By Paula Melton
Every week or two,
EBN’s inbox lights up with the latest research breakthrough that could slash the cost of photovoltaics (PV) by dramatically increasing efficiency. While these laboratory “eureka” moments are genuine, developing them for the marketplace takes time. In the next few years, solar industry experts say it is not novel technology but rather old-fashioned economic incentives that can realistically bring PV into the U.S. mainstream through
grid parity—the point at which the cost of generating power with PV equals that of using conventional energy sources.
Comparing Power Generation Technologies
As seen in this chart developed by the Electric Power Research Institute, solar is still seen as expensive and is generally chosen for its environmental advantages. However, many in the industry believe the needle is moving on cost, and PV has attained grid parity in some states.
Long considered the missing link needed for PV to knock coal off its perch, grid parity has actually been attained in certain U.S. states, both in terms of utility-scale installations and small residential ones, according to Steven Strong, president of Solar Design Associates in Massachusetts. However, he says, in places where electricity is dirt cheap—like the Pacific Northwest—grid parity will not come about on its own in the near future. “The path to success for renewables is to just get our act together policy-wise,” Strong argues.
It’s a stormy economic and political climate for that—and outdated assumptions about the cost of solar don’t help matters, says Joshua Pearce, Ph.D., associate professor at Michigan Technological University. The metric known as
levelized cost of electricity (LCOE), commonly used as the basis of policy and financing decisions, needs to be revisited, Pearce argues in a recent paper in
Renewable & Sustainable Energy Reviews. “Historically, the people that have done LCOE for PV have in general been PV supporters or people in the field—and in trying not to be overly optimistic, they’ve erred on the side of being super-conservative,” Pearce told
EBN. “It makes some of the things they’ve written absurd.”
Pearce points to several things that have changed in the last few years that should alter the way we calculate the lifetime cost of solar:
• The cost of modules has dropped precipitously.
• The lifetime of a PV system is 30 years at minimum—not the 20 or 25 typically used—and modules still generate power even if their efficiency has degraded after those 30 years. Since LCOE calculates cost over the whole lifetime of the power plant, service life and the assumed rate of degradation both make a huge difference in the total cost.
• Balance-of-system costs have decreased dramatically in many areas where installations have become more common.
• Better financing options have also reduced costs as renewables have gained acceptance.
If PV can live down its reputation of being too expensive, Pearce believes that utilities and policymakers will both start to see the wisdom of switching to solar.
Will we ever see grid parity across the board in the U.S.? “We are essentially 50 different markets” because of state-based incentives, points out Mike Taylor, director of research at the Solar Electric Power Association (SEPA). He doesn’t foresee universal adoption across the country in the near future, arguing that “three legs of the stool” are needed to make PV economically viable: solar resource, retail electricity prices, and policy incentives that increase demand. Despite this, Taylor claims the U.S. market is globally viewed as “the next big thing” due to huge untapped demand.
Taylor agrees that major technological advancement is not the answer in the near term. With a solid product already on the market, efficiency improvements and economic success will come from adjustments to the manufacturing process, not radical changes to the technology, he says.
To support manufacturing innovations, subsidies are needed not just on the installation side but also on the manufacturing side, says Joshua Pearce. While China has been lavishly investing in solar manufacturing—allowing that country’s entrepreneurs to sell their modules for next to nothing—the U.S. has only invested small amounts. “You’ve got to get big and you’ve got to get big fast,” said Pearce, who believes that U.S. bankruptcies are a short-lived phenomenon and that thin-film PV is likely to get to scale eventually and fulfill its promise of much cheaper manufacturing costs. All PV manufacturers, utilities, and policymakers, he says, should be thinking in terms of terawatts rather than megawatts “so they can really start to compete with fossil fuel.”
Long considered the missing link needed for PV to knock coal off its perch, grid parity has actually been attained in certain U.S. states, both in terms of utility-scale installations and small residential ones, according to Steven Strong, president of Solar Design Associates in Massachusetts. However, he says, in places where electricity is dirt cheap—like the Pacific Northwest—grid parity will not come about on its own in the near future. “The path to success for renewables is to just get our act together policy-wise,” Strong argues.
It’s a stormy economic and political climate for that—and outdated assumptions about the cost of solar don’t help matters, says Joshua Pearce, Ph.D., associate professor at Michigan Technological University. The metric known as
levelized cost of electricity (LCOE), commonly used as the basis of policy and financing decisions, needs to be revisited, Pearce argues in a recent paper in
Renewable & Sustainable Energy Reviews. “Historically, the people that have done LCOE for PV have in general been PV supporters or people in the field—and in trying not to be overly optimistic, they’ve erred on the side of being super-conservative,” Pearce told
EBN. “It makes some of the things they’ve written absurd.”
Pearce points to several things that have changed in the last few years that should alter the way we calculate the lifetime cost of solar:
• The cost of modules has dropped precipitously.
• The lifetime of a PV system is 30 years at minimum—not the 20 or 25 typically used—and modules still generate power even if their efficiency has degraded after those 30 years. Since LCOE calculates cost over the whole lifetime of the power plant, service life and the assumed rate of degradation both make a huge difference in the total cost.
• Balance-of-system costs have decreased dramatically in many areas where installations have become more common.
• Better financing options have also reduced costs as renewables have gained acceptance.
If PV can live down its reputation of being too expensive, Pearce believes that utilities and policymakers will both start to see the wisdom of switching to solar.
Will we ever see grid parity across the board in the U.S.? “We are essentially 50 different markets” because of state-based incentives, points out Mike Taylor, director of research at the Solar Electric Power Association (SEPA). He doesn’t foresee universal adoption across the country in the near future, arguing that “three legs of the stool” are needed to make PV economically viable: solar resource, retail electricity prices, and policy incentives that increase demand. Despite this, Taylor claims the U.S. market is globally viewed as “the next big thing” due to huge untapped demand.
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