An Empirical Analysis of Project Cost, Performance, and Pricing Trends in the United States
The utility-scale solar sector—defined here to include any ground-mounted photovoltaic (“PV”), concentrating photovoltaic (“CPV”), or concentrating solar power (“CSP”) project that is larger than 5 MWAC in capacity—has led the overall U.S. solar market in terms of installed capacity since 2012. It is expected to maintain its market-leading position for at least another five years, driven in part by December 2015’s three-year extension of the 30% federal investment tax credit (“ITC”) through 2019 (coupled with a favorable switch to a “start construction” rather than a “placed in service” eligibility requirement, and a gradual phase down of the credit to 10% by 2022).
In fact, in 2016 alone, the utility-scale sector is projected to install more than twice as much new capacity as it ever has previously in a single year. This unprecedented boom makes it difficult, yet more important than ever, to stay abreast of the latest utility-scale market developments and trends.
This report—the fourth edition in an ongoing annual series—is intended to help meet this need, by providing in-depth, annually updated, data-driven analysis of the utility-scale solar project fleet in the United States. Drawing on empirical project-level data from a wide range of sources, this report analyzes not just installed project costs or prices—i.e., the traditional realm of most solar economic analyses—but also operating costs, capacity factors, and power purchase agreement (“PPA”) prices from a large sample of utility-scale solar projects throughout the United States. Given its current dominance in the market, utility-scale PV also dominates much of this report, though data from CPV and CSP projects are also presented where appropriate.
Some of the more-notable findings from this year’s edition include the following:
• Installation Trends: Among the total population of utility-scale PV projects from which data samples are drawn, several trends are worth noting due to their influence on (or perhaps reflection of) the cost, performance, and PPA price data analyzed later. For example, the use of solar tracking devices (overwhelmingly single-axis, east-west tracking—though a few dual-axis tracking projects have entered the population in recent years) continued to expand in 2015, particularly among thin-film (CdTe) projects, which had almost exclusively opted for fixed-tilt mounts prior to 2014. In a reflection of the ongoing geographic expansion of
the market beyond the high-insolation Southwest, the average long-term insolation level across newly built project sites declined for the first time in 2015. Meanwhile, the average inverter loading ratio—i.e., the ratio of a project’s DC module array nameplate rating to its AC inverter nameplate rating—has increased among more recent project vintages, as oversizing the array can boost generation (relative to the AC capacity), and hence revenue, particularly during the morning and evening shoulder periods. These trends should drive AC capacity factors higher among more recently built PV projects (confirmed by data for
projects that were fully operational in 2015). Finally, 2015 saw one new CSP project (a 110 MWAC solar tower project with 10 hours of thermal storage) and one new CPV project (an 18 MWAC project with SunPower’s new C7 technology) achieve commercial operation.
• Installed Prices: Median installed PV project prices within a sizable sample have steadily fallen by nearly 60% since the 2007-2009 period, to $2.7/WAC (or $2.1/WDC) for projects completed in 2015. The lowest 20th percentile of projects within our 2015 sample (of 64 PV projects totaling 2,135 MWAC) were priced at or below $2.2/WAC, with the lowest-priced projects around $1.7/WAC. In comparison (though recognizing technological differences, including 10 hours of thermal storage), the single CSP power tower project that came online in 2015 was priced considerably higher than our PV sample, at $8.9/WAC.
• Operation and Maintenance (“O&M”) Costs: What limited empirical O&M cost data are publicly available suggest that PV O&M costs were in the neighborhood of $15/kWAC-year, or $7/MWh, in 2015. These numbers—from an extremely limited sample—include only those costs incurred to directly operate and maintain the generating plant, and should not be confused with total operating expenses, which would also include property taxes, insurance, land royalties, performance bonds, various administrative and other fees, and overhead.
• Capacity Factors: The cumulative net AC capacity factors of individual projects in a sample of 170 PV projects totaling 5,907 MWAC range widely, from 15.1% to 35.7%, with a sample mean of 25.7%, a median of 26.4%, and a capacity-weighted average of 27.6%. This project-level variation is based on a number of factors, including the strength of the solar resource at the project site, whether the array is mounted at a fixed tilt or on a tracking mechanism, the inverter loading ratio, the type of modules used (e.g., c-Si versus thin film), and likely degradation. Changes in at least the first three of these factors have driven mean capacity factors higher by project vintage over the last four years, to nearly 27% among 2014-vintage projects (whose first full operating year was in 2015). Turning to other technologies, two of the three CPV projects in our sample seem to be underperforming, relative to both similarly situated PV projects and ex-ante expectations. And the two CSP projects that had struggled to meet performance expectations in 2014 (Solana and Ivanpah) both increased their capacity factors considerably in 2015, though still not quite up to projected long-term, steady-state levels.
• PPA Prices: Driven by lower installed project prices and improving capacity factors, levelized PPA prices for utility-scale PV have fallen dramatically over time, by $20-$30/MWh per year on average from 2006 through 2013, with a smaller price decline of ~$10/MWh per year evident in the 2014 and 2015 samples. Most PPAs in the 2015 sample—including many outside of California and the Southwest—are priced at or below $50/MWh levelized (in real 2015 dollars), with a few priced as aggressively as ~$30/MWh.
Even at these low price levels, PV may still find it difficult to compete with existing gas-fired generation, given how low natural gas prices (and gas price expectations) have fallen over the past year. When stacked up against new gas-fired generation (i.e., including the recovery of up-front capital costs), PV looks more attractive—and in either case can also provide a hedge against possible future increases in fossil fuel costs.