Public Power - July/August 2008 - (Page 17)

t raordinary growth in the solar power sector is accelerating, largely driven by a federal tax credit, followed by state renewable portfolio standards, record oil and natural gas prices, rising energy demand and technological advances. A political consensus favoring the development of renewable resources and carbon legislation, caused by concern over climate change, sustainability and energy security, is raising prospects for jobs, profits and investment returns in the solar industry. With the bottleneck easing in the supply of silicon—the basic material in first generation devices making up the largest share of the photovoltaic market—industry insiders are optimistic that they are at last on the verge of competing with conventional generation. However, there is still an insistence among those in the industry that the 30 percent investment tax credit passed in the 2005 Energy Policy Act should be extended to 10 years. An extension would help bridge the gap to a future without financial incentives. “It’s happening,” said Jon Bertolino, superintendent of renewable generation at the Sacramento Municipal Utility District in California, which has 11 MW of gridconnected photovoltaic resources. “Solar is going to be a part of the energy future. The question is when. I’m guessing sooner rather than later.” The big change came when Wall Street banks, not just venture capitalists, began issuing billions of dollars in credit lines to solar industry firms for large projects, he said. “Whether PV will become a meaningful contributor to the global energy supply portfolio is not the question,” the Electric Power Research Institute (EPRI) said in a December 2007 report. “Record levels of public and private investment capital are fueling research.” The report insists there is now a potential for revolutionary breakthroughs in cost containment and technology. “This has been said before, more than once, but now the optimism appears more realistic.” Solar set-asides under state renewable portfolio standards have dramatically increased prospects for the industry. Of the 25 states with RPS policies, nine and Washington, D.C. have solar set-asides. www.APPAnet.org Ex Approximately 6,700 MW of solar capacity would be required by 2025 to meet existing RPS mandates. Nevertheless, solar has a dilemma, said Bolko von Roedern, a senior project leader in solar at the Department of Energy’s National Renewable Energy Laboratory. It is the only renewable energy technology with enough resources to produce tens of terawatts, but is still the most costly electricity to produce. National Renewable Energy Laboratory concedes photovoltaic system prices must come down another 50 to 70 percent to achieve nationwide “grid-parity.” Grid parity means a cost equal to the retail price of electricity, a figure that varies widely by region and customer class, says National Renewable Energy Laboratory. Much of the industry believes grid-parity is only a few years off. For instance, the Department of Energy’s Solar America Initiative is an attempt to make solar photovoltaics cost-competitive with conventional forms of electricity by 2015. The initiative will require bringing photovoltaic module costs down to $1.25/watt. In addi- tion, the 2016 expiration date for the $3.3 billion California Solar Initiative is predicated on the belief that solar will be self-sustaining by then. But, the industry may be cost competitive sooner than California or the Department of Energy predict. “The solar industry is on a trajectory to be cost competitive in about five years with current technology,” said Morgan Stanley. EPRI also believes incentives may be unnecessary by as early as 2015, speculating that third generation photovoltaic technology will be the least-cost supply resource by 2030, offering “unforeseen versatility.” EPRI cautions utilities: because solar is a type of distributed generation, utilities should already be planning for how the expansion of solar deployment—which it likens to the proliferation of cell phones—will affect business models and transmission and distribution operations. A “tipping point” is coming in the next five to 10 years, when rising energy prices will meet declining solar power What Does a Photovoltaic Watt Cost? In a detailed example published in its December 2007 report, EPRI calculated that in 2007, a 5-kW DC (3.75-kW AC) residential photovoltaic system with an annual energy output of 7,335 kWh purchased outright in Fresno, Calif., cost $47,000 with no incentives. That translates to a 20-year levelized cost of energy (LCOE) equal to 32 cents/kWh. Subtracting the federal $2,000 maximum residential investment tax credit and the California Solar Initiative buy-down payment ($9,803) brought the LCOE to 24 cents. If financed under a 20-year mortgage at 7 percent by a consumer in the 25 percent tax bracket employing no incentives, the LCOE was 45 cents/kWh, although the first year, after-tax LCOE came to 37 cents. These all compare to the retail rate for electricity in California, which ranged from 12 to 36 cents/kWh, depending on usage. “Even with state and federal incentives and tax-deductible financing, photovoltaic installations currently supply only nominally competitive electricity,” EPRI concluded. Moreover, the less sunlight a city gets, the longer the payback period. EPRI said equivalent retail LCOE values ranged from a low in El Paso, Texas, of 90 percent of the Fresno baseline to a high in Seattle of 167 percent. U.S. electricity rates range over a factor of four. “The implication here is that a photovoltaic ‘bargain’ in one region can appear very expensive in another,“ EPRI said. Nevertheless, future retail power prices are likely to increase. “Accordingly, a photovoltaic system that appears nominally competitive at today’s rates may well seem to be a competitive bargain by the end of its lifetime,” EPRI said. ❚ JULY-AUGUST 2008 17 http://www.APPAnet.org

Table of Contents Feed for the Digital Edition of Public Power - July/August 2008

Public Power- July/August 2008 Contents Perspective 10 Questions Solar Energy Rising Sacramento's Solar Shares Gainesville Crowns a Conservation Idol By the Numbers Curbing Costs of Outages Reliability Green Energy Hometown Connections Customer Service Parting Shot

Public Power - July/August 2008

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