A new study makes the case that solar power is emerging as a cost-effective hedge against fossil fuels and is likely to reach cost parity with retail-electricity rates in most regions of the U.S. in less than a decade.
The Utility Solar Assessment (USA) Study, produced by Clean Edge and green-economy nonprofit Co-op America, provides a roadmap for utilities, solar companies, and regulators to reach 10% solar in the U.S. by 2025.
The study finds that significantly scaling solar power in the U.S. will require the active involvement of utilities. The study delivers a to-do list for the three key stakeholders in the nation’s solar industry. Among others, the action items include:
- For utilities: Take advantage of the unique value of solar for peak generation and alleviating grid congestion; implement solar as part of the build-out of the smart grid; and adapt to new market realities with new business models.
- For solar companies: Bring installed solar systems costs to $3 per peak watt or less by 2018; streamline installations; and make solar a truly plug-and-play technology.
- For regulators and policy makers: Pass a long-term extension of investment and production tax credits for solar and other renewables; establish open standards for solar interconnection; and give utilities the ability to "rate-base" solar.
The study also reports that for the first time solar power is beginning to reach cost parity with conventional energy sources. As solar prices decline and the capital and fuel costs for coal, natural gas, and nuclear plants rise, the U.S. will reach a crossover point by around 2015.
Installed solar PV prices are projected to decline from an average $5.50-$7.00 peak watt (15-32 cents kWh) today to $3.02-$3.82 peak watt (8-18 cents kWh) in 2015 to $1.43-$1.82 peak watt (4-8 cents kWh) by 2025.
The investment to arrive at 10% solar in the U.S. is not small, reaching $450 billion to $560 billion between now and 2025, an average of $26 billion to $33 billion per year. However, given utilities’ existing capital costs such an investment is not prohibitive, the report said. To put the investment in perspective, utilities spent an estimated $70 billion on new power plants and transmission and distribution systems in 2007 alone.
In just the past year, a number of utilities and solar companies have announced aggressive programs to deploy large-scale solar power projects, including Southern California Edison‘s plan to install 250 megawatts of distributed solar PV, Duke Energy‘s stated goal of investing $100 million in rooftop solar, and Pacific Gas & Electric‘s announcements to invest in thousands of megawatts of concentrating solar power in California’s deserts.
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