Solar PV Becoming Cheaper than Gas in California?

The latest round of proposed contracts from a California utility for 250 MW of solar PV projects comes in below the projected price of natural gas.

Stephen Lacey, Editor
February 08, 2011 | 59 Comments

We hear it every day: "Solar is too expensive." Well, not according to the California utility Southern California Edison.

In a recent filing to the state's Public Utilities Commission, SCE asked for approval of 20 solar PV projects worth 250 MW – all of which are expected to generate a total of 567 GWh of electricity for less than the price of natural gas.

Although the exact details of the 20-year contracts for the projects are kept confidential for a few years, the utility reports that all winning solar developers issued bids for contracts below the Market Price Referent, which is the estimated cost of electricity from a 500-MW combined-cycle natural gas plant.

What does that mean? It means that a large number of solar PV project developers believe they can deliver solar electricity at a very competitive price. And these aren't mega-projects either. All of the installations will be between 4.7 MW and 20 MW – a sweet spot for PV projects.

Although the price of natural gas has plummeted in recent years because of excessive production and lower demand for power, the cost of solar projects and the price of solar electricity has dropped in tandem. With stong solar requirements in states like California, demand for PV has stayed strong.

"Solar energy is a natural hedge against rising energy costs – a hedge that regulators and utilities are turning to lower electricity costs for their customers," said Rhone Resch, president and CEO of the Solar Energy Industries Association.

California regulators seem to agree that mid-sized solar PV installations, which capture economies of scale but suffer fewer regulatory and transmission constraints, are an important part of the market.

These latest projects were solicited through SCE's Renewables Standard Contracts program, a reverse auction mechanism implemented by the utility in 2010. The program is a precursor to California's Reverse Auction Mechanism (RAM) that was approved last December. That 1-GW program requires California's three largest utilities to hold auctions twice a year to solicit bids from developers of mid-sized (i.e. 1-20 MW) solar PV projects.

The 250 MW of contracts sent to the CPUC for approval is in addition to a 500-MW solar program initiated by SCE in 2009.

According to SCE's filing, the utility seems to be genuinely positive about the prospects for solar PV:

“Solar PV is a mature and proven renewable energy technology that has been supplying a substantial amount of renewable energy to SCE and other California load-serving entities (“LSEs”) for several years.”

While large-scale concentrating solar power projects have been gaining ground in California and other southwestern states, PV is looking like the better option in many cases. Due to the steady declines in the cost of production and price of modules, as well as improvements in Balance of Systems technologies (i.e. power electronics, racking and wiring) that make installations more efficient, solar PV is leading the way.

“The solar industry has done a great job in bringing down costs – long a promise, now a reality,” said Adam Browning, executive director of the Vote Solar Initiative, in a response to the recent SCE announcement. “These are price-points that can really scale, and will encourage policymakers to think big.”

In a recent report from GTM Research comparing similar-sized CSP and PV projects, the authors forecast that electricity from utility-scale PV plants will be considerably lower than some CSP technologies. In the next decade, the research firm projects CSP plants will be generating electricity in the $0.10 to $0.12 per kWh range and PV will be producing electricity in the $0.07 to $0.08 kWh range. (On the flip side, CSP technologies can offer storage capabilities and hybrid natural gas components, providing value that PV can't necessarily deliver.)

With high peak demand, lots of expensive “spinning reserve” power plants and ample sunlight, California is the likely place for PV to compete. But with project costs continuing to drop and utilities promoting the technology, the steady march toward grid parity will spread to other markets as well, said Vote Solar's Browning.

“Though California does have world-class sunlight, solar is modular and adaptable, and similar results can be had throughout the country.”

59 Comments

jim douglas
February 18, 2011

I love this country. I'm a treehugger, rockhugger etc. and am still able to drive my affordable F150 4 wheel drive truck + fuel to places were there are no power lines, windmills, environmentalists (whoever they are) and enjoy nature. All the above are just a complex mix, some good, some bad. In the end it's just hard gritty work. REDNECKS FOR WILDERNESS!!

ANONYMOUS
February 16, 2011

Mike Casey's piece:

http://www.renewableenergyworld.com/rea/blog/post/2011/02/top-eia-energy-trends-watcher-no-definitive-count-on-dirty-energy-welfare

Andrew W
February 16, 2011

@Luke: Maybe REW can look into that instead of simply cheering certain technologies. DOE has some numbers, but nobody has completed a definitive study of government subsidies. Now, would be a good time to complete that.

