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October 16, 2015Solar Costs declining fast in USA
It is not a revelation that solar power prices and equipment costs have been dropping sharply over the last 5-6 years all over the world. But the quantum of the drop is a big surprise to almost everybody. A recent NREL study has found out that the solar PPA prices in USA has dropped to just 5c/kWh now, making it competitive with fossil fuel prices. The equipment cost has come down by 50% to $3/watt on average. This looks high to me, given that equipment and installations costs overall is just $1/watt in India now. This means there is a huge scope of decrease with NREL study showing the lowest cost at ~$2/watt and the prices were for 2014.
It is not only USA where the sharp drop in solar power prices has made it competitive with fossil fuels everywhere. India, Dubai, Jordan, UK and other places have also seen sharp price drops. Bloomberg has already found that wind power prices are now lower than fossil fuel prices in UK and Germany these days. Solar energy will soon reach that stage in a number of places. What is interesting is that fossil fuel prices are increasing, as increasing penetration of renewable energy sources decrease the capacity factor of fossil fuel powered power stations across the world. With the variable cost for wind and solar power plants being almost zero, it is very hard for fossil fuel plants to compete with RE in the power exchange markets.
Read more about US Installers here.
The NREL study has also found out that trackers now account for almost 50% usage in the USA market and the prices of the tracker projects are similar to that of the non-tracker projects. This is a bit strange finding to me. The capacity factors for solar projects have also seen an increasing trend with 2014 average coming to almost 29%, which is quite high. I think the major reason for this increase is the usage of trackers and the location of the plants in sunny locations in the southwestern USA.
Even with the reduction of the US ITC to 10% from 30%, I do not think that the growth of solar energy is going to slow down. Given the already low prices of solar power and continuous decreases expected over the coming years, the growth should continue at the rapid clip that is going on.