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
|3||New York||New York|
|9||New Hampshire||New Hampshire|
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.