Luke Divemaster
February 16, 2011

Shouldn't there be a definitive count of energy subsidies? As we're looking at cutting waste from our federal (and states') budgets, shouldn't there be a credible accounting of all the ways we pay to grease the way for these mature, highly profitable industries? We're not talking about numbers compiled by dirty energy lobbyists or their hired "experts," by the way, but a real inventory done by those who wouldn't profit from a lower or incomplete count. Such an accounting should include:

•Tax breaks
•Dirty energy subsidies
•The costs of government agencies that are set up to perform functions that these industries should pay full cost for doing, such as figuring out how to stuff their pollution underground instead of wasting it on exorbitant, fantasy projects like "FutureGen."
•Military expenditures to protect oil shipping lanes
•Pollution forgiveness or remediation
•Rock-bottom-price access to public property, such as mountains, subsurface property, aquifers, ocean waters, all of which fossil energy companies routinely wreck and pay comparatively little to fix.
We need to force politicians to be aggressively honest about how much of our money is going to Tillerson, Boyce., Blankenship, O'Reilly, Lesar, etc. Until they do, the anti-clean energy bigmouths in Congress who are bashing clean energy policy support need to back way off. And the dirty energy lobby mouthpieces who propagandize about how "cheap" dirty energy is should do the same. Directly or indirectly, we're paying their salaries.

***

Mike Casey is president of communications firm Tigercomm. His last post was on the vague, open-ended nature of fossil subsidies.

Luke Divemaster
February 16, 2011

According to Namovicz, there really isn't such a widely available, definitive, comprehensive number.

Right…so we're not accounting for the nuclear insurance subsidy, we're not accounting for military oil shipping, we're not even accounting for the tax depreciation benefits that some resources get over others.

The fact is, there is a wide array of government subsidies, both implicit and explicit, that are doled out every year to fossil fuel companies. One estimate, by the Environmental Law Institute, finds that dirty energy companies in the United States alone have run up a $72 billion tab at the taxpayer's bar from 2002 to 2008. Worldwide, it's far worse, as this study by the OECD explains:

"The [International Energy Agency] estimates that direct subsidies that encourage wasteful consumption by artificially lowering end-user prices for fossil fuels amounted to $312 billion in 2009. In addition, a number of mechanisms can be identified, also in advanced economies, which effectively support fossil-fuel production or consumption, such as tax expenditures, under-priced access to scarce resources under government control (e.g., land) and the transfer of risks to governments (e.g., via concessional loans or guarantees). These subsidies are more difficult to identify and estimate compared with direct consumer subsidies."

As we pointed out in a recent post, these subsidies aren't just reckless and stupid, they aren't even what people want. In fact, only 8 percent of Americans prefer that their tax money be given to highly profitable, mature industries such as ExxonMobil and Massey Energy.

Luke Divemaster
February 16, 2011

How Big are Fossil Subsidies? No One Really Knows
Americans are in the dark about the giveaways to fossil fuels, says Mike Casey.
. The national conversation about wasteful welfare for highly profitable dirty energy corporations has gone from the dramatic statement by the Chief Economist of the International Energy Agency that fossil fuel subsidies are one of the biggest impediments to global economic recovery (he called them "the appendicitis of the global energy system which needs to be removed for a healthy, sustainable development future"), to a speech by Solar Energy Industries Association President Rhone Resch (in which he called the fossil fuel industry "grotesquely oversubsidized"), to a call by President Obama to cut oil company welfare by $4 billion. Not to be outdone, House Democrats are now calling for a $40 billion cut.

Dirty energy welfare defenders have, predictably, responded with ridiculous, Palin-esque denials of reality, but voter demands that wasteful spending be cut highlights the question: just how much of our tax money is going to ExxonMobil, Massey, etc.? With the new deficit hawks in Congress going after insignificant items like bottled water expenses, you'd think they'd want to know the size of the really wasteful stuff, right?

The problem is, we've long suspected that no one really knows how much of our money goes to dirty oil executives like Rex Tillerson and Gregory Boyce. There have been counts, ranging from $10 billion a year estimated by the Environmental Law Institute to the $52 billion a year advanced by Doug Koplow of EarthTrack. But do taxpayers even have a widely accepted, truly comprehensive inventory of how much of our money is being handed to the dirty energy lobby by politicians, including state-level subsidies, such as the $45 million that Virginia gives to the coal industry?

Andrew W
February 15, 2011

@Luke: So, fossil fuels have received $7 billion in subsidies during the last two years and solar and wind have received 10x as much: $70 billion?

Luke Divemaster
February 15, 2011

Part of the budget will be paid for by $3.6 billion in cuts to fossil fuel subsidies. Note: this figure seems to represent direct subsidies and may not include indirect subsidies, such as below-market royalties for oil and coal on federal land, sweetheart tax deductions, and public works projects, like dredging rivers, that largely only benefit fossil fuel companies. Still, it will be a fight. Expect to see those ads on TV about how coal keeps America working (underground and in dangerous situations).

Never had to dredge a river to install solar (that would make it unaffordable).

Andrew W
February 14, 2011

@ Anonymous: Natural gas electricity levelised costs range from $60 to $120 per mWh. Solar is $300 to $500 per mWh.

