According to a study published last month, the cost of solar power has reached an all-time low, with a reported new average of 5 cents per kilowatt-hour (kWh). The study, conducted by the Lawrence Berkeley National Laboratory, demonstrates a decline of 70 percent in PPA prices since 2009, among other stats highlighting the cost and efficiency of solar energy.
Each year, the Berkeley Lab publishes a Utility-Scale Solar statement, which reports new findings about utility-scale solar projects based on vast amounts of empirical data. Utility-scale refers to large, ground-mounted solar projects of more than 5 megawatts (MW).
Here’s a roundup of key findings from this year’s Utility-Scale Solar report.
1. The cost of installation has decreased by more than 50 percent since 2009.
2. Efficiency of new solar technology has increased from an average capacity factor of 24.5 percent in projects completed in 2011 to 29.4 percent in projects completed in 2014.
3. The new low average price of 5 cents per kWh has made solar power a competitive option in states outside of the Southwest, where solar power is most widely used. Notably, Southeastern states Arkansas and Alabama are seeing more solar development than ever before.
While this new low average price can be partially attributed to improved project performance and lower installation costs, the standing 30 percent federal investment tax credit incentive will fall to 10 percent after 2016. As such, solar technicians are rushing to build projects before the upcoming tax credit decline. Smaller-scale solar companies are competing for space with larger installers, as evidenced by an increase of more than 50 percent for solar panel installation in 2014.
To put these findings in perspective, standard electricity providers earn an average of slightly less than 11 cents per kWh, as of the September update from the U.S. Energy Information Administration. The price is lowest for industrial applications, with an average of 7.3 cents revenue per kWh. Ultimately, this makes solar power a highly competitive option for utility-scale applications.
For the Economy
Scientists have long advocated the advantages of a widespread move toward solar energy, stating it will provide jobs and other economic benefits in addition to helping stabilize energy prices nationwide. In contrast to wildly fluctuating fossil fuel prices, renewable energy technologies – like solar – operate at a consistently low cost after installation.
For the Environment
Fossil fuels like oil and coal remain the largest source of energy, even though they are finite resources. Solar energy, on the other hand, is available in abundance. As such, the new low costs and competitive, widespread installation of solar technology also points to environmental benefits, including reduced air pollution and greenhouse gas emissions. For example, a 2009 UCS report predicts that an increase to 25 percent national renewable electricity standard by 2025 would drastically lower CO2 emissions from power plants by around 277 million metric tons per year.
Some analysts are thinking even further ahead. According to a study conducted by the U.S. Department of Energy, global warming emissions could be reduced by as much as 81 percent with a move toward renewable energy, which ideally would comprise 80 percent of the country’s electricity by 2050.
For parties interested in making the switch to this form of renewable energy, it’s important to know how solar energy works. Most solar systems are grid-tied, which means they connect to the utility grid for backup energy during nighttime hours and on overcast days. A successful switch to solar depends on large-scale variables, such as proximity to the equator, as well as smaller-scale variables, such as the specific environment surrounding the property. For example, trees and tall buildings create shade, which hinders the efficacy of solar technology.
If you’re deliberating making the switch, take the big picture into account. You’ll want to consider factors like installation costs, federal tax credits and the amount of sunlight your region receives on average – and consulting an expert can definitely help. It’s also a good idea to look at the projected timeline for federal incentives, especially because tax credits are projected to drop significantly within the next two years.
Ultimately, the data points to solar power as a highly viable option, and the low current cost means greater energy savings. For many consumers, this will eventually pay for the cost of installation and then some.
Photo credit Alan Levine
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