The solarbuzz.com module price survey reported industrial solar prices dropped .9% for September to fall below 20 cents per kWh for the first time. It’s price is more than 7% below that of September 2008. With commercial and residential solar prices remaining just above 25 and 35 cents per kWh, respectively, solar remains more expensive than conventional electricity in most markets. But that may change within the next three years. 

Price moves in US & Europe similar

Solar module retail prices reached a new record low in September, falling 1.4% (6 euro cents) to 4.28 euros per watt. This price has finally dropped below the record low back in 2003-04 of ~$4.33 when the dollar was stronger. Prices in the US also fell 6 cents (1.3%) to reach $4.39 per watt. 

Current Retail Price Drops Only the Beginning

The fall in retail prices of ~9% for a single module over the last year is only the beginning. On the wholesale side, solar modules are projected to fall as much as 50% this Fall from the third quarter of 2008. That leaves another 40% of retail price drops for the months ahead just to catch up. And wholesale module prices are projected by many to fall a good deal further over the next several months. One analyst recently projected the massive overcapacity of supply beyond recessionary demand should lower wholesale prices another 40% from today’s levels in 2010. This would translate into a module price below $1 per watt. He went further to predict prices per watt to approach 50 cents in 2011 — which would easily mean grid parity within two years if he were right and solar producers could do so profitably. The same analyst predicted that as many as half of the ~200 current solar producers will go bankrupt due to this massive price dive. 

Consumers & Installers Will Reap Benefits

These lower prices should translate into huge savings for consumers and solar installers in the years ahead. Lower prices will drive greater demand and help wean the solar industry off of current governmental incentives. While the profits of solar producers from First Solar to Solarworld to China Sunergy will be squeezed, the price drop will allow the Solar Age to emerge in the 2010s as solar chargers for our laptops, cell phones, and other aspects of our daily lives will become second nature.

Onwards in the sustainable energy transition-

Dennis

Price per Watt Dips Quickly

The price of a single solar module in Europe fell 2.2% (10 euro cents) to 4.34 euros per Watt. The August price was almost 8% below that of August 2008 and represents a new record low. And remember, this price survey is for single modules, so large orders would get lower prices.

In the US, prices fell 2.4% (11 cents) to $4.45 per Watt. The August price is now less than 3% above the record low set a few years ago. The price of solar electricity fell almost 2% to reach a new record low in all three categories:

Residential fell below 36 cents per kWh for the first time at 35.89 cents, commercial fell below 26 cents for the first time at 25.77 cents, and industrial slid to 20.07 cents per kWh.

The eight-year survey witnessed two new monthly records: number of lower prices for modules and the rate of decline (described above). A total of 176 modules had lower prices (12.7% of the survey) compared to the previous record of 126 (9.2%) in May of this year. The previous record change was an increase in prices at 142 modules in August 2005.

And Demand Poised to Grow

Solarbuzz also reported that more solar projects are moving again, a sign that demand should pick up quickly in the months ahead. Economic recovery, green governmental policy, and more attractive prices are the main drivers of this increase in demand.

Bottom line: While solar electricity prices remain higher than most conventional electricity markets, they are getting more and more competitive as the months roll by. September should be an exciting month as prices continue to decline and finally reach a record low in the US. Combining further solar price reductions with a return of tight oil market this winter should help the price of solar reach its most attractive point ever relative to other energy sources.

Onwards in the Sustainable Energy Transition-

US Oil Output 1% Below Last Year

The US EIA weekly petroleum report announced that US oil output fell 1.3% last week to a rate of 5.107 million barrels per day (Mbd). That is 1% below the same week in 2008 and 6.8% lower than the 2009 production peak of 5.48 Mbd hit in mid-April.

How Low Could Oil Output Fall?

US oil output will probably continue to gradually fall since drilling for new wells remains below average on the relatively lower oil prices of 2009. But production will be higher than last year in the period from late August to October — unless we have an unlikely repeat of hurricanes slamming directly into the Gulf of Mexico’s oil production and refining hub. But an interesting question is, “How low could US oil output go?” If the average output decline of .5% per week over the last 15 weeks continued for several weeks, production would be significantly below 5 Mbd by the winter. Such an occurrence could lift prices back to $80 per barrel, especially if current trends continue to our South.