ANONYMOUS
February 14, 2011

Andrew_W, what do you have for natural gas peaking costs per MWh?

And the nuclear industry would not exist without the Price-Anderson Act.

Andrew W
February 14, 2011

@ Anonymous: Which solar plants will be completed with a $2.50/Watt cost structure?

It's still $4-$6/Watt for solar schemes.

ANONYMOUS
February 13, 2011

By the end of 2012 some solar PV plants of 20 MW-AC will be installed with a cost structure under $2.50/Watt. With conservative nat gas price and 20 year O&M assumptions, investing in a solar project is the obvious choice. Natural gas volatility ripples through most of the 20 years pro formas I have been seeing such that optimized solar PV is the clear winner in VERY high insolation areas of the U.S.

Andrew W
February 12, 2011

@ Joseph" Here are the costs of wind and solar:

http://www.eia.doe.gov/oiaf/aeo/pdf/2016levelized_costs_aeo2010.pdf

They are 3-5 times as much as our current costs for base power. They are not affordable or reliable. But, cheer on. Wind and solar have only grown in the few years BECAUSE of the subsidies - currently more than $40 billion in just two years.

Advanced nuclear is probably 20-30 years away.

Joseph Fournier
February 12, 2011

Given all the external costs associated with conventional electricity production - the Tax-payer saves money through renewable susidies! Money well spent, especially in light of the fact that subsidies & incentives for the US oil & gas industry is >2.5x that of renewables!

Joseph Fournier
February 12, 2011

Andrew, I see your same old comments all over, not just this site. You say the same empty rhetoric where ever you go.

Check this out: http://www.wind-energy-the-facts.org/documents/download/Chapter3.pdf

You use economics that you fail to understand Andrew. There is a reason why wind power is growing consistently for the past 15 years - cause people like throwing their money away! Well, that is what you are trying to convince the world of!!

It is simple Andrew, wind, solar, biomass etc in their present state are transitionary electricity generating technologies that will only continue to become more affordable - especially with the peaking in conventional hydrocarbon reserves.

Here is something for you to study in your spare time - General Fusion, Canada. Fully funded demonstration fusion power plant by 2013. Another is Bill Gate's TerraPower technology. Long term is advanced nuclear.

Andrew W
February 11, 2011

@joseph; It's is perfectly okay for you to be a cheerleader for solar and wind schemes. But, the math doesn't lie - they are NOT affordable. That's the solution to our energy challenges - not blindly supporting non-solution like wind and solar.

We need a breakthrough. We haven't found it yet and wasting money on wind and solar just delays that possibility. Our attention and resources should be seeking a solution - not over-hyped and under-performing wind and solar schemes.

Joseph Fournier
February 11, 2011

These series of interesting blogs have commented numerous times on the idea of subsidies to renewable energy. Here is an interesting publication that shows that $80B in subsidies were given to the US oil & gas industry between 2002 - 2008 vs $29B to renewables!

"Estimating US Energy Industry Subsidies 2002 - 2008"

Andrew W is a clanging symbol who cruises sites such as this to simply reiterate the same empty statements over and over again.

Andrew, please educate us dummies and cheer leaders on what your grand ideas are for our energy future!

Andrew W
February 11, 2011

@skoulouras: You may not want to compare solar to our baseload needs, but that what we need. We need to replace coal-generated electricity affordably. Baseload is tow-thirds of our electricity consumption. Solar can't do that.

Solar generated electricity is 3-4 times expensive as our current baseload electricity. It needs to improve before we waste more money on "development deals."

Spero Koulouras
February 11, 2011

The table in the DOE report cited by Andrew_W needs to be looked at correctly in context. It can actually be used to support the argument that the spread between Coal/NG and PV is narrowing.

Please note the authors of the report state:

"The availability of wind or solar will not necessarily correspond to operator dispatched duty cycles and, as a result, their levelized costs are not directly comparable to those for other technologies (even where the average annual capacity factor may be similar). In addition, intermittent technologies do not provide the same contribution to system reliability as dispatched resources, and may require additional system investment (not shown) to achieve a desired level of reliability"

PV is NOT A BASELOAD generation capability. It is a PEAKING technology which is very reliable when deployed in appropriate geographies, with duty cycles coincident with demand.

By far, the dominant factor in the cost of PV systems is the cost of panels. This report, from 2009, uses an installed capital cost of $376 per MWh. Current costs for utility-scale PV installs are much closer to $200 per MWh, with panel costs now under $2/Watt.

The appropriate comparison for PV is NOT against Baseload plants - it is against peaking plants, typically NG Turbines, with a reported levelized cost of $123-139/MWH.

So a more accurate comparison of the reported LCOE is ~$220 (2011 costs) for PV vs. $135 for NG or CCS Coal. This represents an 80% premium TODAY.

Note that any subsidies which the oil industry receives ARE IMPLICITLY INCLUDED in this study, since it is based on the market cost of fossil fuels. Removing subsidies to the fuel side of the equation would narrow the gap.

