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Published on September 30th, 2015 | by Derek Markham

44

Average Utility-Scale Solar Price In US Falls To 5¢/kWh

September 30th, 2015 by  


utility-scale-solar-reportOriginally published on Cost of Solar.

According to a new report from Lawrence Berkeley National Laboratory (LBNL), solar energy prices are at an all-time low, with the average price of solar energy in the United States having dropped down to 5¢/kWh, representing a 70% decline in power purchase agreement (PPA) prices since 2009.

The falling prices for this clean renewable energy resource are being driven by lower overall installed solar costs, improved performance, and the presence of a virtual landrush to get utility-scale solar projects online before the reduction of the federal investment tax credit next year, and as a result, PPA agreements are being signed with an average price of 5¢/kWh or less.

The new report, Utility-Scale Solar 2014: An Empirical Analysis of Project Cost, Performance, and Pricing Trends in the United States, is the third edition of LBNL’s annual publication focused on identifying key trends in utility-scale solar. The report offers insights into the state of the industry, some surprising, such as the drop in the price of solar to a nickel per kilowatt-hour, and others, such as the fact that utility-scale solar projects are dominated by conventional photovoltaic (PV) generation, not concentrated solar (CSP), which has not dropped significantly in price.

The average costs of installed solar projects have fallen quite a bit, from 2009′s $6.3/W (AC) cost to 2014′s $3.1/W cost, reflecting a drop of more than 50%. In contrast, installed costs for three large CSP projects referenced in the report ranged from $5.1/W (AC) to $6.2/W.

The drop to an average price of 5¢/kWh for solar PPAs indicates that solar power plants are an effective cost-competitive source of energy for utilities, and thanks to the relatively fast construction process, could be an essential component of quickly adding grid capacity, especially in regions with high insolation levels.

The new report found that there appears to be a “deep market” at the low PPA prices, especially in the solar stronghold of the US Southwest, but also in other areas of the country, most notably the Southeast, where recent solar contracts have been announced in previously untapped markets. According to LBNL, the average wholesale price for electricity across the US in 2014 ranged from 3 cents/kWh to 6 cents/kWh, putting the new lower prices of utility-scale solar right inline with most of the utility market.

The trend for utility-scale solar energy adoption looks to continue apace in the near future, as the report found a total of almost 45,000 MW in solar projects under development in 2014 (roughly five times the installed capacity during that time), and the authors presumed that most of these projects would be operational before 2017 in order to get the full 30% federal tax credit, leading to a prediction of “an unprecedented amount of new solar construction in 2015 and 2016.”

The full report can be found as a PDF here: Utility-Scale Solar 2014 and is also available as a PowerPoint briefing and an Excel workbook with much of the data from the report.

Reprinted with permission. Image: LBNL.






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About the Author

lives in southwestern New Mexico and digs bicycles, simple living, organic gardening, sustainable lifestyle design, slacklining, bouldering, and permaculture. He loves good food, with fresh roasted chiles at the top of his list of favorites. Catch up with Derek on Twitter, Google+, or at his natural parenting site, Natural Papa!



  • vensonata

    I came across the average spent, per adult, on coffee in the U.S. per year: $1092. Hmmm, that is almost the average household electricity cost per year…about $1320. In fact if there are two adults in the house, electricity is less than coffee. A net zero house averages less than that with PV rooftop. And yet there is such hysteria over what will happen to the “economy” if we go off fossil fuels and onto alternatives.

    • Bob_Wallace

      This is the sort of factlets we need to have at hand to counteract anti-renewable claims.

    • Jeremiah Farmer

      The *average* adult spends $4 a day on coffee? Hardly. Even your most addicted Starbucks customer probably doesn’t spend $4 a day average.

      • Bob_Wallace

        Worker –

        “A new report estimates that the average American worker spends nearly $14.40 a week on coffee, which does not include the cost of drinking coffee at home. Data is shown to indicate that the average worker spends around $1,100 annually on coffee.”

        http://abcnews.go.com/GMA/american-coffee-habits-spend-coffee/story?id=16923079

        • Jeremiah Farmer

          I realize your math skills are not the highest, so let me help you out — $14.40/week is $2.88/day, and only $700/year. How they got to $1,100 makes no sense. And “a new report” is not cited, nor is that even likely. A small percentage of workers do purchase coffee every day, but I would imagine the average across the workforce is probably in the range of $5-10/week at most.

          • Bob_Wallace

            Ah, another student of Dale Carnegie.

            I did no math. I pointed out that the number likely applies to people who work outside the home (workers) rather than to all adults.

          • Bob_Wallace

            Here’s another statement that is apparently based on a non-specified study.

            “In 2012 and 2013, working Americans spent an average of around 21 U.S. dollars per week on coffee.”

            http://www.statista.com/topics/1248/coffee-market/

            Now, using my reportedly substandard math (and my solar powered calculator) that works out to $1,092 if one assumes a 52 week year or $1,050 is one assumes workers don’t buy coffee on during their two weeks of vacation.