Mexico Oil Output Plummets Further

Mexico’s state-run oil company, PeMex, recently reported its output fell even more in June. Its liquid production was 3.6% below May levels, and 10% below June 2008 (crude was 11% lower). Production is now at the lowest point since the early 1990s and shows little sign of curbing its fall. Output from Mexico’s largest discovered field, Cantarell, continued to nosedive — falling 41% from last June to a production of .604 Mbd. This country that was recently the second largest source of US imports may struggle to export a single barrel by 2015.

With lower output in the US and Mexico (along with depletion in Norway, the UK and Russia), the only way we can keep a lid on our transportation costs in the years ahead is to increase fuel efficiency and implement an active transportation revolution. A bicycle network for local and long-distance travel will be an important step for US planners to take (see the East Coast Greenway vision for a model). And as Fatih Birol of the International Energy Agency says, let’s leave oil before oil leaves us.

Onwards in the Sustainable Energy Transition-

4 GW in First Half of Year a Record

While the second quarter’s growth rate was less than half that of the record first quarter, the two quarters add up to another record — for installed wind capacity in the first half of the year (~4 GW vs. 2.7 GW in H1 2008). And even though we are near the bottom of a deep recession, the second quarter growth of 1.2 GW was equal to Q2 2008. It brings total US wind capacity to a world-leading 29.4 GW.

Major growth occurred in 10 different states across the country. In percentage growth, Missouri led the pack by almost doubling its wind capacity last quarter to over .3 GW (too bad MO Senator Claire McCaskill (D) is slowing the current climate bill that would help the state take further advantage of their wind resources). Pennsylvania and South Dakota also had double digit growth rates at 28% and 21%, respectively. Texas extended its leadership in wind by passing 8 GW, while #2 Iowa passed 3 GW.

My top 10 states list in rough percentage of electricity from wind shifted a little:

1. Iowa (~19% of its electricity from wind)
2. North Dakota (just below 18%)
3. Wyoming (over 15%)
4. Oregon (over 8%)
5. South Dakota (almost 8%, up from a tie for #7)
6. Minnesota (~7.5%, down from #5)
7. Kansas (~7%, down from #6)
8. Texas (almost 7%, up from #9)
9. New Mexico (~6.5%, down from a tie for #7)
10. Colorado (~6%)

Wind capacity can now generate ~1.9% of US electricity demand. Wind may pass 2% by year’s end, further crowding out dirtier coal, oil, and natural gas consumption.

Fewer Wind Farms Under Construction Though

The difference between 2009 and 2008 is the second half of the year. Last July, there were ~9 GW under construction. But this July, the queue is a lower ~5 GW (even though it’s a vast improvement from the smaller 3.4 GW under construction at the end of Q1). As I wrote last week, wind farm construction is expected to pick up tremendously in 2010 to a new record above 10 GW.

Could 2009 Rival 2008?

The second half of 2009 is expected to witness a significantly slower pace of installation than last year (almost 5 GW) on more difficult financing and reduced US electricity demand. But the lower turbine prices and the federal stimulus support emerging in the months ahead may help 2009 get close to last year’s phenomenal growth. AWEA projects annual growth of 6-7 GW (second highest ever), with growth continuing at the second quarter’s rate over the next two quarters. They are probably right, since wind farms are such huge projects and take months to complete. But I would love to be surprised by another record year. And I will keep you abreast of progress here as it is made in the weeks ahead.

Onwards in the Sustainable Energy Transition-

Turbine Prices to Fall, White Hot Growth Rates to Return

Turbine prices have increased since 2001 as demand growth has been through the roof. Turbine prices have actually doubled since 2001 from a low ~75 cents per watt to ~$1.50 per watt in mid-2008. But the deep recession is inducing lower demand in 2009 (down 20-50% from the record high of 8.5 GW hit in 2008). This lower demand has allowed wind turbine supply to catch up, sending prices back toward lows of a few years ago as I mentioned a few weeks back. The grid parity I wrote may be reached by 2012 for solar was reached by wind power years ago (when the federal Production Tax Credit is included). As wind prices get more competitive and financial markets recover, the Energy Information Administration (EIA) predicts that record growth will return to the US market in 2010-12, sending demand to consecutive record highs of 10.4 GW, 11.9 GW, and 13.7 GW!

Another recent DOE report outlines a growth path to 20% of US electricity coming from wind by 2030 that has been far surpassed these past three years and by the EIA projections above. Thus, we may be able to reach 20% wind by 2025 or earlier.