No subsidies to PV manufacturers are included, and the price of PV is still declining. By 2016 it is not unreasonable to predict $1.25/W installed costs.

Netting it out - The costs of PV are at a level where they are a serious, cost-competitive alternative to fossil fuels in sunny CA.

Phoenix Woman
February 10, 2011

Of course solar is becoming cheaper than gas. And of course, the usual cadre of right-wingers all reciting the same regurgitated talking points with their ultimate origins likely from somebody paid by dirty-energy industry execs like the Koch brothers have tried to take over the thread, as they do with all threads in this website. Must be part of the overall dirty-energy assault on clean energy, as well as on anything that threatens the taxpayer-funded gravy train subsidies going to the dirty-energy industry:

http://www.renewableenergyworld.com/rea/blog/post/2011/01/job-for-the-new-congress-read-the-latest-review-of-wasteful-welfare-for-dirty-energy

Luke Divemaster
February 10, 2011

One of my instructors in the RE degree program I'm enrolled in is an ex NASA scientist and a self-professed math nerd. I received A+s in both of his heavily math-weighted classes. I possess excellent math skills, always have.

I have PV systems on sale this week (and every week) if you care to save some money and help save the environment. Get in touch.

Luke Divemaster
February 10, 2011

In the past, (I'm currently enrolled in a RE degree program) I sold and installed millions of dollars worth of PV (really, I'm not prevaricating). I've had my feet put to the fire by very savvy engineers, professors, financial planners, CEOs and other extremely intelligent people to prove to them that the investment made financial sense. After demonstrating the ROI, payback, inflation hedge, added value to their home and long-term savings as well as environmental benefits, these level-headed people invested in a form of energy production that put smiles on their faces (and money saved back in their wallets). I've never had anyone complain that I did them wrong. Quite the contrary.

One fellow used his proprietary program to evaluate the ROI of his system (didn't trust mine, I guess). He came up with numbers better than mine (I should have asked him if I could use his program). He exclaimed in glee that, "this has a ROI of better than 12% and that's tax-free"! He bought two systems, one for his residence and one for his weekend getaway. Solar Rocks!

Andrew W
February 10, 2011

@Luke: No, you were speaking about people that unfortunately dies because of an accident - a gas explosion.

But, it's helpful to know that you don't believe in math or the conclusions of DOE and others. Solar electricity cost 3-4 times as much as natural gas generated electricity.

That's a fact:

http://www.eia.doe.gov/oiaf/aeo/pdf/2016levelized_costs_aeo2010.pdf

http://www.instituteforenergyresearch.org/2009/05/12/levelized-cost-of-new-generating-technologies/

Luke Divemaster
February 10, 2011

I'm speaking of renewable energy production not suntanning. People should have enough sense to wear SPF blocker, hats, clothing that covers exposed areas, etc.

You couldn't convince me in the half-life of plutonium that your views are valid.

Andrew W
February 10, 2011

@Luke: Oh, you want to be irrational? Here's some info on solar:

Skin cancer is the most common form of cancer in the United States. More than 3.5 million skin cancers in over two million people are diagnosed annually.

Each year there are more new cases of skin cancer than the combined incidence of cancers of the breast, prostate, lung and colon.

One in five Americans will develop skin cancer in the course of a lifetime.

Over the past 31 years, more people have had skin cancer than all other cancers combined.

Nearly 800,000 Americans are living with a history of melanoma and 13 million are living with a history of nonmelanoma skin cancer, typically diagnosed as basal cell carcinoma or squamous cell carcinoma.

Solar does kill.

-----

Solar schemes are NOT competitive with natural gas. They are 3-4 times as expensive.

Luke Divemaster
February 10, 2011

3 dead in Pa. natural gas explosion; 2 missing (AP)

@Anumakonda: It's great to hear that India has a Plan, complete with goals. America does not.

But, solar is NOT competitive with natural gas power. It's not even close. The headline and article are simply exaggerated "wishful thinking."

I wish we could get those lives back.
Solar doesn't kill.

Douglas Meyer
February 10, 2011

With respect to 65% efficient solar cells, that is, unfortunately, not possible. A quick look at the Shockley-Queisser theoretical PV cell efficiency, as derived from detailed balance recombination statistics, shows the peak efficiency of a single cell is limited to 30.8%. When the work of Green & Teidje et al, adding Auger recombination to the model, is included, the theoretical maximum efficiency achievable drops to 29.8%.

A PV battery (multiple PV cells in series which are often incorrectly referred to as multi-junction "cells") is considered, the story is a bit different. If a unlimited number of cells is connected in series, each with the maximum possible efficiency at the wavelength they are designed for over the entire AM1.5 spectrum, the maximum possible efficiency is about 60%. This model assumes no resistive losses in the cells or connections (typically tunnel junctions) between each cell.

