NewEnergyNews: TODAY’S STUDY: The Solar Boom Nurtured by President Obama


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  • TODAY AT NewEnergyNews, August 16:

  • ORIGINAL REPORTING: Organizing California’s Distributed Energy Efforts
  • ORIGINAL REPORTING: A Deep Look At Evolving U.S. Efforts To Support Solar

    Monday, May 30, 2016

    TODAY’S STUDY: The Solar Boom Nurtured by President Obama

    On The Path To Sunshot: Executive Summary

    May 2016 (Solar Energy Technologies Office/U.S. Department of Energy)

    Key Findings

    The SunShot Initiative’s original targets were set in terms of reduced solar technology prices and electricity costs, which detailed analysis suggests will translate into dramatically higher U.S. solar deployment over the next several decades. The cost of solar electricity in dollars per kilowatt-hour ($/kWh) can be reduced by boosting the amount of energy a solar system produces over its lifetime (kWh), cutting the lifetime cost ($) of that system, or both. Once that cost is at or below the cost of competing energy technologies, solar deployment should proceed rapidly. This is valid, to a point, and has been reflected in market developments to date.

    However, as U.S. solar electricity has continued its transformation from a niche to the mainstream, several challenges to this equation have become increasingly clear. First, the cost of a solar system embraces more than the cost of solar hardware and even more than the cost of the various processes required to sell, install, and interconnect the system. Second, solar’s cost is dynamically intertwined with the characteristics and costs of all the other ways of satisfying electricity demand within the power system. Finally, some kWhs of solar electricity may be more useful than others—and more useful to some stakeholders than to others—which can have profound implications for cost. All these observations are linked by the concept of value. Value encompasses solar electricity’s costs and benefits. For example, solar electricity might have one set of costs and benefits to a homeowner, another to a utility, and yet another to the broader society. It might have more value than natural gas-generated electricity in one time, place, and mix of generating technologies but less value in a different situation. And so forth.

    Failure to address this complex web of value-related issues could jeopardize the SunShot Initiative’s vision of affordable, widely deployed solar that produces substantial national benefits, including a boost to U.S. solar manufacturing. Conversely, effectively weaving the threads together could spur achievements that surpass the original SunShot vision. Here we extract insights from the On the Path to SunShot reports to highlight critical connections that affect solar costs, deployment, and domestic manufacturing. We also highlight some of the SunShot Initiative’s activities that are supporting advances in key areas. Amid the complexity, one common theme emerges—sustained, multifaceted innovation will be needed to achieve the solar future.

    Systems Integration

    Increasing the use of grid-flexibility options (improved grid management, demand response, and energy storage) could enable 25% or higher penetration of PV at low costs (see Denholm et al. 2016). Considering the large-scale integration of solar into electric-power systems complicates the calculation of the value of solar. In fact a comprehensive examination reveals that the value of solar technologies—or any other power-system technology or operating strategy—can only be understood in the context of the generation system as a whole. This is well illustrated by analysis of curtailment at high PV penetrations within the bulk power and transmission systems. As the deployment of PV increases, it is possible that during some sunny midday periods due to limited flexibility of conventional generators, system operators would need to reduce (curtail) PV output in order to maintain the crucial balance between electric supply and demand. As a result, PV’s value and cost competitiveness would degrade. For example, for utility-scale PV with a baseline SunShot LCOE of 6¢/kWh, increasing the annual energy demand met by solar energy from 10% to 20% would increase the marginal1 LCOE of PV from 6¢/kWh to almost 11¢/kWh in a California grid system with limited flexibility. However, this loss of value could be stemmed by increasing system flexibility via enhanced control of variable-generation resources, added energy storage, and the ability to motivate more electricity consumers to shift consumption to lower-demand periods. The combination of these measures would minimize solar curtailment and keep PV cost-competitive at penetrations at least as high as 25%. Efficient deployment of the grid-flexibility options needed to maintain solar’s value will require various innovations, from the development of communication, control, and energy storage technologies to the implementation of new market rules and operating procedures.

