufacturers are predicting a roughly 50% cost drop in manufacturing over the next 3 or so years.

      As more capacity comes on line look for the new plants to be much more automated with resulting labor cost losses.

      China is currently installing for ~$1/watt. Italy has installed for ~$1.30/watt. The US can get to those price levels over the next few years.

      • UKGary

        Reducing the cost per watt of solar panels is in my view no longer the most effective game for reducing the cost of solar power, especially in markets with high soft costs.

        Why? because in most countries, the cost of the panels is now between half and a third (utility scale) and a quarter and a sixth (domestic rooftop) of the finished installed cost of a solar array, and consequently of the solar power produced. You could therefore halve the cost per watt of a solar panel whilst only achieving between around 8% and 25% reduction in the cost of solar power all other things being equal.

        To achieve deeper cuts requires that the cost per area of solar panels remain stable or reduce whilst increasing yield per area. If the efficiency of solar panels could be doubled whilst simultaneously halving cost per watt, then very large cost savings could be achieved.

        With the exception of the inverter, the cost of BOS within the solar farm – both physical and soft costs tends to follow the area of the solar farm rather than its output (though doubling yield per hectare would bring some increases in wiring, transformer, and transmission costs.)

        It takes the same amount of labour, support structure, land and administration to install 100,000m2 of solar panels regardless of whether the resulting solar farm is rated at 15MW or 30MW.

        The doubled efficiency approach as described has potential to reduce costs by possibly 40% to 45% at all scales from a domestic array to a 100MW utility solar farm – this without other forms of cost reduction such as standardising permitting, volume related learning curve, lighter glass, lower cost materials, and slicker installation methods.

        Halving the cost of solar power by 2020 looks doable, but the majority of the savings will come from factors other than reducing the cost of the current design of solar panel.

        • Vensonata

          You, sir, are bang on!

        • jeffhre

          Good point.

          However, this “Reducing the cost per watt of solar panels is in my view no longer the most effective game for reducing the cost of solar power,”

          is half of this “To achieve deeper cuts requires that the cost per area of solar panels remain stable or reduce whilst increasing yield per area. If the efficiency of solar panels could be doubled whilst simultaneously halving cost per watt, then very large cost savings could be achieved.”

        • Bob_Wallace

          The cost spread between US prices and the least expensive installed price countries reflects BOS costs, mostly soft costs.

          Every country is purchasing panels, racks and inverters for about the same price (except for current US tariffs, which weren’t part of pre-2014 costs).

  • Vensonata

    Once we are talking any form of electricity below 12 cents per kilowatt hour,we are past worrying about the economic picture and only really concerned about the environmental aspects. Why 6cents? It just encourages squandering. Every modern net zero house now understands just how little energy it really takes to live in comfort. But trying to insure cheap slurpies and potato chips to 300 lb Americans is questionable intelligence , isn’t it? They need to eat less and more wisely. They will be better for it.

    • jeffhre

      So the solution is to – artificially maintain the current, or raise the future price? Or to ignore the lower price and purchase it at the desired price so that profligate Americans learn their lesson and improve their ways?

      Is $.06 the retail or wholesale price that we should not worry about with questionable intelligence?

      • Roger Pham

        IMHO, $0.06/kWh is the raw cost of solar with 50% from battery storage for after sundown. Adding $0.03 for transmission cost and $0.03 for taxes and profit per kWh and the retail price will be $0.12.

        • Bob_Wallace

          Why are you adding 3% for transmission?

          Right now the PPA for solar is running 5c/kWh. That includes transmission, taxes and profits. Take out federal subsides and the current price of utility scale solar in sunny places is 6.5 cents.

          Your numbers make no sense.

          • Roger Pham

            Retail, Bob. PPA is a power broker purchase at wholesale prices. What will show on a typical monthly bill for residential customer is PPA + profit + transmission cost (2-3 cents/kWh)+ local fees and taxes = residential rate per kWh.

          • Roger Pham

            Correction: instead of transmission cost, the bill may say distribution cost, meaning the cost to maintain all the lines, transformers and capacitors and meter to one’s house.

          • Bob_Wallace

            OK, that’s clearer.

            12 c/kWh is roughly the US average now. If we were to stick with fossil fuels that cost would rise because we’ve got a lot of aging coal plants that would have to be replaced and the price of NG is likely to rise. Pretty much certain to rise as we burn though a decade or so at the rate we’re going.

            Down the road I think we’ll continue to be at the 12c or maybe a little lower level.

            Large scale solar is likely to drop under 4c for the first 20 years while the loan is being paid off. Then it will drop to less than 1c for the next 20 to ? years.

            Wind farms are likely to fall to 3c over the next few years. After the 20 year payoff the cost will drop to 1c for 10 to 20+ years.