Wind Farm Performance Improving

The capacity factor (percentage of time wind is producing its potential) for wind farms has improved over the years. Back before 1998, the capacity factor was in the low 20% range. Since 2005, the capacity factor has been 35-37%.

What About Solar and Other Renewables?

If wind provides 60% of new electricity demand in 2012, can solar, geothermal, and biomass provide a bulk of the remainder? My current projection is for solar to provide ~10% of EIA’s projected new demand in 2012 (over 2.5 GW). If geothermal and biomass can add a similar chunk together, we’ll only need a couple of new natural gas or coal plants that year (less than 20% of new capacity).

Bottom Line: Wind power has gone through tremendous growth in the US and worldwide. The EIA predict lower turbine prices and healthier financial markets will bring new record growth for the renewable electricity provider – making wind the leading source of new power for America. If we have similar rates of growth for other renewables, our need for new fossil fuel power plants will be miniscule by 2012. Let’s make it happen!

Onwards in the Sustainable Energy Transition-

photo by Jerry Markatos

I’m happy to report that Sustainable Energy Transition (SET) is now getting the bulk of its cell phone’s energy needs from solar power! After 250 blog posts over the past year, it’s nice to look back at this piece of tangible progress for SET’s operations. Thanks to Connect2Earth.org, a green online community supported by WWF, IUCN and Nokia, who gave SET the solar charger – we are further walking our talk.

SET’s Green Practice

SET operations have been green from the beginning. Our office has large south-facing windows, allowing daylight to provide all necessary light during business hours and providing warmth during the cold New York City winter. On hot summer days, a light curtain helps keep the office cool while still letting enough light come through. And my transportation to local and regional meetings has been mainly by bicycle, train, or bus.

A Step in the Solar Direction

Since June, SET has added solar power to its green credentials. Our new solar charger is a Solio Classic Universal Hybrid Charger which retails for $100. The charger provides a majority of the power needs for my cell phone. But since I use a smartphone that requires a bit more power than some models, I need to charge it through conventional sockets around once per week. For my next phone, I’ll aim to get a more energy efficient model. And then I aim to get a larger solar charger that can power my laptop by 2010. Once that is complete, SET will be both energy independent and completely mobile (able to power up the laptop and phone even on bike trips or from remote locations).

Again, this progress as the first year of SET comes to a close is encouraging – here’s to much more in our own operations and by impacting the communities and institutions around us. A huge thank-you to Connect2Earth.org – be sure to check out their site which is full of excellent environmental info, blogs, and discussions with fellow environmentalists throughout the world!

Onwards in the Sustainable Energy Transition-

Output falling to meet lower demand

The petroleum report showed crude oil inventories fall closer to the average range, with its fifth straight week of significant decline. This slide has been largely driven by lower imports. A drop in US crude output is also helping to restore some balance – production is now ~5% lower (~.3 million barrels per day (Mbd)) than its highs during the Spring.

However, petroleum product inventories remain high. Gasoline increased to high levels as demand remains down 1.3% from last year. Distillates (mainly diesel) and propane also increased last week, with distillate demand down a huge 28.9% from 2008. Continued weak demand has sent crude prices down more than 15% from their early July highs and has gasoline falling back below $2.60 per gallon nationwide after almost touching $2.70 a couple weeks ago. As I wrote last week, it will take a marked drop in output or recovery in demand for prices to hike back up significantly in this prolonged recession.

A similar story for natural gas

The weekly natural gas storage report conveyed a similar story. Low prices have lowered output and induced a greater consumption of natural gas for electricity generation (substituting coal). These shifts are slowly returning inventories to balance, as inventories are now 19% rather than 23% above the historical average. It will take months of suppressed prices (and thus lower output) before the surplus subsides.

Prices to mirror recovery

Economic stability is necessary to bring real balance to fuel inventories and lift natural gas and oil prices. These lower costs can help consumers get their finances back into balance before the age of efficiency and renewables really kicks in a few months from now.

Onwards-

US & Europe Details

In the US, the average price per watt for a single module fell 1.1% or five cents to $4.56 per watt. This price is 5.4% below last year, but remains ~5% higher than the record low reached in 2004. In Europe, the average price fell .9% or four cents to 4.44 euros per watt. This price is a new record low and 5.5% below last year.

In kWh, the price for industrial solar electricity fell .8% or .16 cents to 20.4 cents per kWh. Prices are now the lowest since October 2004 (almost five years) and only .5% from the record low set in June 2004. We should see a new record low by the end of the summer based on current price trends.

