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

Originally 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.