We need to keep these facts in mind in order to inject reality in our arguments. Neither PV cells nor nuclear power plants will ever achieve 100% efficiency due to fundamental thermodynamic limits. State variable theory and the work of Gibbs still applies, no matter how much we may want to ignore them.

Andrew W
February 10, 2011

@Anumakonda: It's great to hear that India has a Plan, complete with goals. America does not.

But, solar is NOT competitive with natural gas power. It's not even close. The headline and article are simply exaggerated "wishful thinking."

Anumakonda Jagadeesh
February 10, 2011

It is exciting to find thar Solar competes with Gas in California. Hitherto the criticism on Solar PV is that the efficiency is low(Silicon) and the costof generation of power is high compared to Wind,Biomass,Microhydel etc.

In India The Government of India has drawn an ambitious plan to tap solar energy(PV).

Here are details:

The National Solar Mission is a major initiative of the Government of India and State
Governments to promote ecologically sustainable growth while addressing India's
energy security challenge. It will also constitute a major contribution by India to the
global effort to meet the challenges of climate change.

To achieve this, the Mission targets are:

• To create an enabling policy framework for the deployment of 20,000 MW
of solar power by 2022.
• To ramp up capacity of grid-connected solar power generation to 1000 MW
within three years – by 2013; an additional 3000 MW by 2017 through the
mandatory use of the renewable purchase obligation by utilities backed with a
preferential tariff. This capacity can be more than doubled – reaching
10,000MW installed power by 2017 or more, based on the enhanced and
enabled international finance and technology transfer. The ambitious target
for 2022 of 20,000 MW or more, will be dependent on the 'learning' of the first
two phases, which if successful, could lead to conditions of grid-competitive
solar power. The transition could be appropriately up scaled, based on
availability of international finance and technology.
• To create favourable conditions for solar manufacturing capability, particularly
solar thermal for indigenous production and market leadership.
• To promote programmes for off grid applications, reaching 1000 MW by 2017
and 2000 MW by 2022 .
• To achieve 15 million sq. meters solar thermal collector area by 2017 and 20
million by 2022.
• To deploy 20 million solar lighting systems for rural areas by 2022( Source: MNRE)

Dr.A.Jagadeesh Nellore(AP),India

alok misra
February 10, 2011

The point is that when all electronic devices have seen a fall of very large proportions wh not solar cells?Already there are cells that have 65% effeciency- true it is all in the lab.But then from lab to market ,things move pretty fast- we are not in 18th century. So CPV - or concentrated solar power with CSP combined, right now with current technology of cells is giving 75% effciency - an installation having 16 KW electric and 44 KW thermal costs some 88,000 USD.This thermal energy if used in airconditioning can can do the work for an area of some 10000 sq feets.Now if you work out the cost of electricity you will be surprised.
Tell me where we are on this technology!
You are wasting the infrared region of the sun's energy. Use it then tell me what happens!

ANONYMOUS
February 9, 2011

Tam Hunt states in comment 19 to his recent REW article:
http://www.renewableenergyworld.com/rea/news/article/2011/02/spain-and-portugal-lead-the-way-on-renewable-energy-transformation

"... So when a solar plant sells power to a utility, it sells power at a base price (the Market Price Referent generally) but can earn up to 3 times that base price for power produced on peak (noon to six during summer), which provides a net 30% boost to PPA prices on an annual basis for a good solar resource. "

I cannot readily find this "up to a factor of 3" times the MPR factor in any of the documentation on the MPR itself, but Tam probably understands the details governing these PPAs fairly well. When the deals are described as being below the MPR price, they probably still include such unenumerated bonuses. Given these obscure details it seems pretty hard to deduce what a PPA for solar PV would really cost in the absence of government subsidies. A little more transparency about the costs of CA's 33% RPS would seem warranted. There does not seem to be much evidence to support the claim that PV is approaching the affordability of natural gas yet.
Steven

Stephen Lacey
February 9, 2011

@James Stack -- I appreciate the comment and the criticism.

While we used "projected," "expected" and "estimated" to describe the comparative price outlined by the MPR, we could have much more accurately described how regulators determine the MPR through GHG offsets and other factors.

Thanks very much for providing the model details for those who want to take a look.

Andrew W
February 9, 2011

Thanks James. Why doesn't this website have this level of understanding?

The story should be retracted.

James Stack
February 9, 2011

This article and its title are hugely misleading. To begin with, California's MPR is NOT the "price of natural gas." It's an estimate of the cost of a natural gas power plant WITH GHG OFFSETS PURCHASED FOR ALL OF THE EMISSIONS IT GENERATES.

And since there is no functioning GHG offset market (certainly not a long-term forward market) the price of these offsets is an extremely aggressive estimate put together by a consulting company. If you download the MPR model (http://www.cpuc.ca.gov/PUC/energy/Renewables/mpr) you can see the details. It has the price of offsets getting to over $100/ton by 2032.