Keynesian Price Stickiness

Prices on the individual retail side aren’t falling as quickly as the wholesale numbers I wrote about yesterday: ~5.5% vs. 40+%, respectively. Longterm contracts and general Keynesian price stickiness will eventually shakeout and the lower equilibrium will emerge by the end of 2009/beginning of 2010. And a quick note: these survey prices are per individual module. Average customers generally buy multiple modules that integrate into panels, so the price per watt for most projects is discounted for the bulk purchases to currently below $3 per watt. Still, the Solarbuzz price survey is useful as a comprehensive view of the individual retail sector and gives insight into the trends of the whole industry.

I’ll let you know as further developments occur.

Onwards in the Sustainable Energy Transition-

Competing with Thin Film’s First Solar

The cost leader for solar has recently been First Solar, who lowered their production cost per watt to 93 cents during the first quarter. But the lower efficiency of First Solar’s modules (at ~10.9% vs. 14-22% for silicon-based cells) means that selling its modules at $1 per watt is equivalent to Yingli Green Energy, JA Solar or Sunpower selling its modules for $1.30-$2 per watt. I thought sub-$1.75 per watt was unrealistic for crystalline silicon producers in 2009. But LDK’s revised second quarter guidance means that such prices are expected per silicon-based watt throughout the rest of the year.

Prices Less than Half 2nd Quarter 2008

Such a price translates into less than half the price of just a year ago. If installation costs can fall in a similar trajectory, relative prices versus fossil fuels will be similar to last year at this time. And once economic recovery begins to lift the price of natural gas in coming months, solar will become competitive and demand will soar.

The Strong Will Thrive

Solar companies who are strong enough to weather the next few months by lowering their cost of production will emerge highly profitable as the recession subsides. In the meantime, the second half of 2009 may witness serious consolidation throughout the solar industry as impaired financial markets fail to provide enough capital for smaller players. But the stronger producers (such as First Solar, Sunpower, and Suntech) appear poised to thrive as solar becomes mainstream and grid parity expands into several markets by 2010.

Onwards in the Sustainable Energy Transition-

One of the most compelling speakers at our last day of REFF Wall Street was Deutsche Bank’s Global Head of Asset Management, Kevin Parker.

The focus of his talk was the importance for the finance community to respond to resource scarcity amidst a growing world population and the threat of catastrophic climate change. Parker cited capital markets validating renewable energy with scores of billions in investment over the last few quarters, while “clean coal” is only a dream receiving government support because it is years away from commercial viability.

Parker also emphasized the opportunity over the next several months as money moves from the sidelines (safe-haven money market accounts) back into the market. He talked of more than $10 trillion, of which a small fraction flowing into renewable energy financing could revolutionize our global energy system.

Parker believes investors are waiting for some regulatory certainty — in the form of US cap and trade bill passage and a potential federal Renewable Electricity Standard (RES). If the House passes ACES today and it is able to get through the Senate and to the President’s desk this summer, investors will have some certainty to help them get further involved in the renewable energy sector.

First Solar and other solar companies could definitely use more capital to help them continue to simultaneously break efficiency records and lower costs. First Solar announced yesterday that they aim to lower module production costs per watt by a third or more in the next five years, approaching 50 cents per watt in 2014. Such progress would put solar power on equal footing with coal electricity and lower the risks from future fuel scarcity, since there is practically an infinite supply of energy available from the sun.

The hundreds of billions of dollars that flow every year into coal and oil can shift into renewables. Such a flow would mobilize bright minds to improve energy storage and grid management and overcome the challenges from intermittency.

The technology for carbon capture and storage for coal and other fossil fuels has several years before it is ready for prime time on a multi-GW scale — Parker mentioned the date 2020. Meanwhile, renewable energy is ready to provide the US with more than 10 new GW per year in 2010 and beyond. Globally, the number is poised to approach 50 GW per year in 2010.

Parker and other speakers closed REFF-Wall Street on a positive note. The solution to climate change and resource scarcity is available and getting better in the form of efficiency, wind, solar, and other renewable energies. As debt markets and tax equity improve, regulatory frameworks solidify, and stimulus funds become available in the second half of 2009, massive amounts of capital will be deployable for the renewable energy sector. The hurt from our current recession will remain for many months, but lower prices for renewable energy in 2010+ makes it the go-to technology to achieve a stable climate and a prosperous world.