TODAY’S STUDY: THE PRICE OF BIG SUN

Utility-Scale Solar 2012; An Empirical Analysis of Project Cost, Performance, and Pricing Trends in the United States

Mark Bolinger and Samantha Weaver, September 2013 (Lawrence Berkeley National Laboratory)

Executive Summary

With a critical mass of new large-scale or “utility-scale” solar projects (including PV, CPV, and CSP) now online and in some cases having operated for a number of years(generating data in addition to electricity), the utility-scale sector of the solar market is ripe for analysis. This report, which is envisioned to be the first in an ongoing annual series, meets this need through in depth, data-driven analysis of not just installed project osts or prices – i.e., the traditional realm of solar economics analyses – but also operating costs, capacity factors, and power purchase agreement (“PPA”) pricesfrom a large sample of utility-scale solar projects in the U.S. (where utility-scale is defined as any ground-mounted project larger than 2 MWAC). As such, it provides a more-integrated and holistic view of the market than is commonly found.

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Given the nascent state of the utility-scale solar market, data availability is still, in places, an issue in this inaugural edition. Moreover, given its current dominance in the market, utility-scale PV also dominates much of this report, though more balanced coverage is expected in future editions, given that a number of large CSP projects are currently under construction. Despite these challenges, the report nevertheless paints a coherent picture that will be refined, enriched, and solidified over time as more data become available. Until then, some of the more-notable findings from this year’s report include the following:

• Installed Prices: Installed PV project prices have fallen by nearly one-third since the 2007-2009 period, from around $5.6/WAC to $3.9/WAC on average for projects completed in 2012 (with some projects higher and others lower). Most of the decline has been concentrated among projects using c-Si modules, as the gap between c-Si and thin-film steadily eroded over this period. In response to falling c-Si module prices, there has been a marked increase in the proportion of projects using c-Si (rather than thin-film) modules.

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• O&M Costs: Although O&M cost data are extremely limited at present, what little empirical data exist suggest that actual costs have largely been in line with pro forma operating cost projections gleaned from several bond offering prospectuses. For PV, O&M costs appear to be in the neighborhood of $20-$40/kWAC-year, or $10-$20/MWh. CSP O&M costs(for parabolic trough) are higher, presumably due to the plumbing and thermal components, and come in around $60/kWAC-year.

• Capacity Factors: Like insolation levels, PV capacity factors vary by region. They also vary depending on whether a project is installed at a fixed-tilt or uses a tracking device, with single-axis trackers able to achieve capacity factors in excess of 30% in some of the better locations (thus confirming the industry rule of thumb that single-axis tracking provides a 20% boost in output). In lieu of trackers, and enabled by the sharp decline in module prices, some projects have instead opted to oversize the PV array relative to the capacity rating of the inverters as a way to boost capacity factor. On the CSP side of the market, parabolic trough systems that have been operating in the U.S. for more than 20 years are still (in 2012) achieving capacity factors in excess of 20% (solar portion only, no storage), which is comparable to newer trough projects. Meanwhile, a pilot project for power tower technology has underperformed relative to expectations, but several much larger power tower projects under construction will soon test that technology on a truly commercial scale in the United States (several commercial power tower projects have been operating in the Mediterranean region for several years).

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• PPA Prices: Driven primarily by lower installed PV project prices (which, in turn, have been driven primarily by declining module prices), as well as expectations for further cost reductions in future years, levelized PPA prices have fallen dramatically over time, by $25/MWh per year on average. Some of the most-recent PPAs (for PV projects) in the West have levelized PPA prices as low as $50-60/MWh (in 2012 dollars), which, in some cases, is competitive with wind power projects in thatsame region. Solar appears to be particularly competitive when considering its time-of-delivery pricing advantage over wind (roughly $25/MWh inCalifornia at current levels of penetration).

