Large scale solar near parity in world’s three biggest markets

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Utility-scale solar is making such inroads into the energy business in the US that utilities are no longer fighting it, with large-scale solar likely to be competitive even if current tax credits are removed.

sunpower solarThat is the assessment of SunPower, one of the biggest solar module manufacturers and project developers in the US, which this week bought out the 1.5GW solar portfolio in the US built up by Australia’s Infigen Energy.

In a conference call accompanying its second quarter results, SunPower president and CEO Tom Werner said large-scale solar barely accounted for 1 per cent of total generation in the US, but it had huge potential, even if the investment tax credit (ITC) was removed in 2017.

That’s because of the declining costs. Werner pointed to one contract below $US50/MWh. Others have gone below $40/MWh.

“If you do the math on that and you project post-ITC, and you continue protecting our cost down and performance increases in our systems, that’s where we get our confidence in a potential post-ITC world,” Werner said.

“So, we think that our solar energy is interesting to utilities already post-ITC, assuming there is a post-ITC.”

Costs for large-scale solar in the US are falling rapidly, helped by cheap finance from new asset classes and vehicles that analysts say will result in more investment than the oil and gas industries. Werner’s confidence is reflected in the company’s forecast for solar deployment over the next four years, growing at 30 per cent compound rate.

sunpower forecast

SunPower also pointed to the modular nature of large-scale solar farms, which cut costs, particularly expensive labour costs, and improved efficiencies in solar modules.

The US is not the only market approaching wholesale price parity for solar. A recent report from Deutsche Bank indicated that India was about to reach the same level, an assessment reinforced by the local offshoot of Fitch Ratings. Deutsche believes that investment in large-scale solar will outstrip that of coal generators within a few years.

China has also set huge solar targets. SunCorp said this was being driven by the economics of solar and the need to improve air quality. Deutsche Bank expects China to lift its 100GW solar target for 2020. It expects around 120GW to be installed.

Solar PV is already beating new-build fossil fuels in emerging markets such as Chile, Africa and the Middle East. But the fact that it is likely to take off dramatically in the world’s biggest energy markets underpin forecasts, including from the International Energy Agency, that solar will become the dominant energy sources within decades.

SunPower development head Howard Wenger told the conference call that US utilities are “no longer really fighting solar” – they are trying to figure out a solution to combine solar with the traditional utility business.

One of the emerging new models, Werner suggested, is community solar, or shared solar.

NRG Energy, one of the biggest utilities in the US, this week announced a 1MW shared solar project to service about 200 homes in Massachusetts.

NRG Energy has more than 100MW of shared solar projects already in the works in both Massachusetts and Minnesota, and is actively seeking to expand into other markets.

Steve McBee, the head of NRG Home, says shared solar could be a huge business opportunity. That’s because 73 per cent of people NRG approaches can’t put solar on their roofs – perhaps because they don’t own their home, have structural issues, or have too many obstructions that would limit the system’s output.

“If our customers want solar, they ought to be able to get it, and the only thing standing in their way is that there isn’t a regulatory scheme worked out that will allow that to happen,” McBee told Greentech Media.

“The technology is there, the market demand is there, the cost is right – we’re just waiting on a policy signal. That frustrates me.”

SunPower’s Werner said there are a number of different models that his company was working with utilities.  

  • While in the US rates are low mainly owing to cheap finance, in India they are low mainly due to lower cost of installation per MW. As RBI cuts rates in India, local funding costs will drift lower and therefore one can expect more competitive rates per MW

  • Alastair Leith

    Much of India has fantastic insolation for eight months of the year (Nov-May 80% of country is >5 kW/sq m/Day peaking at >8.5 kW/sq m/Day

    I wonder if the wet season offers unique challenges that are different from European winters, especially in the North (e.g. New Delhi) that sees six months under cloud? I don’t know if Hydro is an option but given uncertainty of the monsoon and glacial ice melt due to CC you wouldn’t want to invest too heavily in that. I guess wind will have to do.

    • David Osmond

      Just some thoughts based on my own experience. I suspect that getting through the monsoon will be much easier than getting though a deep winter (in a location far from the tropics).

      My worst days around the equinoxes are better than my average days in the middle of winter. The panels still produce a reasonable amount of energy under cloud, but they produce nothing after sunset and before sunrise.

      Plus the regular rain will keep the panels clean during the monsoon.

  • Green_Lightning

    CSP innovator SHEC Energy offers costs lower than $35/MW. They are
    working with Sweden’s Cleanergy on solar Stirling Engines. Also, their
    *Ultralight* technologies are ideal for powering spacecraft. They are
    seeking accredited investors.
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  • Ian

    “Community solar”, has a nice ring to it. So does”Community wind”. The idea here is that generation of electricity can be owned by the power consumer but produced remotely.

    The electricity network can continue to play a pivotal role in transmitting power. Apartment dwellers or renters or others without roof space can become ’empowered ‘ to produce their own electricity. Cheap financing can be crowd sourced to build out renewables and ownership of this valuable resource would remain in the hands of local people. In the not too distant future transportation will need to be electrified – that is, battery powered vehicles. very seldom will vehicles be parked at the site of solar power production, the network will provide the means to deliver privately generated power to charge these vehicles. For renewables to grow , this idea of a electricity distribution network needs to be supported. People should be allowed to generate ( and store) as much electricity as they like, wherever they like and pay for this to be transmitted to its point of usage. The network should be allowed to charge a reasonable transmission fee and a storage fee for any electricity that is not used as it is generated. Other models of transportation networks abound. Ones that come to mind are the Internet, road transportation, postal services, telephone services. In each of these models private information or goods are transported and stored.

    The actual way the distribution network could charge for their transmission and storage services can make for an interesting discussion. Here are two that I can think up.1. An electricity market open to all: All electricity to be transmitted could be sold to the network for a spot price regardless of its source and then bought back at a fluctuating rate. If daytime solar is produced to such an extent that it exceeds demand then the export price could drop to zero, but so too could the import price. In the evening peak, when demand is highest, those with storage or suitable generation capacity could earn top dollar for their exported power, but those importing power at that time will have to pay for that privilege . 2 “virtual storage meters”: A second method could be a specially designed meter where units of virtual storage could be purchased . Power could be ‘stored and used’ for free up to the value of the storage purchased. A person could purchase or rent 10 KWH of storage and then export an amount up to 10kWH into the grid to be used at any time . Any excess power exported would attract the normal rate of 4 or 5 c/KWH and any power consumed over the amount ‘stored’ would cost the normal 20 to 30 c/KWH. If the network was smart they would make the cost of this virtual storage competitive with domestic battery storage. Virtual storage meters at different sites could be linked so that ‘ storage ‘ at one site could be used at another- for a small transmission fee of course.