    Wide use of advanced inverters could double the electricity-distribution system’s hosting capacity for distributed PV at low costs—from about 170 GW to 350 GW (see Palmintier et al. 2016). At the distribution system level, increased variable generation due to high penetrations of distributed PV (typically rooftop and smaller ground-mounted systems) could challenge the management of distribution voltage, potentially increase wear and tear on electromechanical utility equipment, and complicate the configuration of circuit-breakers and other protection systems—all of which could increase costs, limit further PV deployment, or both.2 However, improved analysis of distribution system hosting capacity—the amount of distributed PV that can be interconnected without changing the existing infrastructure or prematurely wearing out equipment—has overturned previous rule-of-thumb assumptions such as the idea that distributed PV penetrations higher than 15% require detailed impact studies. For example, new analysis suggests that the hosting capacity for distributed PV could rise from approximately 170 GW using traditional inverters to about 350 GW with the use of advanced inverters for voltage management, and it could be even higher using accessible and low-cost strategies such as careful siting of PV systems within a distribution feeder and additional minor changes in distribution operations. Also critical to facilitating distributed PV deployment is the improvement of interconnection processes, associated standards and codes, and compensation mechanisms so they embrace PV’s contributions to system-wide operations. Ultimately SunShot-level PV deployment will require unprecedented coordination of the historically separate distribution and transmission systems along with incorporation of energy storage and “virtual storage,” which exploits improved management of electric vehicle charging, building energy systems, and other large loads. Additional analysis and innovation are needed in every area to realize the potential of this integrated vision.

    Technology Development

    Although tremendous progress has been made in reducing the cost of PV systems, additional LCOE reductions of 40%–50% between 2015 and 2020 will be required to reach the SunShot Initiative’s targets (see Woodhouse et al. 2016). Understanding the tradeoffs between installed prices and other PV system characteristics—such as module efficiency, module degradation rate, and system lifetime—are vital. For example, with 29%-efficient modules and high reliability (a 50-year lifetime and a 0.2%/ year module degradation rate), a residential PV system could achieve the SunShot LCOE goal with modules priced at almost $1.20/W. But change the lifetime to 10 years and the degradation rate to 2%/year, and the system would need those very highefficiency modules at zero cost to achieve the same LCOE. Although these examples are extreme, they serve to illustrate the wide range of technological combinations that could help drive PV toward the LCOE goals. SunShot’s PV roadmaps illustrate specific potential pathways to the target cost reductions. Energy storage will help enable CSP compete by adding flexibility value to a high-variable-generation (solar plus wind) power system (see Mehos et al. 2016). Compared with PV, CSP systems are more complex to develop, design, construct, and operate, and they require a much larger minimum effective scale—typically at least 50 MW, compared with PV systems that can be as small as a few kilowatts. In recent years, PV’s greater modularity and lower LCOE have made it more attractive to many solar project developers, and some large projects that were originally planned for CSP have switched to PV. However, the ability of CSP to use thermal energy storage—and thus provide continuous power for long periods when the sun is not shining—could give CSP a vital role in evolving electricity systems. Because CSP with storage can store energy when net demand3 is low and release that energy when demand is high, it increases the electricity system’s ability to balance supply and demand over multiple time scales. Such flexibility becomes increasingly important as more variable-generation renewable energy is added to the system. For example, one analysis suggests that, under a 40% renewable portfolio standard in California, CSP with storage could provide more than twice as much value to the electricity system as variable-generation PV. For this reason, enhanced thermal energy storage is a critical component of the SunShot Initiative’s 2020 CSP technology-improvement roadmap.

    Innovation-driven cost and performance improvements, along with strong projected solar demand in the United States and across the Americas, could increase the attractiveness of U.S.-based solar manufacturing (see Chung et al. 2016). Although improvements to standard PV modules have produced deep cost reductions over the past 5 years, the returns on such incremental improvements appear to be diminishing, and more dramatic innovations in module design and manufacturing are required to continue along the path of rapid progress. At the same time, major opportunities exist for innovation to unlock the potential of CSP technologies. This need for innovation could benefit U.S. PV and CSP manufacturers. The United States has been rated one of the world’s most competitive and innovative countries as well as one of the best locations for PV manufacturing. It is a global leader in PV and CSP R&D and patent production, and U.S. PV manufacturers are already pursuing highly differentiated innovations.

