Goldman agrees -- solar will soon dominate electric power



Quick Take:  It was only about a month ago I alerted you to an analysis from the Rocky Mountain Institute implying that utilities would soon be obsolete in Hawaii and California. RMI believes solar power will reach grid parity in those states in a few years, and in other states not too long after. Now comes Goldman Sachs with a similar analysis, as reported by Business Insider.


As you will read, Goldman cites two important factors that drive its forecast. I think they are overlooking to other factors. I believe the "balance of system" costs, which until now have been slow to fall, will soon plummet as well. And I think installation costs will drop as companies move away from one-piece-at-a-time installation to modular systems.


Utilities: You may complain that solar power brings many problems, especially when it hits high penetration rates. You may complain that solar power will create a utility "death spiral." But you can't complain you haven't been warned. - Jesse Berst


Goldman's recently sent out an analysis of Tesla, the California company that makes electric vehicles (EVs). Tesla will soon have a "Gigafactory" to produce batteries for both EV and solar power applications.


Why will solar power come to dominate? First, Goldman cleantech analysts Brian Lee and Thomas Daniels believe the cost of solar panels will continue to fall, dropping by 3% annually. This is consistent with a well-known forecast from Bloomberg New Energy Finance (see chart below).




Second, they believe battery costs will drop faster than expected. They cite the Tesla Gigafactory. They believe it will help batteries reach $125 per kilowatt hour from today's $200 per kilowatt hour. And that battery costs will continue to drop 3% each year thereafter.


Meanwhile, they predict that electricity prices will continue to climb by 3% annually. As solar + storage drops while electricity rises, we'll soon hit the crossover point. This is especially true in Hawaii, California and New York where electricity is already more expensive.


Goldman thinks solar power will come to dominate even without tax credits and incentives. "Ultimately the holy grail of solar is to move to a situation where the customer is no longer tied to the grid at all. This may be far off, aside from entailing a much more expensive solar/battery system, this is also potentially out of people’s comfort zone entailing a 100% reliance on a new system for their electricity needs. That said, decreased reliability from an aging distribution infrastructure, a broadening desire to reduce the carbon footprint, and perhaps most importantly, the reduction of solar panel and battery costs could also work together to make grid independence a reality for many customers one day."


Jesse Berst is the founder and Chief Analyst of SGN and Chairman of the Smart Cities Council, an industry coalition.


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