Transforming the Solar Market
With all the talk about Solyndra’s bankruptcy, the message that the solar industry is struggling to effectively compete at scale with cheaper electricity sources such as coal is being made loud and clear.
So while solar photovoltaic module costs have decreased significantly in the past decade, high installation costs caused by a complex tangle of utility interconnection requirements, financing expectations and permitting codes is a big reason why installed solar PV remains an expensive energy option.
“Ultimately, we found all the processes required to get a system approved and installed were not being addressed by anyone,” said Ned Harvey, Rocky Mountain Institute’s chief operating officer. “We quickly gained a lot of traction with our research and found that, while the hardware cost is going down very fast the process costs are actually going up.”
The U.S. Department of Energy is tackling the challenge through its SunShot Initiative, recently granting more than $145 million for advanced solar technologies. One of the six categories of funded projects included extreme “Balance of System” (BoS) hardware cost reductions. This funding builds on RMI’s collaboration with the DOE that began at RMI’s Balance of System Charrette (DOE was a key sponsor) in June 2010 and continued with the agency’s February 2011 workshop on solar process costs, which RMI facilitated.
“Nobody even understood the nature of the problem,” Harvey said. “They could get a grasp on how big the challenge was but couldn’t quantify it. That revelation got a lot of attention, helping shift some of the DOE’s focus and helping driving a lot of activity in the market right now.”
Driving Innovative Solar Business Models
Last month, RMI received a DOE grant of nearly $684,000 to accelerate large-scale adoption of solar PV through the creation and adoption of innovative approaches to utility regulation, rate design and business models.
As distributed solar expands into new markets and costs decline to levels of SunShot targets, solar PV will create significant pressure on the current boundaries of cost, performance and value of the incumbent process for delivering electricity services—a fundamental shift in the economics of the electricity sector’s value chain.
“When you’re looking at BoS process challenges, one of the most expensive aspects of trying to develop a large-scale solar system is the inefficiency of working with utilities,” Harvey said. “What we and the DOE realized is that, really, the only way to take the costs out is to try to work with utilities themselves to understand how their business models might be improved by using solar or other distributed generation.”
RMI’s Innovative Solar Business Models project supports the goal of large-scale deployment of solar technologies by directly targeting the major medium- and long-term regulatory and business barriers for utilities. Through the project, RMI aims to align the interest of utilities with the continued growth of the solar PV industry and enable high penetration of solar PV onto the grid.
“We felt that we had a really great solution where we could work with utilities, solar industry players and other members of the ecosystem to really explore what solar might mean to the utility of the future,” Harvey said.
RMI is also working with SolarTech, a California-based industry consortium working to remove BoS barriers, on “Solar3.0,” a scalable national platform to develop model codes, standards, rules, and processes that will enable reduced deployment times and costs for solar PV installations.
The project will leverage pilot cities to develop best practices in permitting and interconnections. Funded by a $2.5 million DOE grant, the project’s goal is to achieve a 50 percent reduction in non-hardware BoS costs across approximately 90 percent of the U.S. solar market in targeted solar communities by 2014. “SolarTech is a natural partner for us,” Harvey said. “As an industry association, they are dealing with solar projects every day and a great conduit for RMI and others to reach into the industry to understand and quantify the problem.”
These projects are well aligned with RMI’s Reinventing Fire research, slated for release next month, which analyzes the wrenching changes faced by the electric utility industry. RMI has similarly determined that a massive scale-up of distributed generators—particularly solar PV—is essential to provide resilient, scalable, cost-effective power as existing central thermal plants are retired.
“Not only is solar a technology that’s great for scale,” Harvey said, “it’s a technology that’s uniquely beneficial to any community, business or home that’s interested in generating its own power. Now the question is, can we work with utilities, cities and governments to actually capture the benefits.” to be tomorrow’s burden.