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Introduction

Until the mid-2000s, large-scale solar projects primarily consisted of (and the corresponding term “utility-scale solar” most often referred to) concentrating solar power (“CSP”) projects using parabolic trough technology to produce steam and generate electricity; a number of such projects have been in operation in the United States since the 1980s. More recently, however, utility-scale solarincreasingly refers to large, centralized photovoltaic (“PV”) projects that sell wholesale electricity directly to utilities, rather than displacing on-site consumption (as has been the more-traditional application for PV). In the United States, utility-scale has been the fastestgrowing sector of the PV market, and now dominates: 2012 marked the first year that it captured the largest share of the overall PV market in terms of new MW installed, a distinction that is projected to continue through at least 2016 (GTM/SEIA 2013). Moreover, although a number of new CSP projects – featuring not just parabolic troughs but also newer technologies including compact linear Fresnel reflectors and power towers – have been built in recent years or are currently under construction, PV has largely surpassed CSP as the preferred utility-scale solar technology, with nearly five times as much PV as CSP capacity either currently operating, under construction, or under development in utility-scale configurations (SEIA 2013).

This growing utility-scale sector of the solar market is ripe for analysis. Historically, empirical analyses of solar economics have focused primarily on up-front installed costs or prices(see, for example, Barbose et al. 2013), and principally within the residential and commercial PV sectors.

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But as more utility-scale projects have come online and begun to acquire an operating history, a wealth of other empirical data has begun to accumulate as well. Utility-scale solar projects can be mined for data on not only installed prices, but also project performance (i.e., capacity factor), operations and maintenance (“O&M”) costs, and power purchase agreement (“PPA”) prices ($/MWh) – all data that tend to be unavailable publicly, and also less meaningful,1 within the residential and commercial sectors.

The operating history of utility-scale PV in the U.S. has been brief, however. According to GTM/SEIA (2013), more than 2.8 GWDC of the 3 GWDC of utility-scale PV online in the U.S. at the end of 2012 were built in 2010 (0.27 GWDC), 2011 (0.76 GWDC), and 2012 (1.78 GWDC). The back-loaded nature of this progression, along with ongoing strong deployment in 2013 and beyond, suggests that while there are currently useful data to analyze, data availability will grow rapidly in the coming years.

As such, this report is the first edition in what is envisioned as an ongoing annual series that will, each year, compile and analyze the latest empirical data from the growing fleet of utility-scale solar projects in the U.S. In this inaugural edition, we define “utility-scale” as any groundmounted project with a nameplate capacity of 2 MWAC or larger. Within this subset of projects, the relative emphasis on different solar technologies within the report largely reflects the distribution of those technologies in the broader market – i.e., most of the data and analysis naturally focuses on PV given itslarge market share, but concentrating photovoltaic (“CPV”) and CSP projects are also included where data are available.

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The report proceeds to analyze the data in a logical order, starting with up-front installed prices in Section 2, then moving on to operating costs and performance (i.e., capacity factor) in Sections 3 and 4, all of which influence the PPA pricesthat are reported and analyzed in Section 5. Data sources are diverse and vary depending on the type of data being presented, but in general include the Federal Energy Regulatory Commission (“FERC”), the Energy Information Administration (“EIA”), state and federal incentive programs, state and federal regulatory commissions, industry news releases, and trade press articles. Sample size also varies by section, and at least in this first edition of the report, relatively few projects have sufficiently complete data to be included in all four data sets. All data involving currency are reported in constant or real U.S. dollars – in this edition, 2012 dollars.2

Finally, we note that this report complementsseveral other related studies and ongoing research activities, all funded as part of the DOE’s SunShot Initiative, which aims to reduce the cost of PV-generated electricity by about 75% between 2010 and 2020. Most notable is LBNL’s longstanding Tracking the Sun series (e.g., Barbose et al. 2013), which focuses on trends in PV installed prices with a primary emphasis on the residential and commercial sectors (but also including some of the utility-scale data presented in this report). In addition, LBNL and the National Renewable Energy Laboratory (NREL) jointly issue an annual briefing that summarizes historical, current, and projected PV installed prices, drawing upon data from Tracking the Sun (and perhaps in the future, this report) along with modeled installed price benchmarks and projections of near-term system pricing developed through research efforts underway at NREL (Feldman et al. 2013).

