Solar PV at Grid Parity in 10 States According to Deutsche Bank

Photo Source: NREL

With installed system costs declining to $3 per Watt Deutsche Bank (DB) finds that solar photovoltaic systems can produce electricity at or below grid prices in 10 states.  The DB Market Research Report: Distributed Generation to Herald New US Growth Era finds that grid parity already exists for residential and commercial systems in the following states:

 States at Grid Parity for Solar Systems

Residential Commercial
 1 Hawaii Hawaii
 2 California California
 3 New York New York
 4 Connecticut Connecticut
 5 Nevada Massachusetts
 6 Vermont Arizona
 7 New Mexico Vermont
 8 Arizona New Mexico
 9 New Hampshire New Hampshire
 10 New Jersey Nevada

The DB analysis assumes that system costs are offset by the 30% Federal Investment Tax Credit (ITC), but does not offset the cost of electricity with any other federal or state incentives.  The Levelized Cost of Energy (LCOE) for solar systems in these states is between 11-15 ¢/kWh while the price of electricity is between 11-37 ¢/kWh.  DB also finds that an additional 11 states will reach grid parity once installed prices fall another 50¢ to $2.50 per Watt.  Though panel prices have accounted for much of the decrease in system costs they make up less than half of the cost of a typical installation.  Researchers find ample room to lower the balance-of-system, or soft costs to further reduce overall installed costs.  A recent report from the Department of Energy found that balance of system costs are five times higher in the U.S. than Germany, which has over 35 GW currently installed, indicating there is room for further cost reductions (Revolution Now: The Future Arrives for Four Clean Energy Technologies).

Fewer states have reached grid parity when displacing electricity supplied at lower industrial rates.  Though larger industrial systems typically have lower installed costs due to economies of scale, residential and commercial systems can achieve greater savings because they are displacing higher cost electricity.  Currently, DB finds that four states are at grid parity for industrial systems: Hawaii, California, Massachusetts, and Connecticut.  Though other states are close to reaching grid parity – Xcel energy recently proposed to the Colorado Public Utilities Commission that it triple the amount of solar on the grid in Colorado, installing an additional 170 MW of utility scale solar.  Xcel found in the current round of bidding that solar was cost competitive with natural gas power generation; purely on a price basis, without other incentives (Xcel Energy hopes to triple Colorado solar, and wind power).

The increasing competitiveness of solar will lead to just under a six-fold increase in solar PV installed in the U.S. over the next three years according to DB.  The U.S. currently has 8.5 GW of solar installed; DB projects that an additional 8.0 GW in 2014, 12.0 GW in 2015, and 16.0 GW in 2016 for a total installed base of 49 GW by the end of 2016.  In addition to falling panel prices DB cites lower financing costs, and the push to install solar systems in advance of the 30% Federal Investment Tax Credit dropping to 10% after 2016.

Solar is also poised to expand growth globally.  In their second quarter solar industry outlook DB finds that 10 major markets around the world are already at grid parity.  The report (Solar Industry – Q2 Preview: Improving Fundamentals Outlook) also finds that solar could become competitive in another 10-20 markets over the next three years.


Wasted Energy: 2012 U.S. Energy Flows

Source: Lawrence Livermore National Laboratory

Source: Lawrence Livermore National Laboratory

Lawrence Livermore National Laboratory recently released the 2012 U.S. Energy Flow Chart.  The chart shows how energy flows through major sectors of the U.S. economy, and how efficiently that energy is used.  Most striking is that overall the U.S. is only 39% efficient at converting energy into useful services. Put another way, it takes over 2.5 units of energy to generate 1 unit of useful energy services.   Most of the rejected or wasted energy is in the form of waste heat.  In the electric generation sector transmission and distribution (T&D) losses are also a major source of rejected energy.  The Energy Information Administration (EIA) estimates that T&D losses average about 7% in the U.S.. Though there is room to increase efficiency in every sector, the greatest opportunities lie in the electric generation and transportation sectors.

Where there is significant waste, there is also significant opportunity.  Cogeneration or combined heat and power (CHP) has great potential to increase overall efficiency.  Where buying electricity from the grid and generating hot water or steam from a boiler is about 50% efficient, CHP systems are up to 80% efficient at providing both services.  This explains why CHP is increasingly popular, particularly in industrial and institutional settings where full advantage can be taken of both the electrical and heat outputs.


Source: U.S. Environmental Protection Agency

Other highlights from 2012 include:

  • Overall energy use was down 2.2 Quads in 2012
  • Natural gas use rose in 2012 while coal and oil use both decreased
  • Wind power made the greatest overall gains in 2012, adding .19 Quads of generation
  • Solar had the greatest percentage increase rising 49%
  • Shutdown of 4 nuclear power plants accounted for the first measurable decrease in nuclear power in a decade