The report examines the return rate of investments in residential photovoltaics made by the main utilities from the end of 2008 to the beginning of 2009, to assess the foreseeable break-even cost compared to the average cost of grid-injected electricity in a scenario established for 2015.
Currently, the break-even cost of PV in the United States varies by more than a factor of 10 (from less than $1/Watt to over $10/Watt) despite a much smaller variation in solar resource. Overall, the key drivers of the break-even cost of PV are non-technical factors, including the cost of electricity, the rate structure, and the availability of system financing, as opposed to technical parameters such as solar resource or orientation.
The break-even cost for photovoltaic (PV) technology is defined as the point where the cost of PV-generated electricity equals the cost of electricity purchased from the grid. This target has also been referred to as “grid parity” and may be expressed in $/W.
Currently, the break-even cost of PV in the United States varies by more than a factor of 10 despite a much smaller variation in solar resource. Overall, the key drivers of the break-even cost of PV are non-technical factors, including the cost of electricity, the rate structure, and the availability of system financing, as opposed to technical parameters such as solar resource or orientation.
This analysis of the break-even cost of PV represents neither a market depth analysis nor an estimate of likely consumer adoption, but it does provide insight about the potential viability of PV markets. We begin by considering a base-case scenario evaluating the break-even cost for residential PV in the largest 1000 utilities in the United States as of late 2008 and early 2009. This base case includes a single set of assumptions for financing, technical performance, and several other factors.
This difference is largely driven by incentives, which can exceed $5/W, and the difference in electricity prices, which can vary by a factor of eight (or more when considering the range of tiered rates in California). Even without incentives, large variations in break-even cost will remain given the range of financing options and other non-technical factors.
The general trend observed in this analysis is that break-even conditions appear first in the Southwest where they are driven by resource and in the Northeast where they are driven by high electricity prices. As PV system prices continue to decline, break-even conditions begin to occur in the Southeast and Midwest. Very low electricity prices will preclude break-even conditions in certain areas in the Northwest and Midwest even with PV prices at $3.5/W and continuation of the federal investment tax credit.
Overall, the scenarios evaluated represent a market entry point for solar PV. However, the scenarios do not consider the potential for a deep, sustained market. Therefore, caution must be used when considering this analysis. PV breakeven does not imply that customers will necessarily adopt PV, and only a fraction of customers in each utility will have the necessary combination of good solar access and attractive financing options. A true depth of market analysis is required to determine a “demand curve” for PV at various price points. This must be combined with analysis of commercial buildings to provide an estimate for the market potential of rooftop PV.
According to the study, the break-even cost can vary significantly (up to a factor of ten) due not only to the evolution of PV technology, but also to a number of other drivers, among which mainly drivers connected with the average cost of electricity, the structure of interest rates and the availability of public incentives.
The authors of the report consider that incentive programmes will continue to be key to the development of the PV market. Nevertheless, even without incentives, due to a broad range of funding options, other break-even conditions could arise.
Nevertheless, such conditions are not likely to appear at the same time in the whole country. The report explains that a break-even cost for residential photovoltaics could be reached first in the Southwest, where more resources have been used to favour development, and in the Northeast, where the gap with the high costs of electricity produced from other sources could be essential.