Tuesday, June 26, 2012

Stunning Fact: Solar In USA Will Exceed 17,000 Megawatts In 3 Years & Reshape Power Markets

If the US solar industry simply maintains its 2012 rate of solar installations for 2013 to 2015, the USA will have approximately 17,700 megawatts of solar by the end of 2015.  That would represent more than 1.7% of US installed capacity, generate about the same amount of electricity as five 600 megawatt nuclear plants, and produce annually the amount of electricity consumed by 2.9 million homes.  Here's the math:

The US is likely to see 3,300 megawatts of solar installed this year, bringing total solar capacity to 7,700 megawatts by the end of 2012.  Simply maintaining for 3 more years installation of 3,300 megawatts of solar would add another 9,900 megawtts from 2012 to 2015 and would bring total solar installations to 17,700 megawatts. Any growth in the amounts annually installed would push total solar capacity in the USA to about 20,000 megawatts in 3 years.

While solar produces little during the night (some concentrated solar thermal plants produce after the sun goes down)17,700 megawatts of solar would produce substantial electricity during the peak hours and especially during the 500 hottest hours of the year. In competitive wholesale markets, during the very hottest hours, peak prices can go to the equivalent of $1 or $3 per kilowatt-hour or even higher.

The addition of 17,700 megawatts of solar power will reduce peak power prices, especially during the 500 hottest and most expensive hours, saving consumers large amounts by creating lower market clearing prices that all consumers pay, whether or not they use solar power directly.  Indeed, in Germany, where the world's greatest concentration of solar exists, peak power prices have been cut by as much as 40% as a result of solar generation.

As in Germany and Italy, solar is going to reshape power generation economics in many markets in the USA within 5 years. Yet, when it does, more than a few will be just shocked.


  1. This is great news! Let's hope it trends even faster!

  2. "solar is going to reshape power generation economics "

    It is also going to "reshape" the electricity bill of consumers like it has done in Germany: up by a factor of 3.

    1. Jacob:

      We'll see soon enough on your prediction. You may want to check out the June 23rd Fort Worth Telegram article that documents how 100% renewable energy electricity products in Texas have declined in price to the 7 to 9 cent range, just a bit more than 100% fossil fuel prices. http://www.star.telegram.com/2012/06/22/4053186/savy-consumer-renewable-energy.html. That is remarkable given how low gas prices are right now.

      For customers whose retail supply comes from competitive wholesale markets, solar supply will cut the market price and save them money. It will do so by cutting prices in the hugely expensive 100 to 500 hottest hours per year. The price cut will apply to every kilowatt-hour clearing the market and its value will exceed the cost of the solar. Unlike Germany, where feed in tariffs exist, most of the cost of solar plants in competitive US markets is born by private investors and production tax credits. Solar credits may be included in utility bills. But they often represent a small portion of the total investment cost of a many solar systems.

      But in three years or less the answer will be clear.

  3. Solar PV may become profitable, i.e. cost efficient and competitive, depends on many factors, among them the cost of gas.
    I'm afraid that 100 or 500 hours a year of profitable production at peak demand time is not enough to cover instalation costs.

    Anyhow, we'll know, when, and if, all subsidies are stopped - instalation tax credits, production tax credits, refunds, feed in tariffs, stimulus money, green mandates.

    You can encourage a new industry with subsidies, but you cannot mantain subsidies forever. At this time, solar still depends on subsidies.

  4. The impact of market prices during peak hours on payback periods for solar can be substantial. In the Texas market which is experiencing sustained high peak prices, and then prices above $1 per kwh on many summer afternoons, the payback period for solar is slashed. Texas is the most extreme example. But peak prices in other markets also cut significantly payback periods. Such payments are not subsidies but pure market prices.

  5. I guess we'll just have to wait and find out how the world decides to shape it self. After all, the world is a business. Is it not? I'm just interested to see ten years from now how we'll be handling all this with an increased population, blown up economy (who knows maybe brought down) and all the other stuff thats going on. Lets just hope to go green! Great info John, I'll be back for more!

    -Sharone Tal

  6. First - the solar power is still supported by many subsidies - it's not purely commercial, sustained only by peak prices. It's subsidies PLUS peak prices that brings it to near profitabilty.

    Second: the peak prices themselves are caused by the the many regulatory obstacles that hinder conventional power plant expansion.

    If solar contributes to lowering peak prices it undermines it's own profits...
    On the other hand - high peak prices mean high consumer bills... that is - solar and high consumer bills are correlated.
    It's a very complicated environment.