Clean Power

Published on November 23rd, 2015 | by Tina Casey

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Grid Parity For Clean Power In USA “Sooner Rather Than Later”

November 23rd, 2015 by  

President Obama’s Clean Power plan has already touched off a firestorm of backlash, and here comes the financial services giant Deloitte with a new report that is sure to crank up the heat. The report, released last week from the firm’s Center for Energy Solutions, examines the speed with which wind and solar energy can reach grid parity with conventional electric power sources, a key factor being the effect of government subsidies such as the Production Tax Credit for wind.

Sure enough, on Friday, the Houston Chronicle teed off with the somewhat inflammatory headline, “Report says wind, solar can’t compete for now without tax breaks.” That certainly doesn’t paint the whole picture, so let’s take a closer look at that new clean power report.

Clean Power report Deloitte

Grid Parity For Clean Power Is Inevitable

To be fair, that Chronicle headline does hedge by throwing in “for now.” As a matter of fact, the report does conclude that wind and solar can eventually achieve grid parity — meaning electricity prices competitive with conventional sources — without subsidies. Here’s the conclusion under the heading, “Grid parity is not imminent but may be reached sooner rather than later:”

“The purpose of this report was to examine the timing of reaching grid parity without state RECs and without federal tax incentives, such as the PTC for onshore wind and the ITC for utility-scale solar PV. The research indicated that reaching grid parity is not imminent, except in certain markets possessing the most robust renewable resources and having relatively higher wholesale power market prices.”

The key takeaway, as outlined in the report, is that subsidies can make an enormous difference in the speed with which clean power can achieve parity. Taking into account regional factors in the US, in some cases that difference is a matter of decades.

So, if you are one of those folks who are convinced that the US should significantly reduce its carbon emissions very quickly as a matter of sound public policy, the Deloitte study has your back: subsidies make an enormous difference.

On the other hand, if you are Oklahoma Senator James Inhofe, you can lift some of Deloitte’s points out of the study and use them to bolster your case that wind and solar can’t compete with fossil fuels right now, so it makes no sense to throw public dollars at them.

Clean Power & Innovation

You can find the full report under the title, Journey to grid parity, with the subheading, “Three converging forces provide a tailwind for US renewable power.”

Do read the whole thing for some interesting insights into the US utility-scale solar and wind markets, but for those of you on the go, here’s an important caveat that pops up near the end of the report:

“While the projected dates for reaching grid parity without subsidies appear to be much farther out than many predictions being featured in the media today, this report does not consider the future pace of innovation and its effect on grid parity timing…

“…this innovation could come in the form of technological advancements leading to lower overnight construction costs, greater operating efficiencies and higher capacity factors, and/or in the form of financing or process improvements leading to lower cost of capital and decreased “soft costs,” such as permitting, interconnections, marketing, professional fees, and other intangible expenses associated with development.”



 

The authors of the Deloitte study are also careful to note that they have taken a conservative approach when it comes predicting the pace of future innovation. To get a look at some of the potentials in that area, check out President Obama’s SunShot initiative, which launched in 2011 with the aim of achieving grid parity sooner rather than later.

Part of that effort involved lowering the cost of solar cells themselves. The other part involves reducing the aforementioned soft costs, and financial/process costs in particular.

To take just one example, earlier this month, we had a chance to chat with Dr. Lidija Sekaric, acting director of the Energy Department’s Solar Energy Technologies Office. She filled us in on the Catalyst program, one of SunShot’s initiatives aimed at tapping small-scale innovators for big new ideas. Catalyst is structured as a competition, and in this round several contestants are zeroing in on increasing access to clean power by developing new financial instruments.

When the Clean Power Plan launched earlier this summer, it included several measures aimed at community solar and other pathways for increasing access to solar power. Just last week, President Obama ramped up the Administration’s focus on community solar by announcing new commitments from local governments and businesses to engage in financial collaboration.

