Distributed rooftop solar is the new ‘shale’ for US energy market

A new US report has described solar energy as the new “shale,” predicting it will transform power markets, with large-scale solar expected to reach grid parity in nearly 75% of American states by 2030.

The report, from analysts Wood McKenzie, notes that since the late 2000s, a widespread collapse in the price of PV modules has changed the economics of solar, putting it in a strong position to compete with other more traditional forms of power in the US.

“Just as shale extraction reconfigured oil and gas, no other technology is closer to transforming power markets than distributed and utility-scale solar,” the report says.

“During our analysis, we identified many evolutionary parallels to shale and believe that solar has the potential to make the same scale of impact across markets.”

Already, it says, large-scale has reached grid parity (exluding integration costs) – the point at which the levelised cost of solar is less than a gas combined cycle or combustion turbine – across multiple regions in the US.

“This trend is set to go on as solar costs continue to come down while combined cycle costs rise. By 2020, we expect 19 states to be at grid parity, increasing to 38 by 2030.

“While distributed solar economics (typically less than 1-2 MW) are more uncertain, grid parity has arguably already been reached in many states where they are driven by incentives and financial innovation.”

The study says that, with module costs at historic lows, increased efficiency will be the next frontier. And though higher efficiency solar boost the module price, capacity gains per square meter can make them more economic on a $/W basis.

Savings will also be driven by changes outside of manufacturing, it says, with non-module costs increasingly depending on heightened downstream competition, market structuring and regulatory redesign.

For the US, the report says, “our base case forecast assumes 26GW of distributed solar and 45GW of large-scale solar by 2035, totalling above 71GW.”

Top Image Credit: Process Industry Forum

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Giles Parkinson