TODAY’S STUDY: BIG SOLAR NOW – PLUNGING COSTS, SKYROCKETING GROWTH
Utility-Scale Solar 2014; An Empirical Analysis of Project Cost, Performance, and Pricing Trends in the United States
Mark Bolinger and Joachim Seel Energy, September 30, 2015 (Lawrence Berkeley National Laboratory)
Other than the nine Solar Energy Generation Systems (“SEGS”) parabolic trough projects built in the 1980s, virtually no large-scale or “utility-scale” solar projects – defined here to include any groundmounted photovoltaic (“PV”), concentrating photovoltaic (“CPV”), or concentrating solar thermal power (“CSP”) project larger than 5 MWAC – existed in the United States prior to 2007. By 2012 – just five years later – utility-scale had become the largest sector of the overall PV market in the United States, a distinction that was repeated in both 2013 and 2014 and that is expected to continue for at least the next few years. Over this same short period, CSP also experienced a bit of a renaissance in the United States, with a number of large new parabolic trough and power tower systems – some including thermal storage – achieving commercial operation.
With this critical mass of new utility-scale projects now online and in some cases having operated for a number of years (generating not only electricity, but also empirical data that can be mined), the rapidly growing utility-scale sector is ripe for analysis. This report, the third edition in an ongoing annual series, meets this need through in-depth, annually updated, data-driven analysis of not just installed project costs or prices – i.e., the traditional realm of solar economics analyses – but also operating costs, capacity factors, and power purchase agreement (“PPA”) prices from a large sample of utility-scale solar projects in the United States. Given its current dominance in the market, utility-scale PV also dominates much of this report, though data from CPV and CSP projects are presented where appropriate.
Some of the more-notable findings from this year’s edition include the following:
• Installation Trends: Among the total population of utility-scale PV projects from which data samples are drawn, several trends are worth noting due to their influence on (or perhaps reflection of) the cost, performance, and price data analyzed later. For example, the use of tracking devices (overwhelmingly single-axis, though a few dual-axis tracking projects entered the population in 2014) continues to expand, particularly among thin-film (CdTe) projects, which had almost exclusively opted for fixed-tilt mounts prior to 2014. The quality of the solar resource in which PV projects are being built in the United States has increased on average over time, as most of the projects in the population (>90% in MW terms) are located in the Southwest where the solar resource is the strongest. That said, the market has also begun to expand outside of the Southwest, most notably in the Southeast. The average inverter loading ratio – i.e., the ratio of a project’s DC module array nameplate rating to its AC inverter nameplate rating – has also increased among more recent project vintages, as oversizing the array can boost revenue, particularly when time-of-delivery pricing is used. In combination, these trends should drive AC capacity factors higher among more recently built PV projects (a hypothesis confirmed by the capacity factor data analyzed in Chapter 5). Finally, 2014 also saw three new large CSP projects – i.e., two 250 MW trough projects and one 377 MW solar power tower project – achieve commercial operation; in contrast, no new CPV plants came online in 2014.
• Installed Prices: Median installed PV project prices within a sizable sample have steadily fallen by more than 50% since the 2007-2009 period, from around $6.3/WAC to $3.1/WAC (or $5.7/WDC to $2.3/WDC, all in 2014 dollars) for projects completed in 2014. The lowest-priced projects among our 2014 sample of 55 PV projects were ~$2/WAC, with the lowest 20th percentile of projects having fallen considerably from $3.2/WAC in 2013 to $2.3/WAC in 2014. The three large CSP projects that came online in 2014 were priced considerably higher than our PV sample, ranging from $5.1/WAC to $6.2/WAC.
• Operation and Maintenance (“O&M”) Costs: What limited empirical O&M cost data are publicly available suggest that PV O&M costs appear to have been in the neighborhood of $20/kWAC-year, or $10/MWh, in 2014. CSP O&M costs are higher, at around $40-$50/kWACyear. These numbers include only those costs incurred to directly operate and maintain the generating plant, and should not be confused with total operating expenses, which would also include property taxes, insurance, land royalties, performance bonds, various administrative and other fees, and overhead.
• Capacity Factors: The capacity-weighted average cumulative capacity factor across the entire PV project sample is 27.5% (median = 26.5% and simple average = 25.6%), but individual project-level capacity factors exhibit a wide range (from 14.8% to 34.9%) around these central numbers. This variation is based on a number of factors, including (in approximate decreasing order of importance): the strength of the solar resource at the project site; whether the array is mounted at a fixed tilt or on a tracking mechanism; the inverter loading ratio; and the type of modules used (e.g., c-Si versus thin film). Improvements in the first three of these factors have driven capacity-weighted average capacity factors higher by project vintage over the last three years – e.g., 29.4% among 2013-vintage projects, compared to 26.3% and 24.5% for projects built in 2012 and 2011, respectively. In contrast, two of the new CSP projects built in recent years – a trough project with storage and a power tower project – generated lower-than-expected capacity factors in 2014, reportedly due to startup and teething issues. Performance has subsequently improved at both projects during the first six months of 2015 (compared to the same period in 2014). Likewise, the two CPV projects in our sample seem to be underperforming, relative to both similarly situated PV projects and ex-ante expectations.
• PPA Prices: Driven by lower installed project prices, improving capacity factors, and – more recently – the rush to build projects in advance of the scheduled reversion of the 30% investment tax credit (“ITC”) to 10% in 2017, levelized PPA prices for utility-scale PV have fallen dramatically over time, by a steady ~$25/MWh per year on average from 2006 through 2013, with a smaller price decline of ~$10/MWh evident in the 2014 and 2015 samples. Some of the most-recent PPAs in the Southwest have levelized PPA prices as low as (or even lower than) $40/MWh (in real 2014 dollars). At these low levels – which appear to be robust, given the strong response to recent utility solicitations – PV compares favorably to just the fuel costs (i.e., ignoring fixed capital costs) of natural gas-fired generation, and can therefore potentially serve as a “fuel saver” alongside existing gas-fired generation (and can also provide a hedge against possible future increases in fuel prices).
Looking ahead, the amount of utility-scale solar capacity in the development pipeline suggests continued momentum and a significant expansion of the industry through at least 2016. For example, at the end of 2014, there was at least 44.6 GW of utility-scale solar power capacity making its way through interconnection queues across the nation (though concentrated in California and the Southwest). Though not all of these projects will ultimately be built, presumably those that are built will most likely come online prior to 2017, given the scheduled reversion of the 30% ITC to 10% at the end of 2016. Even if only a modest fraction of the solar capacity in these queues meets that deadline, it will still mean an unprecedented amount of new construction in 2015 and 2016 – as well as a substantial amount of new data to collect and analyze in future editions of this report.