The Obama administration first unveiled its SunShot Initiative in 2011, targeting 75 percent cost declines for large-scale solar systems over the course of 10 years. At the time, the goal was seen as “very aggressive,” according to Minh Le, who managed the initiative as the director of the Department of Energy Solar Energy Technologies Office.
“The resounding feedback we got from the industry was…that we were crazy,” said Le.
But time proved the DOE right. Ten years later the solar industry has done even better than anticipated: Large-scale solar prices reached SunShot’s $1-per-watt target three years ahead of schedule, even as the Trump administration shifted the department's focus and imperiled the formal program.
Now that President Joe Biden has once again made clean energy a federal priority, the DOE has launched a new price goal: to cut large-scale solar costs by 60 percent in the next decade, up from a target of 50 percent cuts established just before Trump took office. But the challenges in reaching that goal may be even more significant than those of the original SunShot effort.
Though solar has proven itself to be economically competitive with traditional generation in many regions, it still accounts for only about 2 percent of current U.S. electricity generation. The Biden administration hopes to generate all U.S. electricity with clean sources by 2035 — a goal that will require deployment of hundreds of gigawatts of new solar and installations at a clip that is five times faster than the current pace, according to the Department of Energy.
And while last decade’s solar installations were competing against struggling coal generators, more and more of which have been shuttered in recent years, this decade’s solar is largely competing with natural-gas plants that many utilities argue are needed to stabilize an increasingly green-powered grid.
This means that price will only account for a portion of reaching the Biden administration’s ambitious renewables goals.
“I think solar has already proven it can be very competitive,” said Le. “The next phase we’re looking at is more about integration: Can solar be a supportive actor as the nation transitions toward more renewable energy?”
Le joined the Department of Energy from Massachusetts.-based Evergreen Solar, a maker of panels that would later declare bankruptcy. This gave him an industry insider’s insight into just how aggressive SunShot’s $1-per-watt target was at the time.
“Having just come from a solar manufacturer, I was really shocked by that target, because I knew our cost stack in the U.S. was already — just for the module itself — higher than the goal for the entire install costs,” he said.
Those costs are no longer shocking.
“If the last 20 years have taught us anything, it’s [to] never bet against any cost goals as too ambitious,” Ravi Manghani, head of solar research at Wood Mackenzie, said in an email.
In 2030, Bloomberg New Energy Finance expects the average large-scale solar project in the U.S. to reach $23 per megawatt-hour. Wood Mackenzie projects $22 to 25 per megawatt-hour, costs that include the benefits of the federal Investment Tax Credit. The Department of Energy is targeting $20 per megawatt-hour in 2030 without incentives such as the ITC, setting its goal lower than those in analysts' forecasts.
Despite that, some see DOE’s new target as not being “particularly ambitious,” Tara Narayanan, a BNEF solar analyst who focuses on North America, said in an email. “Some other countries are already there.”
In the U.S., module prices account for a larger portion of a solar system than in other countries. Trade barriers and a complex tax credit means U.S. prices have diverged from global trends, said Narayanan.
That indicates the challenges ahead for the U.S. as it aims to drive down price while also concentrating on made-in-America equipment and updating the way the grid functions to support solar.
Becca Jones-Albertus, current director of the DOE’s Solar Energy Technologies Office, told Canary Media that driving down costs will help accelerate solar deployment to meet the administration’s overarching clean energy goals. The office sees its new target as “ambitious but achievable.”
Jones-Albertus says the DOE is targeting cost-cutting across the value chain. That means bringing down the price of components that make up a solar system, like inverters and racking. It also entails increasing module efficiency by layering materials to form what are called tandem solar cells, commercializing new materials or improving efficiency in already-widely-used technology.
Solar boosters are also planning for systems that have longer operating life spans, which lowers their overall costs. Jones-Albertus said the DOE is targeting 50-year life spans for utility-scale PV systems, a significant jump from the 25-year power-purchase agreements that most developers sign onto now.
These advances are unlikely to come as quickly as those that were achieved during the SunShot era, however, Jones-Albertus said. “The easy wins in cost reduction [and] the early wins we had at the start of the last decade — those are over.”
Too aggressive — or not aggressive enough?
Whether consistently falling solar costs will translate into consistently rising deployments of solar on the grid is also unclear. Price will play a role in getting there, according to experts like Narayanan and Le, but making sure solar has a place on the grid will be just as important.
“Solar is actually pretty cost-competitive in most power markets across the country today, and by the time you’re in the 2025 to 2030 window, it’s going to very much be competitive on a pure economics basis,” said Narayanan. “The question is really demand.”
Solar’s value to the grid decreases as it grows, as California’s solar-rich system indicates. Midday surpluses of solar power must be stored, exported or curtailed, unless electricity consumption can be shifted in ways to take advantage of the sun’s energy. Meanwhile, late afternoon and evening drops in solar generation must be covered by other generation sources — or with solar power stored in batteries or longer-duration systems — to meet the spikes in electricity demand that come as the sun sets.
Even considering continued price declines, there remains a big gap between market forecasts for U.S. solar growth and the rate of growth needed to meet the aggressive goals of the Biden administration. BNEF forecasts the U.S. will add 31 gigawatts of new solar in 2025, reaching 39 gigawatts of annual additions in 2030. That’s far from the levels required to meet 100 percent clean electricity. To get there will almost certainly require the implementation of additional policy levers.
“Whether the [cost] goal is too aggressive or not aggressive enough, only the future will tell,” said Le.
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