Also, the MPR that the solar contracts are being compared to is from 2009, and this model was calculated using NYMEX gas prices from summer 2009, when prices were significantly higher than they are today.

In reality, the MPR is a better proxy for relatively low priced renewables -- landfill gas, maybe geo. As such, it's still really impressive that these PV contracts came in at below that price. (I am fairly skeptical that they can actually get built and financed at these super low prices, however.) But let's not kid ourselves -- these are still way more expensive than a simple natural gas project being built today.

ANONYMOUS
February 9, 2011

I believe the point is that as fuel prices continue to rise to support the pay-as-you-go and burn-what-you-can mindset, the PV panels will still be producing for a past realized cost.

Andrew W
February 9, 2011

@iSupportSolar:

1. Solar has little impact on our use of oil. We don't use oil to generate electricity. If EVs were powered by solar-electricity they would costs 3 times as much to operate. Who is going to pay for that?

2. Supply of Natural Gas is at record levels and the price is only $3 MMBtu now. Why will it reach $12+ in the "relatively near future?" What's your basis in that assertion?

It's fine to be a solar cheerleader, but please use some verifiable math. Please.

Chris May
February 9, 2011

Feel free to embed these fossil fuel price charts wherever you like - http://oil-price.net/dashboard.php?lang=en#COMMODITIES.

The fiscal beauty of renewable generated electricity is that you can guarantee what your cost per kWh will be in 10 years.

We will reach $12+ MMBTu natural gas and $140+ oil again in the relatively near future.

Hedge your obviously blatant financial risk now and invest in the renewable infrastructure.

Phil Manke
February 9, 2011

I wonder what the tax subsidies to the wealthy strata of this country would scale to as a per-cent of energy costs.

If we were in a closed bubble, would you rather have some cumbustible, toxic materials providing your energy or solar thermal and PV? We may be, if we are willing to see, seeing that we are most certainly in a twin walled bubble, one of insistant profiting from overuse of finite resources, and the bubble of sustainable personal life supporting substances.

Andrew W
February 9, 2011

@Keller: Thank-you for your honest comments. Solar is over-hyped and it will not solve our energy needs.

@Anonymous: The cost of natural gas has dropped 50% in the last few years. In California subsidies for solar schemes may be as much as 50% of their capital costs, if you include Federal and State incentives. That doesn't make solar affordable, it just hides the fact that it isn't competitive.

DOE has it right - solar schemes will still cost about $.20 per kWh by 2016. We should wait for solar to achieve affordability - $.08 per kWh before wasting taxpayer dollars.

ANONYMOUS
February 9, 2011

If you're going to talk solar, at least get the terminology straight. Solar trough systems are not PV systems: PV refers to flat plate collectors using the photoelectric principle, which as it turns out is currently less expensive than solar-thermal trough systems. Not that we should dismiss CT entirely since it can be readily hybridized with NG resulting in a blended lower cost and firmer capacity, and CT trough can go on commercial rooftops.

The point of local mid-scale PV is that it can be implimented without any infrastructure cost and minimal land costs. All that is needed is available roof-top space for lease; no easments, no expropriations, no new distribution equipment, etc. One subtlty of the SCE analysis is that solar capacity substantially tracks peak loads in southern California so that solar may actually operate at levels well in excess of the local distribution transformer capacity; in other words, LDU build out which would otherwise be needed to meet rising demand could be avoided (and unpopular expropriations avoided). One of the best attributes of commercial rooftop solar power is that it can be deployed in months. All others take years and 'time is money'.

Trends to consider: the cost of PV is going down while the cost of NG power is going up. In the time that solar capex dropped 50%, NG capex went up 40%. The cost of sunshine is fixed; while the cost of NG is drifting downward, as soon as the US fixes its economy, the cost of NG will reset to the historical trendline (could be 3X by 2020).

Michael Keller
February 9, 2011

The whole idea of "zero" emissions is complete nonsense and one of the many "red herrings" routinely used by some of the less-than-honest members of the renewable energy mafia.

The "he-gets-more-subsidies-than-me" is another dopey argument. There is virtually no way to make any meaningful "apples-and-apples" comparison because of the vast expanse of the world of "subsidies".

As there is virtually no way to attach any meaningful numbers on the value of reduced CO2 emissions, concentrate on whether or not your product can provide energy at market prices. If you can, you have a winner. If not, work harder at reducing costs but kindly refrain from forcing everybody to continually subsidize your product. In parallel with that, remove all industry "well fare queens" from the federal pig trough.

ANONYMOUS
February 9, 2011

Renewable energy needs subsidies to compete. So what? Solar projects receive a 30% tax credit with a cap on the amount, coal projects receive a 30% tax credit with no cap if they manage to capture 2/3 of the CO2 produced. Solar recieves a PTC of $2 per 100 kWh, coal receives $2 for every ton burned (roughly $0.81 per 100 kWh or $2.31 with CCS). Solar pays a 15% surtax on the equipment they import, coal and gas do not. And as always, incidental medical expenses are no-charge.