            It may well be that someone at ABC News needs to borrow my calculator.

            Twenty-one dollars a week, three dollars a day? That seems to be quite believable to me.

          • Bob_Wallace

            “the folks at Zagat have some of the answers”

            “How much do Americans pay, on average, for a coffee drink?$3.28″

            ” When it comes to barista-prepared coffee, they say $5.07 – a full 38% more.”

            http://zagat.blogspot.com/2015/02/national-coffee-trends-revealed.html

    • Haha, great context. Would make a fun article.

  • Pobrecito hablador

    And there’s news about a new big PV project in Spain without any subsidies. Solar is now cheaper than many generation technologies in many countries

  • Frank

    45000MW, is that like 2% US electricity production? Hope that wind power keeps rolling. Still have 1/3 coal power to get through.

  • Michael G

    Great news of course. But, (there’s always a ‘but’) a friend was told by local utility rep (in CA) that PG&E had decades-long contracts with FF power plants and was unlikely to get out of them without expensive lawsuits.

    • Bob_Wallace

      Florida Power and Light simply bought a coal plant with which it had a long term contract and closed the plant down. It was cheaper than bleeding cash until the end of the contract.

      • Nolan Thiessen

        Coal fire plants seem like they will all close in the near future as environmental regulations pushes up the cost their fuel source. Natural gas, on the other hand, has seen its price fall in recent years because of fracking, so I doubt any natgas plants currently in operation or on the planning books will close. They’re just too cheap to abandon at a cost.

        That said, the continued falling price of solar and wind makes building NEW plants unattractive which gives me hope for the future.

        • Kyle Field
          • Matt

            Not sure what that site is trying to show. It isn’t all the coal plants in USA. There are a bunch along the Ohio river that are no on the map.

          • Bob_Wallace

            Same problem. Page needs to have more info.

          • Kyle Field

            Gotta start somewhere…they are making great progress, very exciting work.

        • Richard Foster

          2 comments:
          1. Natural Gas may be cheap now, but in 5, 10 years time where will it be? So whilst Nat Gas maybe cheap now, that doesn’t mean it will stay that way. 5 years ago, you’d have said the same about coal.
          2. If solar and wind prices fall, it might become cheaper to build new wind and solar and close or mothball gas for emergencies only (long periods of cloudy, settled weather)

          • Bob_Wallace

            I think we’re already at the place where it makes sense to install wind and solar in order to avoid gas prices.

            If wind (unsubsidized) is less than 4c/kWh then that’s probably bit less than fuel + wear and tear costs on the gas plant. Solar should be there soon.

          • Richard Foster

            I agree. I think gas is going to have a place, until we can build out enough wind+solar+wave+etc & companion storage to cover peaks.

            It is encouraging though RE is now cheap enough to compete with all FF now. That could not have been expected, even 5years ago.

            Now we need solar & wind to become cheaper than fuel on all FF (as much as possible) and RE+storage to be comparable with gas by 2020. If that happens, then GHG emissions will plummet, as it’ll be cheaper to build new RE than keep FF plants going.

          • Bob_Wallace

            Are you familiar with the Budischak, et al. paper?

            For those who are not, they took four years of minute by minute demand data from the largest wholesale grid in the country along with hourly wind and solar data and modeled the lowest cost combination of only wind, solar and storage that would meet demand.

            https://docs.google.com/file/d/1NrBZJejkUTRYJv5YE__kBFuecdDL2pDTvKLyBjfCPr_8yR7eCTDhLGm8oEPo/edit

            They found that it wasn’t reasonably affordable to meet 100% of demand with wind/solar/storage with technology in hand at that time. They needed to include 0.1% natural gas generation.

            NG input is represented on the bottom line – the very infrequent (once or twice a year) blips.

            I see us (worst case) gradually pushing NG plants (CCNG, not peakers) into that 0.1% role. First storage takes away the short term grid smoothing job as has started happening. And then as storage prices drop NG use for morning/evening demand will shrink, eating away the duck’s tail and head.

            If we can push NG into a <1% role we should be able to find carbon offsets to even out that small amount of CO2 emission.

            Best case, we come up with cheap enough storage to replace all FF use.

          • Richard Foster

            Thanks for that paper – have had a quick scan and will read in detail later.

            It’s certainly interesting – I wonder if they considered the physical limitations (a la Mackay) in estimating a 300% overbuild?

            I have to say, certainly for the foreseeable future (say up to 2030) this sort of solution makes sense – with NG providing ’emergency’ back-up and having 3days of storage.

            Of course, the conclusions of this could be dependent on what cost analysis they’ve used to model decreases in RE – since costs have decreased faster than anyone has predicted, then RE options are cheaper and 100% becomes cost-effective.

            Not that 0.1% is worth quibbling about!

