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On A Cost Basis, Solar And Wind Improve Against Fossil-Fueled Sources

New analysis from Bloomberg New Energy Finance (BNEF) says that the levelized cost of electricity (LCOE) for solar photovoltaic and onshore wind power technologies is approaching parity with gas-fired and coal-fired generation - and is even on par in certain markets. The LCOE represents the cost of generating a megawatt-hour as a function of the total cost of financing, designing, building, operating and maintaining a plant over its lifetime.

A BNEF report says the global average LCOE for onshore wind has declined slightly during the first half of the year from $85/MWh to $83/MWh in the second half. The global average LCOE for offshore wind - which remains significantly more expensive - fell from $176/MWh to $174/MWh. Over the same period, the global average cost for crystalline silicon PV fell from $129/MWh to $122/MWh.

The drop in costs for these renewable sources accompanies a rise in costs for gas-fired and coal-fired generation in many regional markets. According to the report, the LCOE for combined-cycle gas turbine generation rose from $76/MWh to $82/MWh in the Americas and from $103/MWh to $118/MWh in the Europe, Middle East and Africa regions over the course of the year. The cost for coal-fired generation increased from $66/MWh to $75/MWh in the Americas and from $82/MWh to $105/MWh in Europe.

Among the most noteworthy findings in the BNEF report is that onshore wind is now cost-competitive with both gas-fired and coal-fired generation in the U.K. and Germany, once carbon costs are factored in. In the U.K., the LCOE for onshore wind is an average of $85/MWh in the second half of the year compared with $115/MWh for combined-cycle gas plants and $115/MWh for coal-fired plants. In Germany, the LCOE for onshore wind is $80/MWh compared with $118/MWh for gas and $106/MWh for coal.

In the U.S., by contrast, coal- and gas-generated power have an average LCOE of $65/MWh compared with onshore wind at $80/MWh and PV at $107/MWh.

 

Steady improvement

The dynamics of LCOE in various regions are subject to a wide variety of factors, such as utilization rates, fossil-fuel extraction techniques, incentives, carbon pricing, and the costs of renewable technologies and project financing. In particular, BNEF’s analysis shows that carbon pricing and lower utilization rates are largely responsible for the increase in fossil-fuels costs in Europe. The absence of corresponding carbon-pricing mechanisms in the U.S. is one reason the LCOE for fossil-fueled plants remains below that of renewables - at least for now.

Jacqueline Lilinshtein, an associate at BNEF specializing in finance and energy economics, says the good news is that the LCOE for renewables in Europe is becoming more attractive, even though incentives, such as feed-in tariffs and carve-outs, are weakening or fading away entirely. “This is the first time in the U.K. and Germany where wind is competitive with gas without any policy or subsidy,” she says. “This means that you are going to see less of a need for them.”

Lilinshtein explains that carbon-pricing policies in Europe are not specifically designed to promote the deployment of renewable energy generation. Rather, the pricing is focused on reducing carbon dioxide emissions.

However, it seems that an increase in the price for carbon would have the effect of reducing demand for electricity through higher rates. People are going to use less energy, use it more efficiently or demand electricity from non-carbon sources.

Until carbon pricing works its way into LCOE calculations in the U.S. through the auspices of the Environmental Protection Agency’s Clean Power Plan, cap-and-trade systems or carbon taxes, the emphasis is going to remain on cutting costs for renewable generation. Although the golden age of cost reductions may be behind us, Lilinshtein says many opportunities remain to bring down LCOE - for solar, at least.

“The margins are very thin everywhere - nowhere more so than in manufacturing,” Lilinshtein says. “But, it doesn’t have to be necessarily on the manufacturing side. There are opportunities to reduce soft costs, such as installation, project development and permitting costs.”

Although there are no forecasts in the BNEF report, Lilinshtein says the LCOE for solar power is going to continue to become more attractive. An interesting aspect of the U.S. market is that it is essentially a vast collection of markets with 50 states and thousands of utilities. This makes it difficult to generalize.

“Solar is probably the biggest thorn in the utilities’ sides,” she says. “They realize solar is here now. There are no ifs, ands or buts about it. The question is, how are they going to adapt to it? Some will figure out how to live with solar and profit from it. Others will fight as hard as they can and use any means necessary to stop solar growth.”

On the wind side, BNEF does not anticipate any significant reductions in the cost of onshore wind technologies. However, there are opportunities to increase output, such as through the introduction of taller poles for turbines that enable them to reach higher. “You catch more wind higher up,” Lilinshtein says. “That extra output makes the total LCOE go down.”

- Michael Puttré

 

Attractive PPA Prices Will Keep U.S. Utility-Scale Solar Power Strong

Reports of the death of utility-scale solar in the U.S. have been greatly exaggerated.

A new report from the Lawrence Berkeley National Laboratory says the increasing cost-effectiveness of solar power has resulted in a 70% decline in power purchase agreement (PPA) prices since 2009. Going forward, the report predicts that PPA prices for solar will continue to decline, while natural gas prices are expected to float upward with increased demand.

