1 Aug

Project Economics: It’s more Than Just the Cost of Solar Panels

The decrease in the cost of solar panels in recent years had a significant impact on the growth of the solar industry. Lower costs have improved project economics for solar development in America. However, the decision by Congress to impose an import tariff on Chinese manufactured panels has already caused upward pressure on the price of solar panels. The cost of solar panels is increasing. The price per watt for quality solar panels dipped to historic lows in 2013 below $.70 per watt ($.65-$.68.)  However, recent prices have crept back up to between $.73 and $.75 per watt.

Historic Cost of Solar Panels

Although the cost of solar panels has a significant influence on the success of solar deployment in America there is another aspect to solar project economics and that is state policies that support the economics of solar development.

States have a wide range of policy options that support the solar energy movement in America. In terms of solar capacity installed in recent years states have varying levels of success in solar development influenced to a great extent by state policy. In states with favorable policy the market for solar is exceeding expectations whereas in states without supportive policy the market is substantially underachieving its potential.

The Environment America: Research and Policy Center reports that the solar energy revolution is being led by twelve states whose progressive solar policies enabled domination of the solar industry.

According to the study, “These 12 states – Arizona, California, Colorado, Delaware, Hawaii, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, North Carolina and Vermont – have little in common demographically or politically, but have all used smart policies that if emulated by other states, could help America get 10% of its electricity from solar energy by 2030.”

The State of Massachusetts solar policy is a great example of a smart solar policy - one who has leapt to the forefront of the rising solar energy economy. According to the Massachusetts Clean Energy Center, solar energy in the state has grown 30-fold since 2007.  The Commonwealth started with more than 4 MWs of solar capacity to more than 110 MWs today. Massachusetts’ emerging leadership in solar energy is no accident. Rather, it is the result of strong public policies designed to make it easier and more cost effective for its citizens to go solar.

According to the National Renewable Energy Lab (NREL), the most effective policy supporting solar development is the State Renewable Portfolio Standard (RPS) which affects the income side of the project development equation. In fact, the top 9 states in solar development all have an RPS or solar set aside policy. In simple terms, the RPS requires utilities and other energy producers to include a fixed percentage of their fuel supply (portfolio) to come from renewable energy sources.

This policy, in turn, enables the establishment of a market for Solar Renewable Energy Credits (SRECs) that can be purchased by utilities from solar energy producing assets to fulfill their RPS requirements. The credits are based on the amount of electricity produced as expressed in units of megawatt hours (MWHs). SRECs add economic value to the energy produced by solar arrays going beyond the value of the kilowatt hour price of the electricity. The value of the credits is determined by the open market and guidelines established by the state. Currently Massachusetts and Washington D.C. have two of the highest valued SRECs in the country. The added value increases the income generated by the solar assets enabling projects to cover the higher cost of solar panels while also providing a better return on investment.

Renewable Portfolio Standards

Image Source: Pew Center on Global Climate Change

While the RPS is a recommended policy for solar success, states have a variety of other policy measures that can have a positive impact on solar development. Our next article identifies these policies and describes their impact on lowering costs, providing incentives for private investment and increasing revenue potential for solar projects.

If you would like to see how what the cost of solar panels are in your state then please get a free quote here.

Kurt Easton

Kurt Easton

As a Managing Partner of Clean Footprint and professional Urban Planner with over 25 years of consulting experience, Kurt has an extensive background in both public and private sector initiatives. His experience provides valuable insight into public/private negotiations for renewable energy development. His network of municipal contacts through the Florida Redevelopment Association and Florida League of Cities enables direct access to decision makers for the successful development of solar PV projects throughout the State.Contact Kurt at kurt.easton@clean-footprint.com.