The low risk and transparency of CLEAN Contract Programs can provide states with more solar at a lower cost than solar renewable energy certificate (SREC) programs, says a new report released last week. Produced by the Institute for Local Self-Reliance (ILSR), CLEAN v. SREC: Finding the More Cost-Effective Solar Policy finds that an otherwise identical… Continue reading
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I gave a presentation last night to a public forum hosted by Think Again MN on maximizing the economic returns from the state’s clean energy resources. I was joined by Lynn Hinkle of the Minnesota Solar Energy Industries Association (and former union labor representative) and George Crocker from the North American Water Office (and passionate community organizer). The whole video is below, with my presentation starting around 24:00.
To view just the slide show of my presentation, click below:
A presentation I gave last Friday to the Arizona Corporation Commission.
Installed costs for solar PV have dropped and economies of scale improved significantly in 2010, opening the door for much more cost-competitive distributed solar power.
The data comes from the 4th edition of the excellent report from the Lawrence Berkeley Labs’, Tracking the Sun (pdf) and shows the installed costs for behind-the-meter solar PV projects in 2010. The following merely copies Figure 11 from that report, showing the average installed cost of “behind-the-meter” solar projects in the U.S. in 2010, by project size.
This is useful and shows the significant economies of scale for solar PV in 2010, but the history is important. For context, the following chart shows the 2010 data along with the 2009 data from Lawrence Berkeley Labs, with the grey shaded area indicating the cost decreases. The 2010 installed cost data from the California Solar Initiative (red) is also shown, helping validate the LBNL data. The last data point from the CSI is an outlier likely due to having too few projects in that dataset.
Two things are clear from the new data. First, installed costs have dropped significantly, by $1 per Watt for residential-scale solar PV and by nearly $2 per Watt for megawatt-scale projects. We can also see more clearly how the economies of scale of solar have improved, as well.
The unit cost savings between the smallest and largest solar projects (1 MW and under) jumped from $2.80 to $4.60 per Watt, a change in relative savings from 30 percent to 47 percent. Economies of scale were also much greater for mid-size solar (30-100 kW), with the percentage savings over the smallest projects rising from 21 to 35 percent. The following chart illustrates the change in economies of scale, showing installed costs as a percentage of the cost of a 2 kW system.
Instead of having relatively little economies of scale for solar PV projects larger than 2 kW, the 2010 data confirms that the unit cost of solar does continue to fall significantly as solar projects grow up to 1 megwatt (MW) in size.
Unfortunately, LBNL did not have sufficient data to provide context for economies of scale for larger distributed solar projects (1 to 20 MW), with only about 20 datapoints. However, their finding was that these larger crystalline solar projects cost between $4 and $5 per Watt, showing small but significant scale economies.
The lesson is that solar economies of scale seem to be improving as the U.S. market matures, good news for distributed solar to compete with peak electricity prices on the grid.
[note: for more context, see the previous post on 2009 solar economies of scale]
This is a little taste of a project I’m doing comparing solar renewable energy credits (SRECs) with a state solar mandate to Clean Contracts (a.k.a. feed-in tariffs). One metric for comparison is the risk created by market uncertainty, and there’s no better illustration of the risk and uncertainty in SREC markets that this chart. In the past 9 months, SREC prices have tumbled in nearly every market in the U.S.
The cause is the same everywhere – the solar industry met the state mandate, cratering demand for SRECs. Prices won’t recover until the market slows down.
From an Econ 101 standpoint, SRECs beautifully price market demand and are a powerful indicator of when the state-created market is saturated. From an industry standpoint, however, they represent a real roller coaster. It’s hard to be a solar installer when your entire market dries up for 9 months waiting for next year’s quota to roll in (in NJ and PA, legislation is being considered to accelerate the state mandate to solve the problem).
Clean contracts (if uncapped) solve the problem, because the market doesn’t bust (of course, a solar mandate that can keep ahead of supply would also work).
But rather than pricing market demand (as SRECs do), Clean contracts attempt to price the cost of solar. It’s one reason why they tend to deliver lower cost solar to market than SREC markets or mandates. And as you can see in this chart from a previous post, even Germany’s Clean contract (feed-in tariff) program more closely approximates the cost of solar in New Jersey that New Jersey’s SREC price.
It’s a serious question for policy makers to consider when creating a market for solar. Is an SREC market that depends on a state solar mandate any more “market-based” than Clean contracts that simply provide a standard offer to solar developers? And if the latter means cheaper solar for ratepayers, then shouldn’t that trump considerations of “markets”?
In August 2011, ILSR Senior Researcher John Farrell gave this presentation to a group of rural utilities and environmental organizations in Kentucky. The slides illustrate the enormous renewable energy potential in Kentucky and the cost-effectiveness of clean, local power in meeting the state’s electricity and economic needs. Clean Local Power for Kentucky View more presentations… Continue reading
Updated 8/26/11 and 9/1/11
Many renewable energy advocates argue that the market for solar renewable energy credits (SRECs) is a more cost-effective tool for incentivizing solar power than a feed-in tariff (or CLEAN contract) set in a regulatory proceeding.
This chart illustrates the installed cost of solar in New Jersey from 2006 to 2011 (as reported by the National Renewable Energy Laboratory in Tracking the Sun III and converted to levelized cost) in green, the New Jersey SREC spot market price in red, and the German feed-in tariff price (constant exchange rate, adjusted for NJ solar insolation) for rooftop solar projects 30 kilowatts and smaller in blue. (Update 9/1: the previous chart showing solar cost in $ per Watt is here).
Does a “market-based” policy do a better job of matching the actual cost of solar?
This comes to mind: “one of these things is not like the other…”
Update 8/26: I should add that the German feed-in tariff is the only source of revenue for solar projects, whereas the SREC in New Jersey comes in addition to the federal 30% tax credit and accelerated depreciation (and net metering). Since the two federal incentives (and net metering values) have not changed, the fact that the SREC value is rising against the tide of falling solar prices is even more absurd.