Not suprisingly, the old dogs feed from a bigger dish and then help themselves to their neighbors food. The comparison to natural gas actually ignores a large number of benefits. SCA has a congested NG supply. Adding power generation into the NG load, increases the demand and drives up gas prices for everyone. But NG benefits from tax spending every inch of the way from before it is found all the way up to where it is burned and converted into electricity and then transported somemore. In addition to various eminent domain freebies, the cost of the infrastructure they need is distributed over the entire consumer base. Local mid-scale solar projects receive no such benefit. Nor do they receive any local tax holidays for their mere presence. Suprisingly, they don't even receive a tax credit for the amount of sun they burn. The consumer's cost for NG based power is roughly divided into 2 parts electricity bill, 2 parts tax bill and 1 part gas bill.

Rolf says "Stop the subsidies and the solar business gets as dark as those panels after a desert dust storm.". He might also say 'stop the subsidies and the clean coal business gets as dark as a miner's lung'. Reality is, even with all of the great subsidies available, the clean coal industry is still in the dark ages.

The 'clean' thing about NG is that it burns much cleaner than coal, not that they actually strive to minimize emissions. Note: clean coal with 65% CO2 capture would actually have a lower GHG impact than NG.

Andrew W
February 9, 2011

The commentors seem to know much more about Solar than the author. Solar is NOT competitive with natural gas. it's a silly assertion and at best "wishful thinking."

We need less cheerleading and more accurate reporting.

Luke Divemaster
February 9, 2011

"Solar receives more than 30% in subsidies". The customer receives a 30% federal tax credit only if they owe enough taxes to receive it.

"subsidies the solar PV vendors receive". What subsidies do vendors receive?

Solar(and wind and ocean, also forms of solar energy)energy is plentiful, nothing needs to be destroyed to harvest it. Whatever anyone else is for can't make that claim.

Sam Harriman
February 9, 2011

Excellent news. Great Piece Stephen. Thanks much

Luke Divemaster
February 9, 2011

"Solar receives more than 30% in subsidies". The customer receives a 30% federal tax credit only if they owe enough taxes to receive the credit.

"subsidies the solar PV vendors receive". What subsidies do the vendors receive?

Michael Keller
February 9, 2011

If one simply looks at raw costs with no subsidies of any kind, a new gas turbine profitably produces peaking power (2250 hours per year and $5/mmBTU natural gas) for about $140 per megawatt-hour. A concentrated solar trough produces power for something like $240 per megawatt-hour. PV would be similar and possibly a little higher. This analysis suggests that solar does not reach parity until gas is around $15 per mmBTU. These are hand grenade type numbers but they demonstrate that a very large differential does in fact exist.

If you would like a copy of the analysis, please send me an e-mail at m.keller@hybridpwr.com.

Without question, the developers of solar projects are absolutely relying on subsidies of various types because their product is not inherently competitive. Those who live by subsidies can easily die by subsidies when the next administration shows up or economics overtake the politicians urge to give away other peoples money to buy votes.

While the capital cost of solar energy units are dropping, the production costs of new gas turbines are also dropping because the machines are becoming more efficient. Further such units can and do provide power whenever it is needed.

Andrew W
February 9, 2011

Solar isn't competitive. It is over-priced and under-performing.

ANONYMOUS
February 9, 2011

Ah, the hidden costs of true energy production- interesting subject that we really need to look at if we are to be responsible about this subject. If you actually remove all the tax breaks and subsidies that fosil fuel recieves from (all)goverments- Solar is MUCH less expensive already. Not to mention that someone pays the very high human cost in addition to the dollar amnount. Think about it- exactly how to you place a value on your health? Is it 2 or 5 or maybe 7 cents a Kwh? Fossil fuels including oil, natural gas and coal received more than twice the level of subsidies that renewable energy sources got from the U.S. government (not even taking into account all the other goverments around the world)in fiscal 2002 through 2008, the Environmental Law Institute said. Since this report came out, the focil fuel industry has enjoyed MUCH more tax advantages- there is a reason that oil companies report record earnings year after year- more than the GDP of almost any country- You are paying for it in your increased taxes and increased health costs, you just don't look closely enough...

Douglas Meyer
February 9, 2011

It's always interesting to watch renewable energy technology receive criticism for subsidies while the subsidies to nuclear, coal, natural gas, petroleum, etc. are conveniently overlooked.

The running joke still stands: When renewable energy technology is cost competitive without subsidies, it will be the only energy technology without subsidies.

Based on recent advances, that day is clearly starting to dawn.

