Distributed solar is here to stay, soon without subsidies
By Dexter Gauntlett, Navigant Research
Dexter Gauntlett is a Portland-based cleantech research analyst with Navigant Research. He’s also author of the report “Distributed Solar Energy Generation.” Reach him at email@example.com.
Five years ago, most people thought the only way solar power would be affordable in the United States was if it was installed in massive solar farms out in the desert.
A gold rush of plans for concentrating solar power and solar photovoltaic (PV) plants ensued, amounting to, at one point, applications for 24 GW of proposed utility-scale projects in California alone. Several of those projects have been completed, but the majority will never be, as the market has changed dramatically since then. The rapid decline in solar PV module prices, the emergence of residential financing models, and the prospect of eliminating new construction of costly transmission lines mean that, in a growing number of cases, distributed solar offers the most economical path for scaling cost-effective solar PV worldwide.
According to the Institute for Local Self-Reliance, solar PV systems installed at $5 per watt can only compete with grid electricity prices in the 16 largest U.S. metropolitan areas, including subsidies and assuming the availability of time-of-use pricing. The majority of U.S. residential systems are leased, meaning that buyers pay a fixed rate for electricity to companies such as SolarCity, which own the system and essentially become the customer’s “solar utility.” In most cases, the rate solar leasing customers pay is equal to or less than retail electricity prices they currently pay. Over the 20-year lease period, solar customers will pay significantly less for solar power than they would pay for grid-electricity dominated by fossil fuels.
In Germany, residential solar PV systems are being installed for less than $3 per watt, and in some cases closer to $2 per watt. The financial services firm UBS has forecast that 43 gigawatts (GW) of unsubsidized solar PV systems by 2020 could be installed in Germany, Spain and Italy due to high cost of electricity and advances in battery storage technology.
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