Current U.S. primary energy sources, predominantly non-renewable fossil fuels, present a host of tradeoffs. Nuclear energy, starting with much promise and support, was crippled by the Three Mile Island and Chernobyl incidents, and perhaps decisively sidelined by the Fukushima reactor meltdowns. Clean coal and natural gas still have major advocates as cost-effective and environmentally preferred energy sources and may have a supplementary role. Up to now, has it been more convenient and less costly to go with fossil fuels than with other sources? Perhaps. Have we created a legacy of environmental impacts and financial dependencies? Yes, no question. Lots of pros and cons up to this point, but little consensus about the best way forward.
Developments of the past few years and even months have quietly presented a new path for the U.S. generally and the Vail Valley as well. Quietly, because many entrenched energy interests may not be enthused. The installed price of solar photovoltaic systems has dropped dramatically in the past 36-48 months as a result of technological and manufacturing advances and large increases in global manufacturing capacity. Module prices, representing almost half the cost of a total solar system on average, have been dropping by more than 10 percent per year since 2010. The total installed cost per watt for solar energy has dropped from over $80 per watt in the early 1980s to below $4 per watt for most residential and $3 per watt for most commercial installations today. These are pretty dramatic changes but common in a historical context as solar PV technology travels along an innovation curve experienced previously by the semiconductor, automobile and railroad industries, among others.
Overall price parity between solar photovoltaic power and conventional legacy electric power, often known as “grid parity,” has long been a milestone expected to trigger the further use of solar power. The Earth receives as much solar energy in one hour as is used by the whole planet in a year, yet less than one-tenth of 1 percent of global power production comes from the sun. More than 80 percent of the energy consumed in the U.S. comes from fossil fuels — oil, coal and natural gas. So it’s just a matter of time until the costs work out, as technology advances, right?
The time has long since arrived in many cases. Satellites have been solar-powered for decades. Remote, off-grid power needs and island economies have often been solar-powered too. Grid parity prospects vary from location to location, because like lots of situations, opportunities depend on lots of things. But even with the relative decline in the cost of natural gas in recent years in part because of fracking advances, solar PVs relative advantages continue to grow, and sweeping change may be upon us.
Grid parity has arrived in the Vail Valley. The cost of electricity for the 25-year life of a solar PV system is now less than the projected charges for electricity from the local electric utility for properties with southern exposures. Valley sunshine is beneficial and cooler temperatures enhance system performance. An average-sized home powered by solar PV can be expected to save approximately a net $11,800 over a 20-year period versus a similar home powered by conventional electric power. With an abundance of financing options now available which require no cash outlay up front, the return on investment is immediate and considerable.
This development has extraordinary implications from environmental, financial and geopolitical perspectives. On the environmental front, greatly reduced carbon emissions. Financially, lower costs and greater flexibility. On a long-term basis, there should be reduced global conflict resulting from the pursuit of energy dominance. The resource battles of the future may be spurred more by water than oil and gas.
Is this condition temporary? Probably not — if recent past history offers any clues, the future will favor solar PV even further. On the legacy electric side, the primary cost factors are capital construction, fuel costs and operations. Trends are not the friend of legacy electric. On the solar PV side, the trends are friendly. Efficiencies are increasing, costs per kilowatt of production capacity are declining, and the service lives of systems are lengthening. And internalization of social or environmental costs through mechanisms like carbon regulation will further advantage solar.
Many immediate opportunities have now arisen. Properties and businesses throughout the valley will be affected. Homeowners with unimpeded southern exposures can deploy partial or substantial solar arrays, remain connected to the grid and be dollars ahead. Builders of new homes can install arrays with an immediate positive payback or at least construct homes with the proper conduit and connections to permit “plug-in” solar so each home is “solar ready.” Developers can encourage builders in their communities to offer solar PV and incorporate other smart energy or smart grid features into their plans. Owners of commercial and manufacturing properties can explore transitioning to solar PV to cut operating costs, enabling those businesses to grow more quickly, afford more staff and attract sustainability-oriented customers.
Solar PV is more affordable than ever, and there are competent, trained people available to assist with financing, installation and maintenance. Purchase or lease options are now widely available. An embrace of solar PV will enable Vail Valley residents to participate in one of the fastest growing industries in the U.S., as total revenues and industry employment grow by approximately 25 percent annually.
Beyond the Vail Valley, the 2010s will be characterized by ongoing grid parity milestones across most regions of the world. By next year, about 35 percent of residential and industrial market segments will have achieved grid parity globally. By 2020, the great majority of electricity market segments will be at or beyond grid parity in the Americas.
Thomas Fleming works for Solaris Americas, which offers solar and real estate advisory and project development services to corporations, institutions and governments. One of Tom’s first major professional assignments was advising an Arizona nuclear utility regarding their new nuclear plant’s construction costs in the consumer rate base. Comanche Peak, the plant involved, was one of the last nuclear power plants commissioned in the U.S. One of his most recent projects has been planning the nation’s largest proposed solar-powered master planned community.