Solar: not as expensive as the WSJ thinks
The Wall Street Journal recently published an article called “Test Your Solar Power IQ,” that cites the cost of solar power at 25 cents/kWh, or more than double the cost of natural gas or coal.
Solar is actually a lot cheaper than that. It’s not the reporter’s fault. She got the figure from a national lab. And she’s not alone. If I had a nickel for every similar news account, well, our fundraising worries would be solved.
There’s a good reason for the lack of good, current information about solar’s costs. Solar used to be expensive. And from 2004 to the end of 2008, solar photovoltaic module prices largely trended up, not down. But since then, prices have come down 50-60%–and there’s more room for this trend to continue.
These new price points have triggered a veritable tsunami of new contracts and project development. It’s just that finding out what those contracts are for that’s difficult. The California Public Utilities Commission publishes a list of renewable energy contracts that have been submitted to the Commission for approval. The prices, however, are kept secret in order to increase competition. All the public knows is whether a contract is above or below the market price of bringing on a new combined cycle natural gas turbine. And more than 5 gigawatts of the 7+ gigawatts of solar contracts (and counting) are under the price of natural gas.
We get a little more information from some utility-specific programs. The Sacramento Municipal Utility District offered a standard offer contract, or feed-in tariff, for renewable energy priced at it’s time-differentiated cost of fossil fuel generation (i.e. lower costs when demand is low and power is plentiful, higher costs when demand is high and power is expensive). If you model their tariff on expected PV production, you get a figure around 14 cents/kWh. Even though the program was open to all renewables, it filled it’s entire 100 MW capacity with PV the day it opened.
Southern California Edison also has a voluntary renewable standard offer program, also priced at the avoided cost of natural gas (which, when modeled for expected PV production in SCE territory, comes out around 15 cents/kWh). This year, it sold out at 140 MW of PV contracts. I’ve been told (though unconfirmed) that SCE will move to competitive solicitation process for this program in the future in order to get more competitive pricing.
And Arizona Public Service, a utility more sophisticated than the average bear when it comes to solar, recently put out a request for proposals for small renewable generation. As a kindness to solar developers, the program is limited to bids under 15 cents/kWh. APS has seen enough to know that they will contract well below that price-point.
As the country takes up the debate of our energy future, it will be helpful for policymakers have better information about current costs of the renewable energy alternative. And the good news is that it’s only getting better–with the right policies supporting market development, solar can go a whole lot lower.