Solar Golden Era

Solar power generation in the U.S. is soaring as the nations insatiable demand for renewable energy takes hold and cost parity with incumbent technologies appears more realistic with each passing month.

Indeed, solar power has been a standout contributor to recent U.S. electricity generation capacity additions for the last 8+ years, comprising >40% of new additions in 2020 and surpassing Wind (in 2016) and Natural Gas (in 2018) to become the dominant source of new grid power additions for the country.

US Annual Additions of New Electric Generating Capacity (from WoodMackenzie/SEIA)

Solar Energy Generating Capacity

Further exploring the monthly planned additions in 2021 is revealing and confirms solar energy installations will comprise a major share of new construction.

Planned U.S. Electricity Generation Capacity Additions (via EIA)

Solar Energy Golden Era through the year
Source: Energy Information Agency (https://www.eia.gov/todayinenergy/detail.php?id=46416)

Solar energy is a non-dispatchable renewable power source which means its availability is subject to daily changes in irradiation and weather-driven interruptions. Despite this headwind, utility companies continue rapidly adopting the technology to meet new power demands at the expense of coal and other sources.

Recent data suggests that a precipitous decline in capital costs is contributing to this trend. Solar installations at all scales are benefitting from a dramatic drop of the price of photovoltaic modules, with recent downward step changes occurring most noticeably in 2012 and 2016.

Solar Cost Per Watt DC (from NREL, 2018, in USD)

Solar cost, Solar Golden Era
Solar energy per Watt DC
Source: National Renewable Energy Laboratory, 2018 (https://www.nrel.gov/analysis/solar-installed-system-cost.html)

The above trends show a breakdown of solar installation costs by category from 2010 – 2018 in the U.S. Major reductions can be seen in materials and hardware; specifically the photovoltaic modules and inverters. There has also been a notable reduction in labor cost per installed unit of generation capacity.

For residential solar installations, SEIA estimates average costs have fallen to ~$2.80/Watt (excluding Federal Income Tax subsidies). Surprisingly, >65% of capital required for new installations is directed at soft costs (e.g. labor & installation). This suggests soft costs, especially labor, may become the controlling input that determines further Solar market penetration.

Residential Solar PV Pricing and Cost Breakdown from SEIA

Residential Solar Energy
Source: https://www.seia.org/solar-industry-research-data

As of 2019, solar energy contributed 2.8% of the total energy used for electric power generation in the U.S. according to Lawrence Livermore National Laboratory, up from ~0.1% in 2010 (a 28-fold increase). (source: https://www.seia.org/solar-industry-research-data)

U.S. Energy Consumption in 2019 from LLNL

US energy consumption 2019
Source: Lawrence Livermore National Laboratory (https://flowcharts.llnl.gov/content/assets/images/energy/us/Energy_US_2019.png)

NREL outlined a path for solar energy to reach a Levelized Cost of Electricity (“LCOE”) of $0.03/kWh which would make it competitive with the current leading grid power sources like natural gas, wind and coal generation.

Solar energy path to 3 cents per kWh
Source: National Renewable Energy Laboratory (https://www.nrel.gov/analysis/solar-levelized-cost.html)

Many cost reduction milestones outlined by NREL in 2015 have already been met. NREL provides an LCOE calculator to allow for analysis of economic inputs; the default settings reflect their most current assumptions. (https://www.nrel.gov/pv/lcoe-calculator/)

EIA estimates project new solar photovoltaic generation slated for 2020-2022 construction to have LCOE metrics within striking distance of natural gas combined cycle plants, their primary fossil-based competition, even before the impact of federal tax credits.

We expect Solar energy will continue its rapid growth trajectory and become a major player in the market for energy generation, with the combination of a national thrust toward the adoption of zero-carbon generation and rapidly declining solar installation costs both contributing significantly to its gains on the marketplace. So in a way we might already be in a Solar Golden Era.

Questions we will explore in future posts include:

+ At what point, as measured by percentage of installed nameplate capacity, does incorporation of incremental solar energy generation cause unacceptable levels of electric grid instability?

+ Can the impact of solar energy intermittency be mitigated in whole or in part by localized storage (batteries or other energy storage systems) at an acceptable cost?

+ What storage technologies appear most promising?

+ Does the theoretical limit for solar generation market penetration vary from region to region within the U.S.? If so, how and why?

Sources:

National Renewable Energy Laboratory

U.S. Department of Energy

Lawrence Livermore National Laboratory – Flow Charts

Solar Energy Industries Association


Andrew Schaper is a professional engineer and principal of Schaper Energy Consulting.  His practice focuses on advisory in oil and gas, sustainable energy and carbon strategies.

For consulting or media inquiries, please contact info@schaperintl.com.  To learn more about Schaper Energy Consulting, visit our website here.

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