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Solar: Cheapest form of electricity

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By Elisabeth Kindig


Episode 8 of Tech Lightning Rounds discusses the advances being made in renewable energy sources. Beth Kindig goes directly to the source of expertise in solar energy and sustainable energy in space with interviews from NASA, Stanford’s Departments of Energy Business Innovations and on data interoperability with Intertrust’s modulus. Interviews are held in “lightning round” format, which are rapid interviews with tech experts for immediate depth on each topic.

Global climate change has had observable effects on the environment, including melting glaciers, shrinking rivers and lakes, and has caused cycles that are atypical for plants, such as trees flowering sooner. The loss of sea ice, rising sea levels and longer, more intense heat waves are “likely to be significant and to increase over time,” according to the Intergovernmental Panel on Climate Change (IPCC). The IPCC, which includes more than 1,300 scientists around the world, forecasts a temperature rise of 2.5 to 10 degrees Fahrenheit over the next century.

For good reasons, solar energy has come a long way. As pointed out by Stephen Comello, the director of Energy Business Innovations at Stanford, the prices of solar systems have been coming down quarter over quarter for about 10 years. The cost to produce one kilowatt of solar electricity is competitive with wind, and is the cheapest form of electricity available when looking at utility scale systems installed in locations that receive full sun. More specifically, the levelized cost of energy (LCOE) has come down 300-400% in the last five years.

Don’t miss this interview with a thought leader in solar energy as he discusses the future for both small scale and large-scale solar operations.


08:49 BK: My next interview is with Steve Comello, who leads the energy business innovation focus area at Stanford’s Graduate School of Business. Steve puts into context how far solar has come, and how it competes from an operational standpoint. Where are we with solar PV power, especially as it relates to system prices?

09:09 SC: Sure, and happy to answer this question. Solar is really hot. The prices of solar systems have been coming down quarter over quarter, for about 10 years now. And from system prices perspective, that’s one way to look at it, but I like to recast it in a different way to measure that, and that would be the levelized cost of electricity. Essentially, how much does it cost to produce one kilowatt hour of electricity? And in that perspective, the solar has really, really come down so much so that next to wind in certain parts of the country, it is the cheapest form of electricity out there. Now, what we’re talking about is essentially, really large scale systems, because when you think about solar, there’s three dimensions or there’s three scales to it. There’s the really big solar plants that are out in the desert, there’s the larger systems that you see on top of a Costco or a Walmart, and then you have the smallest systems which are rooftop. And right now, we’re looking at this utility scale, the largest ones out in the desert, those that LCOE has come down, probably, on a scale of 3 to 4X in the last five years, and especially in really sunny places like Arizona, and California, it is the cheapest form of electricity.

10:36 BK: Going back to that levelized cost of electricity, that metric, how does it measure the competitiveness of solar PV? Can you kinda go over that one more time?

10:46 SC: Yeah, yeah, so the LCOE, basically what it does, it’s one bundle metric and it takes into account all the capital cost to actually build the system, and then all the operational costs that go into running the system, running the power plant. And so you can look at something like solar that has… It’s relatively pretty expensive to build right up front, but it’s super cheap to operate because there’s no fuel. And if you contrast that, say, to a coal power plant, they’re not really building that many, but contrast that, that relatively, it’s pretty cheap to build, but to actually operate the thing, all the water, all the coal the other fuel you need to ingest and combust to actually produce power, the LCOE basically levelizes all of that. You have one clean metric, no matter what the operational cost is and the timing of that, and no matter how capital intensive either of the projects are.

11:48 BK: Steve goes on to talk about energy storage from a cost perspective, plus the challenges around industrial solar. And he puts into context, what solar did to disrupt traditional power companies. Energy storage is obviously key to solar, what has been done in the last few years to increase the energy storage capacity or capabilities?

12:07 SC: Yeah, I would think about energy storage on two scales. One, let’s call it small, and one, call it large, and I’ll define those. On the small scale is probably what most people think about when they see a Tesla Powerwall. This is something that you can store a little bit of power in your basement and then you can use it at some other point. Now, what is the value of storage, say, at your home? Well, when it comes to solar, what you’d wanna do is you’re only producing power with your solar panel during the day. And is there an opportunity to capture some of that and actually store it and use it at night? That is a really compelling proposition, from a cost perspective, if you’re, say, in Hawaii or in Germany, because essentially you have a lot of solar during the day, and prices are such that that arbitrage really makes a lot of sense. Now, in a place like California, we have something called net energy metering and essentially, what that means is the grid does all the storage for you, that you capture or you produce all this electricity on your rooftop, from your solar panel, and anything that you don’t use, you just export to the grid. Now, what you export the grid is basically sold back at the same price that you would have otherwise bought it. There’s no reason why you would ever buy storage there.

13:45 SC: However, California, being what it is, actually has a lot of incentive programs and despite certain policies that work against storage being deployed, it actually makes a lot of sense, at least, from a cost perspective, to install storage. And once you get storage into your home, then there’s other benefits that you can acquire. That means that you’ll never get a blackout or you’ll be able to, in the future, sell services to the grid, depending on how policies and regulations work out. That’s at the small scale. At the large scale, that’s where a lot of work needs to get done. Let’s stick with California, we have so much solar that if you actually look at average demand during the day for the state, there’s this big dip in the middle of the day on what’s known as Net Demand, and this is because there’s so much solar being produced in the middle of the day that you almost don’t know what to do with it.

14:52 SC: And what happens is when the sun starts going down, there’s this big demand spike and you have all these other natural gas type generators that have to come on and meet that demand cause essentially, solar is coming down, you have all this demand that’s still there and you need all these facilities to ramp up. And that’s expensive, number one, and number two, carbon intensive. If you had really big storage facilities, you would be able to capture that sun in the middle of the day and deploy it later in the day and basically flatten out that curve. That doesn’t sound too good for natural gas peaker plants, but what it does is it helps de-carbonize the grid and it also takes advantage of power that you would otherwise not use most effectively.

15:43 BK: We had spoken earlier and you stated that distributed solar had kicked off the energy transition. What do you mean by that?

15:54 SC: Essentially, when it comes to distributed solar and distributed generation, my contention is that was one of the first times where traditional utilities had to think about competition. At least in the US, utilities have their service territories and they would produce electricity, a customer would receive it, customer would receive a bill, and that was the transaction. When people started putting solar on their roof, then utilities needed to think about, “What am I actually offering here? Now I have to compete against people producing their own electricity.” And then essentially, with distributed generation because of induced competition in the utility space, it was the first time that utilities really needed to think about their revenue and business models and how they would actually compete against essentially, a product that was undercutting their business.


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