Here’s a rundown from the new community solar announcement that indicates the enormous potential for growth in the community solar market:

“Community solar has the potential to unlock economic growth across the United States while providing clean solar power to historically underserved communities and allowing them to benefit from the falling costs and increased deployment of solar. Low-income households, which spend four times greater proportion of their income on energy than the national median, can see significant benefits from community solar…”

As for whether or not support like this should be counted as an undeserved “tax break,” one grid parity factor not addressed in the Deloitte report is the enormous financial support that continues to pour into the fossil sector from the government, Clean Power Plan or not.

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Image (screenshot) via Deloitte Center For Energy Solutions.





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About the Author

specializes in military and corporate sustainability, advanced technology, emerging materials, biofuels, and water and wastewater issues. Tina’s articles are reposted frequently on Reuters, Scientific American, and many other sites. Views expressed are her own. Follow her on Twitter @TinaMCasey and Google+.



  • Duane Hurne

    I agree with the comment that the report could have been written by Koch. There are several things that are not addressed. In Texas, electricity is basically free at night because of oversupply brought about by renewable energy supply–primarily wind. The report does not take into account the potential of storage which is already having shows the potential of a dramatic effect on pricing for renewables. That will increase with the drop in cost brought about about by increased supply of battery storage. With the increase in natural gas price and cost competiveness of storage for renewables the improvements in grid management brought about by software improvement will reduce the advantage of gas peaking plants without RE subsidies. Expect natural gas exporting to yield greater profit than trying to compete with renewables for peaking or gas power plants. Of course, there could be a concerted effort to force natural gas to remain in the US by subsidizing the natural gas producers. That is the problem. Politics can always allow the dominant provider to tilt the equation in their favor if they spend money in the right place. We’ve already seen that in the current state of subsidies for the dominant providers.

  • Otis11

    What?!? You green, hippies want to use all of our tax money to use expensive RE? What are you all thinking? It’ll cost almost 2c/kwh more than coal in tax breaks to make it profitable! And for what? The animals? The environment? To avoid 30c/kwh in healthcare costs? Create jobs? Reduce our trade deficit?

    You crazy people just don’t understand the “big picture” do you?

    /end rant (Sorry, reading this just made me picture that rant. Thought I’d share…)

  • Ivor O’Connor

    I haven’t yet read the deloitte report but the entire manner in which RE is addressed seems wrong. Instead of mentioning this nebulous concept of grid parity being met or not being met it would be much better to use another metric. A metric that shows how many markets are currently ripe for RE.

    So say we have X units of electricity currently being supplied by wind. That wind is currently growing by Y%. And that there are Z units of economic wind that could be put in. If that Z is much larger than the Y% it could mean we have T years of wind growth at current market prices. Maybe T is 20 years?! That with current energy pricing this metric might make it clear to all that there are no limits to RE growth on the horizon.

    However this deloitte study makes it appear RE is an on/off concept. If this is really the case then the study is flawed from the very start.

    • Ivor O’Connor

      Waste of time reading through the report. It might as well have been written by the Koch brothers.

    • JamesWimberley

      The key graphs on wind and solar costs are Figures 5 and 6 on pages 8 and 9. Deloitte have fitted a curve to estimates out to 2040. which are dominated by two or three conservative sets of guesses. Lazards for instance don’t offer such projections, so the sample is horrendously biased. If you look at the historic costs reported by several sources for 2014, they are all much lower than the curve. Unless you have reason to think that American wind and solar developers are loss-leading on a large scale to gain market share, it’s the low costs that represent the best practice on which others will rapidly converge. I agree with Ivor: file, circular. Wind is below grid parity now in the Plains, solar in the Southwest.

  • Matt

    I wish the reports would at least do a WAG at cool supports. Then the headline would be “can’t compete for now without cutting government support for coal”.
    If the indirect support: Been shown coal has been cheating on royalty payment, by using shell companies (designed loop hole for friends). And then if even low end estimated of externals are a included. Coal would cost 3x-5x what it does today.

    • Frank

      Pay for externals, and then no subsidy required. Besides, higher prices support energy efficiency, which is a great value. And we aren’t talking much. RE just doesn’t cost what it used to.

  • Matt

    Off topic warning!
    As we near the end of the year, now might be a good time to put a little cash behind that RE love. Check and and support a group like.
    http://sunfunder.com

    Full Disclosure : I have invested with SunFunder put am not otherwise associated with them.

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