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Conclusions

Though parabolic trough CSP projects have been operating in the U.S. since the late 1980s, there were virtually no commercial utility-scale PV projects in operation prior to 2007. By 2012 – just five years later – utility-scale had become the largest sector of the overall PV market in the U.S.

Over this same five-year period, CSP also experienced a bit of a renaissance, with new parabolic trough systems operating and under construction, and several large power tower projects also nearing completion in the United States.

With a critical mass of new projects now online and in some cases having operated for several years (generating data in addition to electricity), the utility-scale sector is ripe for analysis. This report, which is envisioned to be the first in an ongoing annual series, meets this need through indepth, data-driven analysis of not just installed project costs or prices – i.e., the traditional realm of solar economics analyses – but also operating costs, capacity factors, and PPA prices. As such, it provides a more-integrated and holistic view of the market than is commonly found.

click to enlarge

Given the nascent state of the market, data availability isstill, in places, an issue in this inaugural edition. The report nevertheless paints a coherent picture that will be refined, enriched, and solidified over time as more data become available. Until then, some of the more-notable findings from this year’s report include the following:

• Installed Prices: Installed project prices have fallen by nearly one-third since the 2007- 2009 period, from around $5.6/WAC to $3.9/WAC on average for projects completed in 2012 (with some projects higher and others lower). Most of the decline has been concentrated among projects using c-Si modules, as the gap between c-Si and thin-film steadily eroded over this period. In response to falling c-Si module prices, there has been a marked increase in the proportion of projects using c-Si (rather than thin-film) modules.

• O&M Costs: Although O&M cost data are extremely limited at present, what little empirical data exist suggest that actual costs have largely been in line with pro forma operating cost projections gleaned from several bond offering prospectuses. For PV, O&M costs appear to be in the neighborhood of $20-$40/kWAC-year, or $10-$20/MWh. CSP O&M costs are higher, presumably due to the plumbing and thermal components, and come in around $60/kWAC-year.

click to enlarge

• Capacity Factors: Like insolation levels, PV capacity factors vary by region. They also vary depending on whether a project is installed at a fixed-tilt or uses a tracking device, with single-axis trackers able to achieve capacity factors in excess of 30% in some of the better locations (thus confirming the industry rule of thumb that single-axis tracking provides a 20% boost in output). In lieu of trackers, and enabled by the sharp decline in module prices, some projects have instead opted to oversize the PV array relative to the capacity rating of the inverters as a way to boost capacity factor. On the CSP side of the market, parabolic trough systems that have been operating in the U.S. for more than 20 years are still (in 2012) achieving capacity factors in excess of 20% (solar portion only, no storage), which is comparable to newer trough projects. Meanwhile, a pilot project for power tower technology has underperformed relative to expectations, but several much larger power tower projects under construction will soon test that technology on a truly commercial scale in the United States (several commercial power tower projects have been operating in the Mediterranean region for several years).

• PPA Prices: Driven primarily by lower installed project prices (which, in turn, have been driven primarily by declining module prices), levelized PPA prices have fallen dramatically over time, by $25/MWh per year on average. Some of the most-recent PPAs in the West have levelized PPA prices as low as $50-60/MWh (in 2012 dollars), which, in some cases, is competitive with wind power projects in thatsame region. Solar appears to be particularly competitive when considering itstime-of-delivery pricing advantage over wind (roughly $25/MWh in California at current levels of penetration).

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Utility-scale project developers(as well as utilities) can use these findings and data to refine their views of the market and/orto inform the various tradeoffs that they must regularly make, for example regarding choice of technology. Policymakers and the general public will presumably come away from this report with a newfound understanding of just how competitive utility-scale solar has become in a very short time-period. Consultants, modelers, and financiers, meanwhile, can use these empirical data from actual operating experience to either validate or improve their modeling assumptions, thereby leading to better representation of this sector in future studies.

Although the insights in this first edition are compelling, they are nevertheless still constrained by limited data availability. As the market itself continues to grow in future years, so too will the sample of data available for analysis, highlighting the importance of maintaining and updating these fledgling data sets in the coming years so that future editions of this report can continue to track this rapidly growing market.

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