My First Law of Technology is in full swing…

For those who don’t know it, my First Law is technology marches on. (If you’re curious, I outlined all of “Dave’s Laws of Technology” here in Energy & Resources Digest.)

In this case, I’m talking about utility-scale solar.

According to the U.S. Department of Energy, more new generating capacity will come from utility-scale solar projects this year than any other energy source.

[ad#Google Adsense 336×280-IA]That’s impressive given where solar was just a decade ago.

At that time, grid-connected solar capacity was around 5,000 megawatts.

Last year, new installs alone accounted for a record 7.3 gigawatts. (As a refresher, 1 GW equals 1,000 MW.) And more than half of that energy is utility-scale.

I never would have guessed we’d be here already.

But that’s Dave’s Second Law of Technology in action…

When it comes to tech, changes often happen much faster than you expect.

The DOE forecasts that this year, solar power generation will more than double last year’s totals. It will hit 16 GW. And 12 GW of that – a full three-quarters – will be utility-scale.

But I think those numbers are low. Let me explain why…

New Markets for Utility-Scale Solar
As I reported in my big 2016 prediction piece, Congress recently extended the 30% renewable energy tax credit. It’s now good through 2019.

After that, it will drop 10% per year and will remain at 10% in 2021 and beyond.

So, as a consumer, now is an excellent time to install some panels on your roof or in your backyard. Or you could construct your own solar farm as I did.

From the utility side, though, solar is becoming even more attractive.

Up until now, state renewable portfolio standards drove about 80% of utility-scale solar projects. (These RPS are essentially regulations that push utilities to increase energy production from renewable sources.) But that’s starting to change…

There are three new non-RPS markets driving utility-scale solar:

  1. Utilities are starting to build utility-scale projects on their own. The cost of solar is steadily dropping. It’s already competitive with traditional energy sources in 20 states. By 2020, that will be the case in at least 42 states.
  2. Large retail customers are getting in on the action. Big companies like utility-scale solar because it flattens their energy demand curves. Right now, this is the smallest of the new markets. However, I expect it to be the fastest-growing in short order.
  3. Solar is a no-brainer for PURPA-qualifying facilities. The Public Utility Regulatory Policy Act of 1978 sought to promote energy conservation and renewable energy use. One group of environmental scientists sums it up as “the only existing federal law that requires competition in the utility industry.” And the lower solar pricing gets, the more competitive it becomes.

Speaking of price…

Can’t Beat Solar’s Pricing
The largest demand driver for solar is pricing. According to Lawrence Berkeley National Laboratory, utility-scale pricing has dropped more than 50% since 2007.

The trend is very clear. In 2007, utility-scale solar cost $5.25 per watt. Last year, it cost just $1.45 per watt. And while estimates vary, it looks like utility-scale solar could drop an additional 43% by 2020.

We’re at a point where solar – especially with its tax credit extensions through 2021 and beyond – is becoming a least-cost option for utilities.

I always imagined this day would come. I just never expected it would happen so fast. Dave’s Second Law strikes again.

This week, I’m excited to speak on solar, EVs and battery storage at the 18th Annual Investment U Conference in Carlsbad, California. The event kicks off today, and I’m hoping to see many of you there.

Good investing,

Dave

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Source: Investment U