            As we’d constantly have a mix of ‘being paid’ and ‘paid off’ wind and solar we’d be averaging, maybe, 2c/kWh wholesale. That leaves plenty room for storage, dispatchable backup, distribution and profits.

      • vensonata

        The issue is in America you can lose elections on the price of gas. So gas prices are artificially low compared to Canada and Europe. At 3,50 a gallon it doesn’t ‘hurt’ to drive thoughtlessly in inefficient vehicles. And it doesn’t help to have cheap electricity either. We keep talking on these comment sections as if “one day solar will be affordable, will compare to subsidized coal etc” The “lowest price” mentality needs to be re thought. Is it a great idea to have electricity at

        5Cents kwh retail? Whatever the source. Just Sayin’.

  • TawnyaEDiaz

    Solar says this should mean that large-scale solar takes up an increasing amount of the capacity required to be built under the current 41,000GWh target. http://alturl.com/brjkr

  • JamesWimberley

    First Solar is on the side of the angels here. But it’s being a little disingenuous. Solar is a global market, and prices follow the same trend everywhere. There are national differences in BOS costs, with a local component: skilled labour, permitting, and so on. But basically solar will become cheaper in Australia whatever the government does.

    The future crossing of the solar and wind cost curves is indeed inevitable, since solar’s learning curve is twice as steep. It’s fun to speculate what that will mean for policy. Wind will remain an essential complement to solar since it produces at different times (winter and night), at least until we have cheap 24/7 EGS geothermal, by no means a certainty. The supply system will have three tranches : first solar (cheapest but daytime only), second wind (dearer, complementary, but incomplete), third despatchable backup (most expensive; geothermal, CSP + hot salt, biomass, ocean, storage, demand management). Wind will always need some long-term incentives to ensure enough capacity.

    • http://electrobatics.wordpress.com/ arne-nl

      More than half the cost of a large-scale solar project, it says, comes
      from the cost of local of local suppliers and contractors.

      Your argument fails as soon as BOS costs become the largest component, Look at the difference between installed cost of solar in Germany and the US. Same PV panels, but the difference in price is purely due to BOS cost. Economies of scale in the supply chain and experience in the (local) workforce are quickly becoming the biggest cost reduction factor.

      • JamesWimberley

        First Solar’s business is utility projects, where BOS costs are much lower than residential, Up to now they have tracked module costs quite well, around half the system cost. And how much of these costs is really determined locally? Not inverters, mounts, or design. You are left with labour, administration and red tape. Suppose these stay flat in Australia, absent any incentives. Costs will still fall, just not quite as fast as in booming markets.

        • Dag Johansen

          They are somewhat lower but not much lower. And you need to add in the cost of transmission lines for utility scale projects.

          • Bob_Wallace

            Mostly short length runs to existing transmission lines.

      • vensonata

        arne-nl, your nailed it. PV is already there people. It is the other 75% of the formula that needs the work. These solar panel manufacturing companies have done excellent and difficult work getting manufacturing prices down only to have some guy in coveralls with high school education putting the costs through the roof while climbing on the roof. And the racking design and manufacture! Don’t get me started…this is brute simple stuff, why rip off the new green world with exorbitant thoughtless aluminum bars?

        • eveee

          Right. I wish I had replaced my roof with a metal one that has those vertical fins. I met a contractor who put them on his roof and declared he did it so he was prepared for solar. I didn’t know why until now. The deal with rooftop solar is that it is difficult and expensive to retrofit a conventional roof for solar when one has to make holes in the roof for attachment points. Its much easier to attach to the metal fins and make no potentially leaky holes in the roof and to avoid blind drilling to try to hit a beam. Several other things could massively lower BOS. One, is to use micro inverters with pluggable connections between panels. A system could be made that requires much less expert work. Lowering panel weight also helps. Reducing and streamlining the permit process. This is all doable stuff. Solar is still in its infancy. Changes are happening extremely fast. Last years experience is much different from this years.

          • Bob_Wallace

            vertical fins = “standing ridge” in roofing talk.

            beam = rafter in carpenter talk.

            ;o)

            Plug and play. Certainly. I’m not sold on micro inverters. I’d rather have a central inverter inside and out of the weather.

            We could move to 96 volts and enjoy the wire diameter savings of on-roof conversion to 120 vac. That would simply be a matter of using the correct wiring harness. Micro-inverters where some of the panels are shaded during part of the day.

          • Calamity_Jean

            I thought the vertical fins were called “standing seam”. Could be a regional difference.

            That kind of roof is good to put solar on because it’s very durable. It lasts about 30 years (so I’m told), so that’s a good match with the expected lifetime of the panels on top.

