West / Regional Reports

Solar Is Nearly Competitive With Traditional Energy in Select Locations

August 17, 2009
/ Print / Reprints /
ShareMore
/ Text Size+

Solar energy has had an image as an impractical high-cost luxury. However, falling costs and time-of-use electricity pricing have now begun to help solar become competitive in select locations. Proximity to “grid parity” varies by location, and is closest for commercial rooftop installations in California, according to a new report from Lux Research called “The Slow Dawn of Grid Parity.”

Grid parity isn’t a single point in time, says the report, and parity for utility-scale generation remains a decade or more away. However, near-term viability in select applications will help lead to cost reductions and future universal grid parity.

“The solar industry is coming of age, and the metrics for judging solar technologies are shifting,” said Ted Sullivan, senior analyst at Lux Research, and lead author of the report. “Instead of upfront capital cost for adding generation capacity - or cost per watt peak ($/Wp) - the new standard is the levelized cost of electricity (LCOE).” Presented as cost per kilowatt-hour ($/kWh), LCOE measures the total lifetime cost of a solar installation. This shift enables a more direct comparison to conventional generation types, and enables more rigorous analysis of solar technology on the basis of life-cycle costs, payback period, and return on investment.

The report also provides executives and investors with data on the internal rate of return (IRR) of new solar installations by geography, application, and technology. “IRR is determined by comparing the LCOE in different countries, applications, and technologies against the specific subsidies and available retail rates of electricity,” explained Sullivan. “The higher the IRR, the higher the demand in that country, and the more attractive the investment. In subsidized markets, the internal rate of return can reach well in excess of 10 percent, actively fueling demand.”

Lux Research’s report derives its intelligence from conversations with 20 utilities, project developers, financiers, and tax experts. Among its conclusions are that select applications nearly enable grid parity today. Solar will converge with grid electricity rates in some situations, such as commercial roof decks in California at costs approaching $0.45/kWh. But grid parity comparable with utility generation costs of around $0.08/kWh remains a decade away for solar in most markets.

Subsidies are still the primary demand driver for new installations. Even where solar is far from grid parity, ongoing subsidies allow investors, businesses, and homeowners to earn positive IRRs from solar installations. These IRRs will boost demand, fueling further increases in scale and enabling the industry to continue cutting costs and innovating. This should drop future solar LCOEs and further accelerate grid parity.

However, premature views of grid parity could be counterproductive, says the report. Mounting fiscal pressure on debt-ridden governments could turn the political tide against solar subsidies, particularly if politicians take the stance that grid parity is a current reality.

For more information, visit www.luxresearchinc.com.

Publication date: 08/17/2009

Did you enjoy this article? Click here to subscribe to The NEWS Magazine

You must login or register in order to post a comment.

Multimedia

Videos

Image Galleries

2014 ACI Home Performance Conference

The 2014 ACI National Home Performance Conference & Trade Show was held in Detroit.

Podcasts

NEWSMakers: Doug Dougherty

Doug Dougherty, president and CEO of the Geothermal Exchange Organization (GEO) joins the program to discuss the latest happenings with GEO, including the drive to get included in state and federal definitions of renewable energy, plus the future of geothermal.  Posted on July 25.

More Podcasts

ACHRNEWS

NEWS 07-28-14 cover

2014 July 28

Check out the weekly edition of The NEWS today!

Table Of Contents Subscribe

R-22 PHASEOUT POLL

Some in the industry are calling for the EPA to halt production of R-22 as of 2015. What do you think?
View Results Poll Archive

HVACR INDUSTRY STORE

plumbing-hvac.gif
2014 National Plumbing & HVAC Estimator

Every plumbing and HVAC estimator can use the cost estimates in this practical manual!

More Products

Clear Seas Research

 

Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications, Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.

DON'T MISS A THING

Magazine image
 
Register today for complete access to ACHRNews.com. Get full access to the latest features, Extra Edition, and more.

STAY CONNECTED

facebook icontwitter iconyoutube iconLinkedIn i con