Solar energy currently generates .1% of the electricity used in the U.S. According to a study released today, this will change rapidly as the cost of electricity increases and the cost of solar energy drops.
The Utility Solar Assessment Study produced by Clean Edge and Co-op America finds that solar energy is already reaching cost parity with conventional sources in some areas of the U.S. where electric rates are highest. By 2015, this will be achieved in many more areas, including Boston, San Diego, and New York. By 2025, cost parity will be achieved throughout the U.S.
The implications of this are huge. The U.S. solar photovoltaic market now relies heavily on state incentives to lower the cost of solar energy. Many people utilize solar energy because it is “the right thing to do” or businesses like the positive publicity solar brings.
Unique Advantages of Solar Electricity
Solar energy does not have fuel costs, like power generated from coal, natural gas, oil, or nuclear energy. The maintenance costs of solar are relatively low , it can generate electricity at the point of use, and emits no carbon. Solar is ideally suited to produce peak electricity, when demand is highest on the power grid and utility companies pay the highest rates. This is also where there is the greatest growth in electricity demand.
“The daily and seasonal variation in grid load in the United States matches solar availability,” said John O’Donnell, executive vice president of Ausra. Solar effectively generates electricity when the rates and demand are the highest.
Action is Needed to Advance Widespread Use of Solar Energy
Large-scale use of solar energy depends on prices dropping to $3 per peak watt of electricity by 2018, according to the study. This involves quickly implementing advanced technologies in a cost-effective manner. Solar technology needs to be easier to install, thus reducing installation costs and other installations barriers.
Utilities have become more and more interested in solar energy. California is a great example, where many utilities have signed purchase agreements for solar plant output. The U.S. will also need trained workers, which is another opportunity for utilities to take the lead.
A large investment in solar energy is needed for 10% of U.S. electricity to be generated by solar energy by 2025. Utilities will need to invest between $26 and $33 billion per year, a pretty hefty sum. To put this number in perspective, utilities invested $70 billion in 2007 on new power plants and transmission and distribution centers.
Solar Regulation and Policy
There is currently a 30% commercial tax credit for solar energy, but it is set to expire at the end of the year. There are purchase agreements for 3.2 gigawatts of concentrated solar power during 2007, but these solar power plants cannot be constructed before the tax credit expires. A long-term extension of the renewable energy tax credit is needed for large-scale use of solar energy. Many states also have renewable portfolio standards, but a national renewable portfolio standard would also help strengthen the industry.