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Open Access Publications from the University of California

Socio-economic and Engineering Assessments of Renewable Energy Cost Reduction Potential

  • Author(s): Seel, Joachim
  • Advisor(s): Borenstein, Severin
  • et al.

This dissertation combines three perspectives on the potential of cost reductions of renewable energy – a relevant topic, as high energy costs have traditionally been cited as major reason to vindicate developments of fossil fuel and nuclear power plants, and to justify financial support mechanisms and special incentives for renewable energy generators.

First, I highlight the role of market and policy drivers in an international comparison of upfront capital expenses of residential photovoltaic systems in Germany and the United States that result in price differences of a factor of two and suggest cost reduction opportunities. In a second article I examine engineering approaches and siting considerations of large-scale photovoltaic projects in the United States that enable substantial system performance increases and allow thus for lower energy costs on a levelized basis. Finally, I investigate future cost reduction options of wind energy, ranging from capital expenses, operating expenses, and performance over a project’s lifetime to financing costs. The assessment shows both substantial further cost decline potential for mature technologies like land-based turbines, nascent technologies like fixed-bottom offshore turbines, and experimental technologies like floating offshore turbines. The following paragraphs summarize each analysis:

International upfront capital cost comparison of residential solar systems

Residential photovoltaic (PV) systems were twice as expensive in the United States as in Germany (median of $5.29/W vs. $2.59/W) in 2012. This price discrepancy stems primarily from differences in non-hardware or “soft” costs between the two countries, of which only 35% be explained by differences in cumulative market size and associated learning. A survey of German PV installers was deployed to collect granular data on PV soft costs in Germany, and the results are compared to those of a similar survey of U.S. PV installers. Non-module hardware costs and all analyzed soft costs are lower in Germany, especially for customer acquisition, installation labor, and profit/overhead costs, but also for expenses related to permitting, interconnection, and inspection procedures. Additional costs occur in the United States due to state and local sales taxes, smaller average system sizes, and longer project-development times. To reduce the identified additional costs of residential PV systems, the United States could introduce policies that enable a robust and lasting market while minimizing market fragmentation. Regularly declining incentives offering a transparent and certain value proposition—combined with simple interconnection, permitting, and inspection requirements—might help accelerate PV cost reductions in the United States.

Performance analysis of large-scale solar installations in the United States

This paper presents the first known use of multi-variate regression techniques to statistically explore empirical variation in utility-scale PV project performance across the United States. Among a sample of 128 utility-scale PV projects totaling 3,201 MWAC, net capacity factors in 2014 varied by more than a factor of two. Regression models developed for this analysis find that just three highly significant independent variables – the level of global horizontal irradiance (GHI), the use of single-axis tracking, and the inverter loading ratio (ILR) – can explain 92% of this project-level variation (with GHI alone able to explain 71.6%). Adding the commercial operation year as a fourth independent variable and three interactive variables (tracking x GHI, tracking x ILR, GHI x ILR) improves the model further and reveals interesting relationships (e.g., the performance benefit of tracking increases with a higher GHI but diminishes with a higher ILR). Taken together, the empirical data and statistical modeling results presented in this paper can provide a useful indication of the level of performance that solar project developers and investors can expect from various project configurations in different regions of the United States. Moreover, the tight relationship between fitted and actual capacity factors should instill confidence among investors that the utility-scale projects in this sample have largely performed as predicted by our models, with no significant outliers to date.

Holistic assessment of future cost reduction opportunities of wind energy applications

Wind energy supply has grown rapidly over the last decade. However, the long-term contribution of wind to future energy supply, and the degree to which policy support is necessary to motivate higher levels of deployment, depends—in part—on the future costs of both onshore and offshore wind. Here, I summarize the results of an expert elicitation survey of 163 of the world’s foremost wind experts, aimed at better understanding future costs and technology advancement possibilities. Results suggest significant opportunities for cost reductions, but also underlying uncertainties. Under the median scenario, experts anticipate 24–30% reductions by 2030 and 35–41% reductions by 2050 across the three wind applications studied. Costs could be even lower: experts predict a 10% chance that reductions will be more than 40% by 2030 and more than 50% by 2050. The main identified drivers for near term cost reductions are rotor-related advancements and taller towers for onshore installations, fixed-bottom offshore turbines can benefit from an upscaling in generator capacity, streamlined foundation design and reduced financing costs, while floating offshore turbines require further progress in buoyant support structure design and installation process efficiencies. Insights gained through this expert elicitation complement other tools for evaluating cost-reduction potential, and help inform policy, planning, R&D, and industry strategy.

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