Want to know why 2014 was such a watershed shed year for utility-scale solar PV in the US? Well you need look no further than the graph that we’ve posted below, as it really says practically everything that needs to be said.
As you can see, the ongoing drop in price means that utility companies are now able to consistently purchase solar electricity for 4.5–7.5 cents/kWh — thus putting solar on a competitive footing with many other conventional forms of electricity generation, even much cheaper in a number of cases.
Owing to this, there will be an estimated 13 GW worth of new utility-scale solar PV projects built in the US over the next two years. This represents a huge burst in such development — this 13 GW (set to be developed over just ~2 years) is equal to what the US’s total cumulative solar energy capacity across all sectors was at the end of 2013.
Greentech Media provides more:
Because solar PV now beats natural gas on a levelized-cost-of-energy basis in numerous markets, it has become more prominent in competitive utility solicitations. That has opened up a half-dozen new markets around the country that had virtually no utility-scale projects before 2013.
Last September, as solar started to outbid gas, an executive at Xcel Energy explained the crossover: “This is the first time that we’ve seen, purely on a price basis, that the solar projects made the cut — without considering carbon costs or the need to comply with a renewable energy standard — strictly on an economic basis.”
In fact, power-purchase agreement prices in the sector have fallen faster than average system prices on a percentage basis, according to GTM Research analysis. The pressure on developers to drop costs is getting more intense. Solar companies building large projects for utilities are “operating on the need to be really, really cheap right now,” said Shayle Kann, VP of GTM Research, in a presentation this week.
Of course, part of the reason these prices are as low as they are is because of the federal Investment Tax Credit (ITC). Which is currently set to be phased-out only a few years from now, in 2017.
According to Kann, while equipment/manufacturing/installation costs have been trending consistently downwards for awhile now, “you can only get those kind of numbers with the ITC in place.”
Well, there are other options. For example, the US could put a price on carbon, which would inherently make solar much more competitive. But that’s not an option with the current fossil fuel–owned US Congress.
Of course, this expected phasing out of the ITC means that many developers are working to get everything done in 2015 and 2016 — another reason for the big projected uptick in installations. If the ITC isn’t extended, then installations can be expected to fall dramatically in 2017, potentially by as much as ~14%.
Image Credit: GTM Research
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