Sean Casten
February 9, 2011

Comparing solar to the MPR doesn't prove much, for the simple reason that energy markets are so rife with subsidies that price comparisons say little about fundamental economics. To take an obvious point, you can't look at the economics of solar without factoring in tax credits that gas doesn't receive. (Indeed, at $6000/kW, a 30% treasury grant under Section 1603 is arguably worth more than the entire installed cost of an equivalent kW of gas).

I don't raise to knock solar - simply to caution against drawing logical conclusions about fundamental economics based on power purchase agreements.

Lawrence Carroll
February 9, 2011

One of the subsidies to natural gas that isn't mentioned is the health costs to residents, users of water (everyone), hospital personel etc. from the use of trade-secret toxic chemicals and diesel fuel in "fracking." These fluids contaminate the ground water, and people . . .

This newsweek article details an instance of a IC health worker who became very ill after being exposed to a patient whom she was tending to who himself was caught in a "fracturing-fluid" spill. Effects: swollen liver, erratic blood counts vomiting, etc. etc.

http://www.newsweek.com/2008/08/19/a-toxic-spew.html

More links:

http://www.popularmechanics.com/science/energy/coal-oil-gas/the-hard-facts-about-fracking
http://www.ens-newswire.com/ens/feb2011/2011-02-04-092.html
http://climateprogress.org/2010/12/03/disclosure-of-chemicals-in-gas-fracking-advances/

In addition, drilling for natural gas can release methane -- the most potent greenhouse gas -- and thus offset any possible benefit in that regard that natural gas is said to have . . .

John Ihle
February 9, 2011

In the 80's electricity produced from wind was over 30 cents/kwhr. It was investment prompted by subsidies that's brought the cost down substantially to where it is competitive with new fossil fired generation. Solar technology is incredibly interesting and cost projections predict costs for solar will be coming down significantly over the next decade. Guess what? It don't happen without subsidies. It's not as "free a market" system as many would like others to believe. Federal and state dollars and incentives for the energy industry over the last several decades (and currently) have by far gone towards traditional energy sources such as clean or cleaning up coal and gas. You take out the subsidies, which should include the cost of defending oil, it would likely drive the cost of energy up significantly. All energy is subsidized. Renewable energy subsidies also mean job creation and an investment into our country's future. Kudo's to (some) forward and smart thinking legislators and regulators.

rolf westgard
February 9, 2011

There are reasons solar provides only one tenth of one percent of our electric grid power, and they relate to capacity value, capacity factor, and cost. Stop the subsidies and the solar business gets as dark as those panels after a desert dust storm.

ANONYMOUS
February 9, 2011

Andrew_W writes in comment #3:
"Solar receives more than 30% in subsidies and the $.02 per kWh."

Presumably by "the $.02 per kWh" he is referring to the production tax credit (PTC), which funds wind, geothermal, and some other resources at 2.2 cents/kWh for the first 10 years of production. My reading of presumably the latest version of the law, reflected in this:
http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US13F
is that solar does not now qualify for the PTC although it did for a brief time under earlier versions of the law. It probably does, however, get a ~30% subsidy from the federal government, and perhaps more from selected state governments.
Steven

Joseph Fournier
February 8, 2011

I appreciate the concept of solar PV as hedging against future high electricity prices from NG.
1.) Shale NG production reduction rates are higher than conventional fields;
2.) Export LNG facilities such as Kitimat LNG are set to shift the paradigm on LNG as a true international commodity - further increasing the prospects of future escalations in NG prices;
3.) Life cycle analysis such fail to take into account the offsetting of additional economic costs associated with reduced NOx/SO2 emissions and improvements in air quality by deploying non-combustion based power generating capacity.

Andrew W
February 8, 2011

Solar receives more than 30% in subsidies and the $.02 per kWh.

The cost comparison is likely for peak power (daytime) and not natural gas baseload pricing. That would probably put the price at $.15 per kWh.

The headline for this article is inaccurate and has no foundation.

José Manuel Silva Norinho
February 8, 2011

Here in Europe, coutries are investing a lot in solar power, but it is higlly subsidised and we don´t know waht is the real cost per Kwh as it seems to be in America. For investers it seems to be a good business, but not so for consumers who have to pay for the subsidies to the power companies. In Portugal, only 40% of every bill is related to consumption, the rest are taxes and the mentioned incentives to the companies.

ANONYMOUS
February 8, 2011

Ideally, this story would mention the market price referent (MPR) value as well as the amount of subsidies the solar PV vendors receive so readers could better evaluate the claim of the title.

CA's MPR seems a bit high given the decline in natural gas prices. Apparently a 20 year contract value starting in 2011 is ~10.1 cents/kWh:
http://www.cpuc.ca.gov/PUC/energy/Renewables/Feed-in+Tariff+Price.htm

Steven

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Stephen Lacey

I am a reporter with ClimateProgress.org, a blog published by the Center for American Progress. I am former editor and producer for RenewableEnergyWorld.com, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep...