GreenTech Media Wrote:
Over the last few years, solar PV has gotten cheap. Cheap enough to start impacting some commodity energy markets today. Cheap enough that with continued progress, but no breakthroughs, it might alter the global outlook for energy supply within a decade.
I have long been skeptical of solar hype. In 2008 we did an expert judgment exercise suggesting only even odds of getting to module prices of $0.30 per watt in 2030. In 2011 we did some analysis showing how the power-law learning curve for modules appeared to be flattening. That analysis was done at the end of a decade that saw big increases in installed capacity, with little corresponding change in module prices.
I worried that deployment incentives (the global total amounting to many hundreds of billions of dollars over the past decade) would simply lock in the current technologies and do little to drive the breakthroughs that were needed to get solar cheap enough to compete for commodity power.
I was wrong.
Facts have changed. Just a few years ago, the cost for industrial systems was twice what it is today. A host of little innovations have driven costs down. Module prices are now around $0.50 per watt. The unsubsidized electricity cost from industrial-scale solar PV in the most favorable locations is now well below $40 per megawatt-hour and could very easily be below $20 per megawatt-hour by 2020. Compared to other new sources of supply, this would be the cheapest electricity on the planet. Let’s look at how that cost is calculated.
The current state of play is captured in three facts:
The capital cost of industrial (>50 megawatt) solar PV installations with north-south axis trackers is now about $1,500 per kilowatt, and contracts for some industrial systems without trackers are getting down to $1,000 per kilowatt.
Capacity factors of industrial systems with trackers are reaching just over 30 percent at the best sites in the U.S.
Real-world efficiency for commercial PV systems now exceeds 20 percent.
Let’s now proceed on the assumption that these facts are correct. What does this mean for electricity supply cost?
Assume that an average capital change factor (CCF) is 6 percent, a low but not unfeasible value, as the risk premium for these facilities has decreased dramatically. (CCF is the ratio of the total annualized cost of capital, spread across debt and equity, divided by capital cost.) At $1,500 per kilowatt, a 6 percent per year CCF, and 30 percent capacity factor, electricity cost is $34 per megawatt-hour.
1500 × 0.06/(8760 × 0.3) = 34
Note that this low cost of capital would only make sense for a project that was selling into a low-risk market.