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Kent Moors

Kent Moors

Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk management, emerging market economic development, and market risk assessment. His…

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Solar Costs Are Dropping Much Faster Than Expected

Solar

Back in 2011, the U.S. Department of Energy (DOE) began something called The SunShot Initiative. The intent was to set 2020 and 2030 targets making solar power more affordable in three categories: utility-scale generation, commercial, and residential.

Well, the DOE recently announced that we hit the 2020 goal for utility generation… three years early.

Now, these goals don’t take subsidies into account. It’s the actual technology that’s getting more and more cost-effective.

In other words, solar power is quickly maturing.

Here’s where it’s going next…

Solar Power Costs are Falling Quickly

The targets are set in something called a “levelized cost of energy” (LCOE). This measures the cost of electricity generated by solar energy systems in a way that is comparable to the cost of electricity from other sources.

The goal is to have solar become competitive with conventional power sources.

LCOE is calculated by combining the initial installation price with the present value of the power plants lifetime operational expenses. That sum is then divided by the net present value of the power produced, as measured in kilowatt-hours (kWh).

The assumptions underlying the LCOE estimates are based on systems installed in an average U.S. solar resource location – represented by Kansas City, Missouri – and do not include either the federal investment tax credit (or ITC, which at 30 percent lowers the overall cost even further) or any state or local incentives.

The targets are derived from models developed by the National Renewable Energy Laboratory (NREL).

For 2020, the targets per kWh are: $0.06 for utility-scale generation; $0.08 for commercial; and $0.10 for residential. It’s that $0.06 per kWh target that the DOE announced has just been reached.

Related: Expect A Major Leap In U.S. Oil Exports

While the commercial and residential goals are adjusted for inflation, the utility goal is not. That’s because wholesale power prices have been virtually flat and have even declined from 2010 to 2017.

Relatively early in the process, it was apparent that the initiative was proceeding more rapidly than anticipated. As a result, goals for 2030 were introduced, designed to lower kWh costs to $0.03, $0.04, and $0.05 for utility, commercial, and residential, respectively – half the 2020 goal.

The longer-range goals also focused on a new objective – the reliability of electricity availability. SunShot is now working on advancing grid integration approaches to enable two-way power flows, increase demand response, and optimize charging of electric vehicles.

Such advances, combined with low-cost battery storage, could enable economically competitive solar to be more widely deployed nationwide, while also allowing a greater integration with other renewable power systems.

As the new energy balance among distinct energy sources takes shape, the ability to integrate among them becomes particularly important.

Next Up: Expanding Access to Solar Power

SunShot has also been addressing market barriers that limit solar adoption. These additional objectives aim to streamline processes to reduce project cycle times, expand access to solar, and provide a more accurate appraisal of solar’s value in the new, integrated power market.

The utility-scale target success is in large part a result of declining costs in photovoltaic (PV) hardware, higher module efficiency, and lower labor costs, according to the NREL.

Meanwhile, residential and commercial operations are moving slower: In six years since the introduction of the initiative, costs have dropped 6 percent and 15 percent, respectively.

Soft costs like sales taxes and overhead remain the most expensive factor in residential adoptions of solar power. DOE is on record as intending to cut those specific costs in half.

Yet the utility-scale breakthrough is significant, representing the biggest difference overall.

A report from the Solar Energy Industries Association (SEIA) indicates that utility-scale solar installations accounted for nearly 60 percent of photovoltaic panels installed last quarter.

Source: U.S. Department of Energy

Nonetheless, NREL has reported that the solar industry is more than 85 percent of the way to achieving the 2020 goals in both commercial and residential solar applications.

Now, there are still some technical and networking obstacles to pushing solar forward. Despite the remarkable accomplishments in driving the costs of generation down, inversion remains the single largest restraint on further major pricing declines.

Here’s Where Solar Power Technology is Going Next

See, solar power is harvested in direct current (DC), but must be converted into alternating current (AC) to move on to the power grid or network. That conversion process is known as “inversion.”

Until a reliable inverter technology comes about, a significant amount of the power is lost in the process. In some cases, that still amounts to more than 50 percent.

Related: Failed Oil Price Recovery Slams Energy Stocks

Then there’s the need for better battery/storage systems. This remains the single greatest impediment to solar (and wind) overtaking conventional sources and becoming the de facto cheaper way of generating and utilizing electricity.

After all, we need power 24/7 – not just when the sun is shining or the wind is blowing.

Still, solar is looking up.

In the last decade, the amount of solar power installed in the U.S. has increased from 1.1 gigawatts (GW) in 2007 to an estimated 47.1 GW in 2017.

That’s enough to power 9.1 million average American homes.

The early success of The SunShot Initiative shows this growth is hardly slowing down.

By Dr. Kent Moors

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Leave a comment
  • Brent Jatko on September 25 2017 said:
    I'm sure the Trump Administration will try to "solve" this "problem" with tariff barriers that increase costs for everyone.
  • NickSJ on September 25 2017 said:
    Do solar power cost figures include the cost of the nearly 100% backup power required, since the sun inconveniently doesn't shine at night?
  • Bill Simpson on September 25 2017 said:
    The beauty of both solar and wind is that they are much harder for an enemy to knock out with cruise missiles during a war. They are too many of them. Conventional power plants and petroleum refineries are sitting ducks for cruise missiles launched from submarines in the Pacific, Atlantic and possibly the Gulf of Mexico.
    Only the dead have seen the end of war.
  • Oilracle on September 25 2017 said:
    Finally!

    We all know by now that Puerto Rico has lots of winds and sun, so the US taxpayers will not need to buy those stinky gasoline power generators anymore for the abundantly blessed with free sources of energy island!

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