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Big solar now competing with wind energy on costs

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The cost of large-scale solar projects has fallen by one third in the last five years and big solar now competes with wind energy in the solar-rich south-west of the United States, according to new research.

The study by the Lawrence Berkeley National Laboratory entitled   Utility-Scale Solar 2012: An Empirical Analysis of Project Cost, Performance, and Pricing Trends in the United States” – says the cost of solar is still falling and contracts for some solar projects are being struck as low as $50/MWh (including a 30 per cent federal tax credit).

The LBNL study is the first detailed investigation on the costs of “big solar”. The US has more than 4,000MW of utility-scale solar (any installation more than 2MW) and has been building them since the 1980s. The US has more “big solar” than rooftop solar, in contrast with Australia, where nearly all solar capacity has been built on rooftops.

The most interesting observation is that solar is now competing with wind energy on costs. If this were to happen in the Australian market it would likely cause a rapid reshaping of the projects needed to acquit the 20 per cent renewable energy target, which is criticised in many quarters for being focused only on wind energy.

This graph below illustrates just how dramatic that fall has become, although it should also be noted that PPA prices for wind energy have also nearly halved in the past year, although the sample is small.

berkley solar vs wind

But here’s another reason why solar is attractive. Because solar generates its output during the day, when demand and wholesale prices are normally higher, it can generate much higher revenue than wind farms. LBNL quantifies this at around $25/MWh. “In 2012 and 2013, solar has given wind a run for its money,” the researchers say. “This is particularly true given solar’s greater time-of-delivery value to utilities.”

It also notes that wind energy and solar farms could be co-located because their output is complimentary, and infrastructure costs such as sub-stations could be shared.

berkely solar v wind

Both these observations are interesting for the Australian market, particularly for developers such as Infigen Energy and Pacific Hydro, which are looking to add solar to their wind portfolios and looking to bypass the blockade of the major utilities by either “playing” the merchant market – generating revenue from spot prices, or writing their own contracts. Both companies are looking at co-locating some wind and solar projects.

This next graph below shows the progress of the various technologies, and plant sizes, over the last 10 years. It is interesting to note that solar PV outnumbers CSP and CPV by a large margin, but smaller plants are often more cost-effective than larger ones. That’s because of the extra costs in permitting and other factors of large installations, and because most solar PV arrays are now built in small modules.

“Once you move beyond installing a few power blocks, economies of scale appear to diminish (or perhaps be offset by higher costs elsewhere),” the researchers note.

To illustrate the price falls, the LBNL study cites the Copper Mountain project in Colorado. It began with a CSP project, before making three separate additions using thin-film solar PV technology, and then a fourth with crystalline silicon based solar PV modules.

The first two solar PV contracts in 2008 and 2009 were struck at $150/MWh for 58MW of capacity, the next stage was struck at $103/MWh for 150MW capacity, and last year a contract was struck for another 250MW of capacity at $82/MWh.

Given the underlying similarities among these four projects – location, duration of contract – it says that the near halving of prices over the three-year period can be attributed primarily to the declining cost of solar modules and other balance-of-system costs. (It would be interesting to see what the likes of Bjorn Lomborg, the new Coalition pin-up boy who opposes deployment on the basis that only R&D can deliver cost reductions, make of this).

berkley solar ppa

Another interesting observation from LBNL is that most of the contracts written in recent years do not escalate in nominal dollars over the  life of the contract. This means that in real dollar terms, the pricing of the contract actually declines.

This means that towards the end of their contracts, the solar plants (including PV, CSP and CPV) contracted in 2013 will on average will be delivering electricity at less than $40/MWh. This is likely to be considerably less than fossil fuel plants at the same time, given the expected cost of fuels and any environmental regulations.

berkley solar long term ppa

 And here’s one final graph on capacity factors. It notes utility-scale solar installations with single axis tracking are achieving capacity factors of more than 30 per cent, while the best performing solar installations without tracking are more than 25 per cent.

berkeley capacity

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  • Bob_Wallace

    That’s simply incredible.

    Thanks for bringing that news Giles.

  • Ivor O’Connor

    “It also notes that wind energy and solar farms could be co-located because their output is complimentary, and infrastructure costs such as sub-stations could be shared.”

    Seems like the shading from the turbines would cause troubles. Has anybody actually done this?

    • Giles

      I don’t think they are going to be that close. Nearby is more likely – co-located in the sense of sharing infrastructure.

    • Bob_Wallace

      Not panels underneath the turbines. Just close by, out of the shadow zone.

  • oliver r

    Figure 7 is statistical nonsense, and so is its interpretation by the author.

    • Bob_Wallace

      And your proof is?

      • Warwick

        He probably has a harsh way of saying it but Oliver is correct. Normally, you’re looking for R^2 values close to 1.0 i.e say .90 or better which shows that there is strong correlation. The charted R^2 lines of best fit are so low to basically say that there is no correlation whatsoever between net capacity factor and installation date. i.e. if you understand these values, you wouldn’t include them in your chart.

        • Bob_Wallace

          Got it. I glanced at the R^2 values and ignored them.

          I thought he was talking about capacity being too high.

          It would make more sense to say that some single-axis tracked systems are returning 30% CF, etc…..

  • Sean

    why hasn’t wind dropped like solar? (lack of manufacturing volume? materials?)
    what’s the next big thing in wind? (new materials? designs? hub height?)

    • Bob_Wallace

      Wind did its big dropping earlier. About 30 years ago wind-electricity in the US was $0.38/kWh. It’s now dropped to $0.04/kWh.

      It’s understandable that wind prices would have come down quicker. It’s built around already fairly mature technology. Electric generators. We’ve been using generators for almost 200 years and massive work had gone into making them efficient for over 100. We have used wind to move machines for hundreds of years. We’d been using wind to spin generators since early last century. Bringing down the cost of wind generation was mostly about building up an industry.

      With solar we had to take an inefficient technology and figure out how to make panels more efficient and make them a lot cheaper. There was little aside from computer chip wafers to build off of.

      The next big thing with onshore wind is likely gradual improvement. Fine tuning. We’re already close to $0.03/kWh, there’s not a lot of room underneath that level.

      Offshore wind needs cost improvements. That will come as we figure out the best way to install turbines out where the wind is best.