    Market Enablers

    Financial innovations—independent of technology-cost improvements—could cut the cost of solar energy to customers and businesses by 30%–60% (see Feldman and Bolinger 2016). Financing is critical to solar deployment, because the costs of solar technologies are paid up front, while their benefits are realized over decades. Solar financing has been shaped by the government incentives designed to accelerate solar deployment. This is particularly true for federal tax incentives, which have spawned complex tax-equity structures that monetize tax benefits for project sponsors who otherwise could not use them efficiently. Although these structures have helped expand solar deployment, they are relatively costly and inefficient. This has spurred solar stakeholders to develop lower-cost financing solutions such as securitization of solar project portfolios, solar-specific loan products, and methods for incorporating residential PV’s value into home values. To move solar further toward an unsubsidized SunShot future, additional financial innovation must occur. Development of a larger, more mature U.S. solar industry will likely increase financial transparency and investor confidence, which in turn will enable simpler, lower-cost financing methods. Utilityscale solar might be financed more like conventional generation assets are today, non-residential solar might be financed more like a new roof, and residential solar might be financed more like an expensive appliance. Assuming a constant, SunShot-level installed PV system price, such financing innovations could reduce PV’s LCOE by an estimated 30%–60% (depending on the sector) compared with historical financing approaches.

    Implementing a range of alternative utility-rate reforms could minimize solar value losses at increasing levels of distributed PV penetration (see Barbose et al. 2016). In conjunction with the technical issues described above, the connections between distributed PV and electric distribution systems hinge on utility business models and regulations. As PV deployment has leapt forward and presaged a truly significant solar contribution, however, it has become clear that utilities’ traditional treatment of distributed PV cannot be taken for granted—nor can the future value and deployment of distributed PV. At the heart of this issue is net energy metering (NEM). Under NEM, PV owners can sell to a utility the electricity they generate but cannot consume on site, often at full retail rates. This widespread policy has helped drive the rapid growth of distributed PV, but the success has raised concerns about the potential for higher electricity rates and cost-shifting to non-solar customers, reduced utility shareholder profitability, reduced utility earnings opportunities, and inefficient resource allocation. The resulting reform efforts have revolved largely around changing NEM rules and retail rate structures. Most of the reforms to date address NEM concerns by reducing the benefits provided to distributed PV customers and thus constraining PV deployment. A new analysis estimates that eliminating NEM nationwide, by compensating exports of PV electricity at wholesale rather than retail rates would cut cumulative distributed PV deployment by 20% in 2050 compared with a continuation of current policies. This would slow the PV cost reductions that arise from larger scale and market certainty. It could also thwart achievement of the SunShot deployment goals even if the initiative’s cost targets are achieved. This undesirable prospect is stimulating the development of alternative reform strategies that address concerns about distributed PV compensation without inordinately harming PV economics and growth.

    Monetizing the environmental health benefits of solar could add ~3.5¢/kWh to the value of solar energy (see Wiser et al. 2016). The monetary impacts due to environmental degradation and public health impacts seem far removed from the apparent “sticker price” of electricity. Yet quantifying these impacts is essential to understanding the true costs and benefits of solar and conventional generating technologies. Compared with fossil fuel generators, PV and CSP produce far lower lifecycle levels of greenhouse gas (GHG) emissions and harmful pollutants including fine particular matter (PM2.5), sulfur dioxide (SO2), and nitrogen oxides (NOx). Achieving the SunShot-level solar deployment targets—14% of U.S. electricity demand met by solar in 2030 and 27% in 2050—could reduce cumulative power-sector GHG emissions by 10% between 2015 and 2050, resulting in savings of $238–$252 billion.4 This is equivalent to 2.0–2.2 cents per kilowatt-hour of solar installed (¢/kWh-solar). Similarly, realizing these levels of solar deployment could reduce cumulative power-sector emissions of PM2.5 by 8%, SO2 by 9%, and NOx by 11% between 2015 and 2050. This could produce $167 billion in savings from lower future health and environmental damages, or 1.4¢/kWh-solar—while also preventing 25,000–59,000 premature deaths. To put this in perspective, the estimated 3.5¢/kWh-solar in benefits due to SunShot-level solar deployment is approximately equal to the additional LCOE reduction needed to make unsubsidized utility-scale solar competitive with conventional generators today. In addition, water savings from achieving the SunShot goals, could result in the 2015–2050 cumulative savings of 4% of total power-sector withdrawals and 9% of total power-sector consumption—a particularly important consideration for arid states where substantial solar will be deployed. Improving public health and the environment is but one aspect of solar’s many costs and benefits. Clearly, however, the assignment of value to such “external” impacts has potential implications for policy innovation and the economic competitiveness of solar and other generation technologies.

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