America Will Achieve Its Sunshot

Solar energy will be cost competitive with fossil fuels by 2020, if not before, the director of the Department of Energy's Solar Technologies Office said in New York Thursday.
And industry leaders agreed that the remaining obstacles to solar's success, like the expiration of a federal tax credit, should not prevent the industry from achieving the goal DOE set in 2011 as America's "sunshot."
"When I speak to industry leaders now they're telling me that they'll get to the Sunshot goal targets by the end of the decade, if not sooner than that," said Sunshot Director Minh Le during New York Energy Week. "That's a very dramatic change in attitude from when we convened industry stakeholders in 2010 and they pretty much said, 'You guys are crazy.'"
Those targets include accelerated solar deployment and reductions in technology and grid-integration costs, until the solar industry can produce power for 6¢ per kilowatt hour. With a federal tax credit, utilities are already buying solar energy consistently for less than 7¢/kWh, according to GTM Research.
The SunShot Initiatve was born after President Obama's 2011 State of the Union Address, in which he likened the moonshot, America's race against the Soviets to plant a flag on the moon before the end of the 1960s, to a race against the Chinese to develop economically feasible renewable energy by 2020:
Half a century ago, when the Soviets beat us into space with the launch of a satellite called Sputnik¸ we had no idea how we'd beat them to the moon. The science wasn't there yet. NASA didn't even exist. But after investing in better research and education, we didn't just surpass the Soviets; we unleashed a wave of innovation that created new industries and millions of new jobs.
This is our generation's Sputnik moment. Two years ago, I said that we needed to reach a level of research and development we haven't seen since the height of the Space Race. In a few weeks, I will be sending a budget to Congress that helps us meet that goal. We'll invest in biomedical research, information technology, and especially clean energy technology – an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.
The following week, Energy Sec. Steven Chu announced the SunShot Initiative.
"We set the benchmark for ourselves to be cost competitive with conventional energy sources by the end of the decade," Le said Thursday. "That was a very ambitious goal in 2011 and when we were planning for it in 2010."
At the time, solar cost four times as much as conventional energy. In 2015, the 7¢ utilities are now paying through purchase agreements compares to 6¢ to 15¢ for coal, 6¢ to 9¢ for the cheapest form of gas, 30¢ to 33¢ for diesel, according to Lazard—and 9¢ to 13¢ for existing nuclear.
"I'm happy to report that we're roughly halfway into this decade-long initiative and the industry is about 70 precent of the way towards our 2020 goals," Le said. "So, dramatic progress since 2011."
To fulfill the remaining 30 percent, the price must fall in regions where solar has remained more expensive, and the market must develop so the industry can thrive without federal aid. The solar Investment Tax Credit is scheduled to roll back significantly at the end of 2016. The ITC for commercial installations will drop from 30 percent to 10 percent. For residential, it will drop to zero.
"Looking at that cliff, that will be a very significant shock to the system, and certain segments of the market will probably fall significantly," Le said. "The utility scale segment will probably drop, but the commercial-residential segment I think will still have some life. It will probably drop a little bit, but it will still have some significant opportunities."
But the end of the ITC is a cliff only if the ITC ends, industry leaders said.
"We are hopeful—not necessarily optimistic but hopeful—that the ITC will be extended," said Laura Stern, president of Nautilus Solar, a project development firm.
After seeing the wind energy tax credit expire—before Congress extended it retroactively—the solar industry worries that the solar credit won't be extended in time to allow the industry to plan effectively, Stern said.
But eventually, solar has to compete with fossil fuels without a tax credit—a result that could be effected by economies of scale as the industry grows, and that would be aided by a price on carbon emissions.
Stern expects regional, state, and local initiatives and the EPA's Clean Power Plan to "absorb some of the potential shock of the loss of the ITC."
The utility-scale market also should benefit from cheap battery storage, which may allow utilities to rely on intermittent solar and wind energy at a net lower cost to customers.
But other industry leaders suggested the rooftop residential market and the utility-scale market had already developed sufficiently, while community solar gardens and commercial solar developments offer enough margin for profit that the loss of the ITC won't imperil their progress.
"Small commercial is hard," said Eli Hinckley, a clean energy lawyer with the law firm of Sullivan & Worcester. "It's hard because of credit risk, it's hard because standardization is difficult, and it's hard because you've got lots of little projects.
"But against that, you have very high margins compared to the rest of the marketplace. This is the place where the money is left in this market."
Mike Ziemke of SunEdison agreed with Hinckley that profit margins in the commercial sector will be large enough to absorb the loss of the ITC.
"This is the part of the market that hasn't been exploited yet," Hinckley said. "For those participants who can figure out how to manage credit risk, how to manage standardization and how to get better at deploying natural assets on rooftops, there is a huge market opportunity here."
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