          • Bob_Wallace

            The paper is both limited and somewhat out of date.

            They presented a limited model. They did not factor in load-shifting, EVs, hydro/other renewables, and power sharing with adjacent grids. They treated the grid as an island with only two renewable inputs.

            I suspect a more complete model would not find anything like 300% overbuilding necessary.

            If I had the money I would pay for someone to build an online model that took all the factors into account and updated as new prices and technologies emerge.

            One in which anyone could plug in their “what if” cost numbers and see how things changed.

            And, like has happened to everyone, prices and technology have moved much faster than anticipated. Just going back half a dozen years to Jacobson and Deluchhi (2009) we can see how their assumptions about solar panel efficiency and wind turbine size won’t hold.

          • Calamity_Jean

            I suspect that it’s safe to assume gas will be more expensive in a few years. Much of the current gas supply is from fracked wells, and they “run dry” pretty fast and need to be re-fracked. That’s not cheap and will push up the price. Already some utilities prefer to sign 5¢ per kWh solar contracts rather than 4¢ per kWh gas contracts, because the gas contracts will adjust for the price of gas, and the solar ones won’t.

          • Nice nutshell summary. That’s what I’ve gathered. Hope it’s correct.

          • Calamity_Jean

            Thanks. We’ll see in a few years.

        • JamesWimberley

          Wind and solar can displace gas without big changes in the installed gas fleet. They just loer it’s capacity factor.

          • Calamity_Jean

            “…switch NG plants to renewable hydrogen.”

            Or anhydrous ammonia, or bio-methane.

      • Matt

        If USA would get it act together and pass a carbon fee/dividend system. Then the cost of running those cola plants would go up, and it would be the coal plant wanting to end the PPA as much as PG&E. Getting externals into the cost of coal is the biggest thing we could do to move us to a green energy system.

        • Bob_Wallace

          I think we’ll get there in a few more years.

          We’ve now reached the point at which a majority of Republicans agree that we need to reduce CO2 emissions.

          Humorously, the percentage that hold that we need to reduce CO2 is higher than the percentage who say that humans are causing climate change. Apparently some aren’t capable of admitting that they are no longer deniers.
          California is ‘going there’. If it doesn’t cause California to break off and fall into the Pacific then a lot of the anti- talking points will fade away.

          In many ways I feel that the Great Ship America has changed course, or at least is well into the turn. After the new direction is set then we’ll accelerate.

  • Bob_Wallace

    Adjusting out the subsidy that makes utility scale solar about 6.1 cents/kWh. And that’s cheaper than new gas generation (6.1 and up).

    http://www.lazard.com/PDF/Levelized%20Cost%20of%20Energy%20-%20Version%208.0.pdf

    • heinbloed

      The link doesn’t work anymore, but I’ve seen this report before I think.

    • Thanks, and apologies for whatever disagreements in the past. Hopefully, solar will still exponentiate after the subsidies end. I think they will because there must still be a little room for improvement on the machine automation of all the parts.I believe installers will come down a bit in price too, due to competition.

      • Bob_Wallace

        Take away the subsidy and the PPA price should pop up only a bit. I expect solar installers will work very hard to get their costs down to subsidy prices. And since solar is being installed for even less in other countries it should be doable.

        Actually, I suspect most installers have already been working on how they will cut costs. We might not see price jump from “5 cents to 6.1 cents”.

        I don’t expect to see much cost drop over the next year. There won’t be any reason to drop prices in order to attract orders, demand is going to be really high. That means that there will be “unused” cost drops, lower panel prices for example, that can be dialed in after 12/31/2016.

        I suspect we’ll see a large drop in installation in 2017, some due to the price increase but more due the fact that lots of people will have sped up their plans in order to get in before the subsidy expired.

        Some people are talking 2019 before installation volume recovers. I can imagine a year sooner.

        • Bernard Finucane

          In Germany the solar installation specialists went broke when the general contractors started muscling into the business. Then the price of installation dropped very quickly. That was about 10 years ago.

          • Bob_Wallace

            Germany certainly had a more effective subsidy program than the US. It’s too bad that they didn’t see the possibility of very rapid price drops and build in a way to bring down their FiT levels as installation prices dropped.

          • You need to add this at the end: /s

          • Bob_Wallace

            “/s”?

          • /s is what them internet kids write to indicate they were being sarcastic, since that is hard to gather without audio.

          • Bob_Wallace

            Thought that was perhaps what you meant. But there’s no intended sarcasm in my post. A FiT that kept the potential profit between, say, 5% and 10% should drive uptake rapidly while scaling down as costs dropped.

          • Oh, I thought you were praising the system since it does adjust over time (decreases as costs decrease), but agree that it was cut too quickly. However, I think that was basically done by people eager to slow the renewable revolution.

          • Bob_Wallace

            I was thinking that it fell too slowly early on, as happened in Spain.

  • heinbloed

    A nickel per kWh 🙂

    Thanks!

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