Greentech Media
Over the past two months GTM Research has begun to survey the solar power landscape in a world with fewer incentives.
Specifically, we have been focused on analyzing project economics after expiration of the 30 percent Investment Tax Credit (see here and here for parts I and II in this series). Our core assumption has been that solar markets will tend to reach an initial tipping point when developers can offer customers a PPA at less than retail electricity prices. And if the PPA has an escalator, it should be less than historical increases in retail rates. We can determine when this will occur by comparing the levelized cost of energy (LCOE), a measure of total generation cost in dollars per kilowatt-hour, over the lifetime of a PV system, to retail electricity prices.
Our first two articles focused on broad comparisons across states. While useful for general purposes, this fails to account for the many quirks in individual state and utility territories. For a next step, we’re undertaking a deep dive at the state level, starting with Arizona, a market which is closely approaching “post-incentive” status. Arizona Public Service (APS) claims to be in near-term compliance with the state’s Renewable Energy Standard (RES) for distributed generation and argues that a purely compliance-based budget for 2013 would not warrant further cash incentives. However, in the interest of obtaining the least-cost renewable kilowatt-hours to meet overall RES requirements, the Arizona Corporation Commission (ACC) is suggesting a budget of around $10 million for incentives. The majority of this funding will go toward residential PV, at an upfront incentive level of $0.10 per watt. Once this $10 million is expended, which may be as early as mid-2013, residential PV incentives will drop down to zero. For commercial solar, the ACC staff recommends a production-based incentive cap of $0.065 per kilowatt-hour, about 30 percent lower than the 2012 cap.