According to Mark Bolinger, a researcher at Lawrence Berkeley and one of the co-authors of the report, attractive PPA prices will be a key reason why utilities can be expected to want more large-scale - 5 MW and larger - solar projects for the foreseeable future.

“If you compare the latest PPA prices to the range of fuel-cost projections for gas-fired generation, solar looks fairly competitive,” Bolinger says. “Even if a utility doesn’t need any capacity going forward, they might still consider investing in solar simply as a fuel saver. We have seen utilities buy wind power for that very reason.”

The Lawrence Berkeley study reinforces another recent report from Bloomberg New Energy Finance that says that the levelized cost of electricity (LCOE) for solar photovoltaic and onshore wind power technologies is approaching parity with gas-fired and coal-fired generation in many markets, including the U.S. Furthermore, the drop in costs for these renewable sources accompanies a rise in costs for fossil-fueled generation sources.

One of the reasons many have sounded the death knell of utility-scale solar is the impending sunset of the federal investment tax credit (ITC) at the end of 2016. Bolinger says some decline in new large-scale projects in 2017 is to be expected, even if the credit were extended. Rather like when car buyers took advantage of the so-called “Cash for Clunkers” incentive, a lot of the capacity that otherwise might have been built in 2017 has been pulled forward into 2016 to try to capture the credit.

“Regardless of what happens with the federal credit, 2017 is unlikely to be a good year,” he says. “There is going to be a pretty substantial pullback. Even if the credit were extended by the end of this year or early next year, I think we’d still see a slump in 2017. I don’t think there is very much that can be done about that.”

At the same time, the slump should be seen as an artifact of the ITC - and a temporary one - not as a trajectory for future utility-scale development. One of the reasons for this optimism is that the economics of solar continue to improve. Experience is causing solar projects to be better sited, and lower construction costs enable wider use of trackers - both of which increase yield. However, few expect the precipitous decline in costs to continue as they have over the last decade. Analysts are turning to soft costs, such as permitting, construction, maintenance and access to capital, as the means of reducing solar LCOE even further.

Perhaps most important is the LCOE of solar relative to that of gas-fired generation. Historically, most, if not all, utilities have based their solar purchases on their respective states’ renewable portfolio standards (RPS). Many utilities subscribe to the “not one megawatt more” school. Natural gas prices and the need to adhere to emissions requirements under the U.S. Department of Energy’s Clean Power Plan are likely to alter the calculus for utilities.

“Looking ahead at things like the Clean Power Plan potentially coming into play here, I expect utilities are going to see many more reasons to consider utility-scale solar,” Bolinger says. “Although there are some purely RPS-driven utilities at the moment, I think that that mindset is likely going to change - particularly as the price continues to get more competitive. At some point, it is really going to be hard to say ‘no’ to solar when it’s the cheapest resource out there.” - Michael Puttré

 

IHS Raises Year’s Global Solar PV Forecast To 59 GW

According to a new analysis from IHS Technology, global solar photovoltaic demand will reach 59 GW this year - an increase over the previous demand forecast in June.

The company now expects global solar installations to grow by 33% this year - which is the fastest growth rate since 2011.

IHS also raised its 2016 forecast by more than 2 GW to 65 GW. The reasons for the increase are twofold: first, an acceleration of projects in the U.S. ahead of the solar investment tax credit expiration and second, faster growth in China led by a likely increase in long-term government targets.

Although growth will drop to a moderate 12% in 2016, solar PV installations will still put the total installed global capacity of PV in excess of 300 GW, IHS says.

“IHS Technology already had one of the most bullish forecasts in the industry,” says Ash Sharma, senior research director of IHS. “But due to accelerated and expanded deployment in the U.S., as well as in China, India and other countries in Asia, our forecast has increased further.”

 

1366 Technologies To Establish Plant In N.Y.

1366 Technologies will establish its first large commercial Direct Wafer production plant at the Science and Technology Advanced Manufacturing Park in Alabama, N.Y.

1366 Technologies develops and manufactures silicon wafers as a “drop-in” replacement for conventional wafers. Construction of the manufacturing facility will require two phases over the next five years. The initial capacity of the plant is expected to be 250 MW of wafers per year. The company plans to eventually expand the plant’s capacity to 3 GW per year. Over the course of the project, 1366 will invest approximately $700 million, including a $100 million initial investment.

In order to encourage 1366 Technologies to establish its new manufacturing operations in the Finger Lakes region, Gov. Andrew Cuomo’s administration offered an incentive package of up to $56.3 million and up to 8.5 MW of low-cost hydropower. State agencies providing incentives and support include Empire State Development, the New York Power Authority, the New York State Energy Research and Development Authority, and the New York State Homes and Community Renewal.

The Genesee County Economic Development Center will consider local incentives of up to $41.7 million, including $12 million for the first phase of construction.