          • Vensonata

            There are AC panels already. They have the micro inverter pre installed, just plug them together. Not rocket science. Yes, standing seam metal roofs are a fortunate match with pv, but one needs to use pure s 5 clips without metal support bars to get to the reasonable 10% of panel cost. Most racking doubles the cost of panels now that they are under a dollar a watt…nobody thought much of the price of racks when panels were $6 a watt, it was a small percentage, now it’s a big percentage.

          • eveee

            Vensonata- Thanks for the tip. Sounds like an opportunity for further cost reduction. Build the mounting structures right into the panels. One would think one could design the panels and the roof to mate with standardization to lower costs. Right now, BOS is so high just because retrofits are all custom.

    • Bob_Wallace

      “Wind will always need some long-term incentives to ensure enough capacity.”
      I question that. Solar may well become cheaper than wind but most of the 24 hour cycle the issue is not ‘wind or solar’ based on cost, it’s ‘wind or stored solar’. Stored 2 cent solar would be hard to produce for less than the (apparent) current 3.6 cent price of onshore wind.

      • Roger Pham

        At under $2/W, solar can cost around $0.04/kWh. Winston LiFe battery has 5,000 charging cycles, if cost $200/kWh, will result in $0.04/stored kWh. If only half of solar needs storage , then solar with storage only costs around $0.06/kWh.

        Wind at $0.036/kWh is without storage. There are nights with strong wind and then in most locations, there are nights with little wind, then there are sunny days with strong wind with great surplus of wind or solar energy. So, wind, too, will need storage to be dependable, so the cost of wind and solar are comparable in optimal locations for each. One battery storage unit can be used for both solar and wind so storage cost will be comparable for each.

        However, when solar and wind energy are used to make transportation and heating fuels, industrial chemicals, fertilizer, seasonal scale energy storage, etc, then the energy cost of solar and wind will be less because no storage needed.

        • Bob_Wallace

          Clearly dispatchable loads would and will be useful in minimizing the need for storage.

          But we don’t know the cost of those loads and how much “surplus” electricity will be available.

          Take, for example, wind farms and transmission. Sometimes transmission is built to cover only 90% full wind farm output. The reason is that blowing at 100% is a relatively rare event and the lost power would never pay for larger wire.

          If you’ve got a very cheap alternative use then it could ‘sit and wait’ long hours/days/months for surplus wind and then start doing whatever it does.

          “transportation and heating fuels, industrial chemicals, fertilizer, seasonal scale energy storage, etc, ”

          That’s a lot of demand and not likely to be filled by surplus power. It’s not likely those industries could run on only late night wind.

          The best dispatchable load I can identify is EV charging since the average EV would need only three hours per day of charging and (with 200 mile range EVs) many could skip multiple days when supply is low and fully charge when supply is high.

          I imagine one could do the same with a “home” electrolyzer and storage tanks. But now you’ve added the cost of a standalone fuel system that would get used few hours per day. EVs would already have the batteries for storage.

          • Roger Pham

            That is true, excess of RE is very rare for the foreseeable future. What I have in mind is to build wind and solar farms for mostly energy harvest and only 25% of capacity transmitted to the grid.
            For example, the USA has 1000 GW peak power requirement and 4000 TWh annual electricity consumption. If solar and wind are built to 5,000 GW capacity at average assumed 25% CF, then yearly, this will produce roughly 10,000 TWh, of which, 6,000 TWh will go toward non-electricity demands. With sufficiently interconnected national grid, hardly any storage nor backup would be needed with 5,000 GW of solar and wind combined nameplate that is 5x greater that the peak demand, so one can get both low-cost electricity and all renewable energy supply with a massive built-up of RE. For maximum energy security, EV’s and biomass can serve as backup for rare occasions.

            At $1.5/W, this will cost $7.5 T, but over 20 years, the yearly cost will be only $350 B per yr. I believe that we are spending at least $1 T yearly on energy cost right now, so the energy bill will go down. At $1/W, the yearly investment would be only $250 B.

          • jeffhre

            Would also eliminate billions of dollars of externalities.

        • jeffhre

          “At under $2/W, solar can cost around $0.04/kWh.”

          What is included in the $2/W estimate? For example, panels can be purchased at $.75 a watt now, and solar with storage is nowhere near $.04 a kWh.

          • Ronald Brakels

            We’re installing solar for $2 US a watt in Australia now. That includes panels, roof racks, and inverter, all installed and producing electricity. And panels can be purchase for 50 cents a watt now, of course this is in a country without punitive tariffs.

    • jeffhre

      Just for a contrarian perspective, last I looked, wind prices were falling. Relatively rapidly. A moving target, with the endpoint not yet established.

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