A recent article breathlessly noted “And the Cheapest Electricity in America is…Solar!” The implication is that solar has become cheaper than other forms of electricity, but the reality is that the story describes how one contract for solar power came in at a very low price.
And the story is like a bikini, more interesting for what it conceals than what it reveals. The price is given, but there is no indication if that price is fixed for the life of the contract, adjusted for inflation, or inflated in some other way. Some contracts have escalator clauses that affect the actual cost of the power, but I can’t locate any information on this particular one.
(Word to the wise: In attempting to find out what sort of contract and price clause I could get from a solar provider, I entered my information on a website and since have been overwhelmed with junk calls from solar power installers/companies. It seems to be very difficult to find a standard contract.)
Also, solar is not the cheapest electricity in America. Rather, the plant discussed in the story, First Solar's Playa Solar 2 project, which is located in Nevada, produces solar power cheaply. Given the location and size of the plant (100 MW in Nevada), this should be just about optimal for achieving low-cost power from solar panels. Which implies that other locations will be more expensive; the National Renewable Energy Laboratory suggests that New England and the upper Midwest receive one-third to one-half the solar energy of the Southwest. Additionally, many residential rooftop installations will not be oriented precisely towards the optimal angle to receive the maximum solar radiation, meaning a further loss of power compared to utility-scale installations.
And the story doesn’t appear to take into account the government support for solar, which appears to reduce the cost for this plant’s power by about one-third. Nor does it mention the cost of backup power to cover the low capacity factor and times off-line, which are admittedly less in Nevada than in New England.
It is also directly contradicted by a story about NRG, one of the most avid promoters of solar and renewable energy, reducing its exposure to solar by splitting off its solar operations into a separate company because it wanted to focus on “good and near-term returns.” And in countries like the UK, where the government suggested reducing exorbitant prices paid to producers of solar electricity, producers expressed outrage.
Solar power has become much cheaper, but unlike nearly any other kind of power, the cost is highly variable and dependent on local conditions, primarily because of weather conditions but also due to different levels of infrastructure. The Sahara Desert has ample solar radiation, but constructing and maintaining solar plants in such an isolated place can be expensive, to say nothing of the cost of delivering the power. The counter example is Dubai, where solar power is being sold at a low price into an advanced electricity grid.
And even more, electricity prices are vastly different around the world, in large part because fossil fuel prices are far from uniform. Primarily, natural gas prices are now three to four times as high in Japan, Korea and Taiwan, which import LNG, than in the United States. European prices are at least twice as high. However, this reflects mainly the recent high oil prices and the impact of the nuclear power shutdown in Japan, and the next few years should see sharply lower prices around the world. Not as low as the US, unfortunately, but the competitiveness of solar will be correspondingly reduced.
A sensible approach would be to use natural gas turbines in Massachusetts (build the
