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Back in 2011, the U.S. Department of Energy (DOE) began something called the SunShot Initiative. The intent was to set 2020 and 2030 targets making solar power more affordable in three categories: utility-scale generation, commercial, and residential.
Well, the DOE recently announced that we hit the 2020 goal for utility generation… three years early.
Now, these goals don't take subsidies into account. It's the actual technology that's getting more and more cost-effective.
In other words, solar power is quickly maturing.
Here's where it's going next…
Solar Power Costs Are Falling Quickly
The targets are set in something called a "levelized cost of energy" (LCOE). This measures the cost of electricity generated by solar energy systems in a way that is comparable to the cost of electricity from other sources.
The goal is to have solar become competitive with conventional power sources.
LCOE is calculated by combining the initial installation price with the present value of the power plant's lifetime operational expenses. That sum is then divided by the net present value of the power produced, as measured in kilowatt-hours (kWh).
The assumptions underlying the LCOE estimates are based on systems installed in an average U.S. solar resource location – represented by Kansas City, Missouri – and do not include either the federal investment tax credit (or ITC, which at 30% lowers the overall cost even further) or any state or local incentives.
The targets are derived from models developed by the National Renewable Energy Laboratory (NREL).
For 2020, the targets per kWh are: $0.06 for utility-scale generation; $0.08 for commercial; and $0.10 for residential. It's that $0.06 per kWh target that the DOE announced has just been reached.
While the commercial and residential goals are adjusted for inflation, the utility goal is not. That's because wholesale power prices have been virtually flat and have even declined from 2010 to 2017.
Relatively early in the process, it was apparent that the initiative was proceeding more rapidly than anticipated. As a result, goals for 2030 were introduced, designed to lower kWh costs to $0.03, $0.04, and $0.05 for utility, commercial, and residential, respectively – half the 2020 goal.
The longer-range goals also focused on a new objective – the reliability of electricity availability. SunShot is now working on advancing grid integration approaches to enable two-way power flows, increase demand response, and optimize charging of electric vehicles.
Such advances, combined with low-cost battery storage, could enable economically competitive solar to be more widely deployed nationwide, while also allowing a greater integration with other renewable power systems.
This latter point is something we've often discussed here in Oil & Energy Investor. As the new energy balance among distinct energy sources takes shape, the ability to integrate among them becomes particularly important.
Next Up: Expanding Access to Solar Power
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.