Solar Costs Continue To Plunge Globally
Originally published on RenewEconomy.
Two stunning auction results in India and Chile in the last week have underscored the extraordinary gains that large-scale solar has made against its fossil fuel competitors.
In both countries, solar is now clearly the cheapest option compared to new coal-fired power stations. In Chile, where the auction was open to all technologies, fossil fuel projects did not win a single megawatt of capacity. And the auction produced the lowest ever price for unsubsidised solar – US6.5c/kWh.
In India, US firm SunEdison won the entire 500MW of solar capacity on auction in the state of Andhra Pradesh, quoting a record low tariff for India of INR 4.63/kWh (US7.1c/kWh). Again, this was unsubsidised. And again, it beats new coal generation, particularly generation using imported coal.
These bids follow an auction in the US last month by the Texas city of Austin, which contracted to build 300MW of large-scale solar PV at a price of less than US4c/kWh. Even after backing out a tax credit, this is still less than US6c/kWh, and still beats gas and new coal plants, if anyone was planning to build one.
As Greentech Media reported last month, and we have signalled in the past, that means utilities are choosing large-scale solar over new peaking gas plants. Solar PV is beating gas on fuel costs alone, and is acting as a safe hedge against fuel price volatility.
The significance of the India auction was not just in the price, but in the quality of the bidder. Far from being an unheard of upstart who has bid low in previous auctions, SunEdison is the biggest renewable energy development company in the world.
Other close bidders are also substantial names. Second place went to Japanese firm Softbank, much-touted for its announcement of investing US$20 billion in India’s renewables market, which is thought to have offered INR 4.80/kWh.
Other parties to beat the previous record (of 5.05/kWh) and bid below the 5/kWh mark were Italian giant Enel Green, Reliance Power, the Indian power group that recently announced it was selling its coal mines to focus on solar, and Renew (no relation to this website), along with three others.
Such prices were predicted just last week by analysts including from Deutsche Bank, who predicted prices of 4.7/kWh and predicted that the India solar market was “ready to take off.”
Still, the actual bidding results still took some analysts by surprise, with some suggesting that the prices will not allow for significant returns.
The same thing was said about the ground-breaking solar result in Dubai earlier this year, but companies are clearly grabbing territory to develop supply chains that can further reduce costs. It is a story that has been repeated over and over across the world, and underlines the power of the auction system.
And these results certainly have major implications for future energy choices in India, and elsewhere.
Jasmeet Khurana, senior consulting manager at analyst firm Bridge to India, said solar projects are now in the same range of electricity prices as wind projects and even new greenfield coal-fired power projects, which tend to have tariffs ranging between INR 4.50/kWh and INR 5/kWh.
“I think this changes the paradigm, not just for the solar sector, but also for the power sector in India,” he told PV-Tech. Even the Indian government was delighted, with energy minister Piyush Goyal tweeting: Delighted that Solar Tariffs in India have broken Rs 5/kWh level.”
The results were comparable with bids the previous week at an auction in Chile, where renewable energy cleaned up and took all the capacity on offer.
Large-scale solar PV projects won with bids of between US6.5c/kWh and US7.8c/kWh, bettering two winning wind farm bids at US7.9c/kWh.
And it is not just solar PV that is undercutting fossil fuels. Solar tower technology with storage also won a significant amount of capacity after bidding a price of US9.7/kWh ($US97/MWh)
Abengoa is already building one hybrid plant near the city of Calama, combining a 100MW solar PV farm with a 110MW molten salt power tower designed to run 18 hours without sunlight. That will be paid on a tariff of $US115/MWh, with no subsidies, when the whole complex is complete in 2017.
Abengoa has proposals to build a “twin” of this project in another city, as well as a bigger, triple-tower, 315MW project near Copiapó.
SolarReserve, which has built Crescent Dunes in Nevada, the world’s biggest solar thermal power tower project optimized for energy storage which recently delivered power to the grid for the first time, is also building a similar hybrid plant in Chile.
It is proposing, also near Copiapó at the southern end of the Atacama Desert, a plant that would combine a pair of 130MW salt towers with 150MW of solar PV.
CEO Kevin Smith says his company will offer power from its Chilean hybrid PV-thermal solar projects as a bundle, and promises it will sell for “well under” $US100/MWh.
That is even cheaper than the $US125/MWh for power it will supply from the Redstone 100MW solar tower facility it is to build in South Africa, also adjacent to two solar PV arrays already in production.
That $US100/MWh mark is a key metric. It is where the Australian roadmap for solar thermal – set out by the Australian Renewable Energy Agency – hopes to take local generation costs.
It also suggests that the estimated costs of a plant to replace the Port Augusta coal-fired power station – at more than $200/MWh – are grossly inflated.
