Proving the solar skeptics wrong, the U.S. Energy Information Administration (EIA) now expects that utilities will add 54.5 Gigawatts (GW) of solar generation capacity in 2023. And this capacity does not include 6.4 GW of residential installations and 1.7 GW of commercial installations expected in 2023.
SIDEBAR: a Gigawatt is a billion watts of power. In 1955 the eminent Dr. Emmett Brown stated that the only power source capable of generating 1.21 GW is a bolt of lightning. Obviously things have changed in the future.
For over 20 years the EIA predicted that fossil fueled power generation would continue as our leading source of new power generation. They’ve been among the biggest solar skeptics, predicting that solar would never catch up. But now, solar-generated electricity is the cheapest source for new power. By far. Utility solar plants generate electricity for less than $0.02/kwh, and residential rooftop systems generate electricity for less than $0.08/kwh. Compare that to the $0.16/kwh average costs for power in the U.S., and $0.35/kwh for the average home in California.
You may have heard about some of the solar industry "ups" (increased solar tax credits in the Inflation Reduction Act and more affordable battery storage systems) and "downs" (less favorable utility solar rates and tariffs on certain solar equipment). These ups and downs define what we in the industry call the Solar Coaster. Although challenging to predict, the one thing we can count on is that the economics for solar will continue to improve. Equipment costs are trending down, utility rates are increasing, and the reliability of the grid keeps getting worse and worse — all at the same time we are electrifying our buildings and transportation systems.
To really understand the ups and downs in the solar industry it’s necessary to look at the economic drivers in each of the main industry segments: Utility, Commercial and Residential. System costs, government policy and incumbent electric rates affect each of these market segments quite differently. In spite of this variability, the health of the overall solar industry is quite good. For a detailed dive into each of these market segments, please listen to this week’s Energy Show.