Utility-Scale Solar Now Cost-Competitive with U.S. Natural Gas
Utility-scale solar is now cost-competitive with natural gas across the United States, according to the third in a series of annual reports by Lawrence Berkeley National Laboratory.
“The cost of installing utility-scale solar has fallen considerably in recent years, from more than US$6 per watt in 2009 to about US$3 per watt in 2014,” Greentech reports. “That has resulted in a boom in the sector, which is 31 times bigger than it was a decade ago.”
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In the U.S. Southwest, where developers are rushing to complete projects before the federal Investment Tax Credit (ITC) expires, power purchase agreements (PPAs) as low as US$40 per megawatt/hour (4¢ per kilowatt/hour) make photovoltaic costs the equivalent of “just the fuel costs for natural gas plants.”
GTM Research reports that the new normal for utility-scale solar prices across the U.S. is US$50 to US$75 per megawatt/hour. Prices in that range have “opened up some markets to avoided-cost contracts, where solar is cheaper than a utility’s avoided costs to generate electricity elsewhere,” Tweed writes.
While solar installations could decline nearly 80% from 2016 to 2017 when the federal tax credit disappears, “the post-2016 outlook is not as bleak as we once thought,” said GTM Research solar analyst Colin Smith. “With the loss of the ITC, we expect to see a rise in PPA prices. But as the installation cost of utility PV continues to fall, we expect to see PPA prices start to return to 2015-2016 levels in 2019.”