In Australia, many gas-fired peaking power stations operate at a significantly higher price than that.
If the solar tower and storage technology can get a foothold in Australia any time soon – possibly via the ACT government’s “next generation” solar auction – then it has the potential to rapidly transform Australia’s electricity grid, working with battery storage to allow for more flexible capacity to fit in with the increasing penetration of renewables.
Reprinted with permission.
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yeah, costs is going down all over the world, except in the USA where it barely dropped down… Thanks to Greed and Profit… For as long as they can milk the cash cow, why not?
I don’t understand your comment. If costs/prices are still high, wouldn’t there be a great opportunity for others to step in and take a market share by offering lower prices?
I’m not a market fundamentalist – far from it – but I do believe that if there is a fair and viable market in the US for solar, costs/prices would be dropping in the US as they are in the rest of the world. Am I overlooking something?
One difficulty is that contrary to the myths put about both by opponents of wind and solar and BT battery enthusiasts, there isn’t yet much if a need for more storage in the US or other advanced countries with strong grids and diversified generation. This will change as baseload coal and nuclear plants retire, but at the moment CSP is selling a premium product that is not highly valued.
Chile has no national grid reaching as far as the mines in the Atacama. South Africa has an unreliable grid. Morocco has SFIK no fossil fuels of its own. The CSP proposition is much more attractive there.
Even nuclear needs balancing with other sources of energy or storage, it’s highly inflexible. I’d like to know whether coal CCS is really possible or not, if 90% carbon capture were possible then it wouldn’t be such a bad method of power backup because it’d only be releasing 10% co2 occasionally.
So far it looks like coal CCS is not economically possible. Can’t just stick a CO2 sucker on the smokestack, the plant has to be built from the ground up. CCS adds to the cost of new coal plants which are already too expensive to be competitive.
Then there’s the problem of what to do with the CO2. If it’s not put securely back underground then there’s no gain. The one Canadian coal plant that was built with CCS had to be greatly downscaled because they were unable to find a place to dump only a small percentage (20%?) of the CO2 they had planned to produce/capture. The CO2 was sold to an oil extraction company to be used to get more oil out of the ground (like that’s win).
As the price of wind, solar and batteries continue to fall it makes sense to me to concentrate our efforts on building as much of what works as rapidly as possible until we get all coal and most NG shut down. Over the ~20 years it will take to get rid of 80% to 90% of fossil fuels we can be developing solutions for the last “10%”.
Demand for rooftop solar has never been high enough in the US to create the installation efficiencies seen in other countries.
In the US, for example, installation companies spend a lot of money selling, “customer acquisition”. In countries with high demand there’s no need to sell, customers call up asking for services.
Also, with high demand there is less time wasted moving from one side of a city to another to do installations. The next job may be just down the street.
US costs are going down. Some other countries have dropped prices faster. I think this is mainly due to the use of FiT subsidy systems which allow individuals to install solar and make a fixed profit over a number of years off the electricity they sell back to the grid. Or, in the case of places such as Australia, save considerable money from not purchasing grid power.
I don’t expect much decrease in US solar prices between now and the end of next year with the federal subsidy disappears. High demand should allow installers to charge a premium price.
Early 2017 should see a drastic drop in solar installations and then we should see prices start to drop and perhaps at a good pace as installers look to create more demand.
We had our rooftop solar panels installed for $6/watt 5-1/2 years ago. I talked with the owner of the installation company about six months ago and he said they were currently bidding at $3/watt.
Location?
The mountains of AZ about 185 miles from Phoenix. The owner did qualify his $3.00/watt to pertain to the Phoenix and suburban area. However, now that APS and SRP have gone anti-solar for residential rooftop installations, he may reconsider and continue to install in areas with other electric utilities.
“It’ll never catch on!”.
What’s so exciting is that costs will keep going down. Even with only incremental increases in efficiency’s and incremental decreases in cost the market is forced to respond. Even unfavorable governmental policies can’t stop it. The tipping point is near… or have we already tipped?
Already tipped, at least in my area. West Texas/Southern NM
Question:
What happens to such auctions when carbon taxes are applied to the “fuel”?
At that stage of the “game” all FF will be out of the bidding process!
And then some people think oil will be back at $ 80 barrel in 5 years!
Great question, all over the world countries are implementing carbon taxes of various kinds and none of them are likely to have a ‘positive’ affect on the use of fossil fuels. I do also believe oil values will rebound many times before it becomes a secondary energy source not worth investing in. We use SO much of it that it will take decades to truly cut fossil fuel usage significantly.
The good news, we appear to already be at the point in which we dont install much new Fossil Fuel Capacity so now its just a matter of getting through the 20+year lifespan of the newer plants/cars/etc.