Jim Hughes, the CEO of vertically integrated solar developer First Solar, spoke at the Edison Electric Institute meeting in New Orleans two weeks ago. (Please forgive the late filing, I lost my notes in a club on Frenchman’s Street and just recovered them. I ♡ NOLA.)
Hughes spoke on a panel along with a few utility CEOs and shared some straight talk on utility solar.
Hughes cited "three big trends" in solar power.
Utility-scale: The CEO of one of the world’s largest utility solar builders said, "There’s lots of talk around distributed generation and yet the bulk of the photovoltaics added on a global basis is still utility scale" and "will continue to be utility scale."
"Cost, cost, and cost": The CEO said, "We recently did a strategic review of our business and asked, ‘What does it take to trigger demand? How do we gain competitive advantage over our competitors?’ The answer is ‘cost.’"
Hughes spoke of markets driven by "demand elasticity versus price in a rather spectacular fashion." He gave two examples. "We saw in Texas 18 months ago CPS put out an RFP and they had first responses that had a 4 in the front for a price — 4 cent solar." Hughes said that price was a "wake-up call" and the "response has been massive procurement" across the southeastern U.S. Hughes also cited a project in the Middle East for Dubai Power and Water. First Solar won the 13-megawatt first phase at a relatively high price "because the cost structure was unknown." By the second phase of 100 megawatts the price was in the five cent range and the customer’s response was to double the demand.
He said, "I don’t remember the last time I saw pricing that had a 7 or 8 cent price front of it…and we’re regularly bidding in at…5 and 6 cent power. We’re beginning to see 4 to 5 cent power." The CEO said that 4 cents was reachable in certain cases. He added, "I fully believe that within ten years we’ll be talking about low 3 cent power on a peak basis."
Expiration of ITC: Hughes called the expiration of the ITC "irrelevant," saying "Within 18 months we will overcome the cost delta resulting from the drop [of the ITC] from 30 percent to 10 percent. It actually opens up new markets, in our opinion, because you’ll see an increased interest in utility generation — once the distortion of the ITC is behind us."
The CEO added, "We have a technology roadmap — by 2017, we’ll be under $1.00 per watt fully installed on a tracker in the western United States." (News of First Solar’s record-setting module efficiency here, Global Demand Report here.)
"The growth in corporates interested in direct acquisition of photovoltaic power is not driven by climate change concerns — it’s driven by economics. When you look at data centers, when you look at electricity-intensive industries, they are all interested in locking in a significant cost as a fixed cost rather than a commodity-priced variable cost — and that’s driving a whole lot of procurement on a global basis."
Hughes said, "In five years community solar will play a dominant theme at utilities. The single most valid point that the Net Energy Metering crowd has is that consumers deserve a choice…you better give it to them or they will find a way to procure it around you. Community solar is a very effective way of providing consumers that choice." He called community solar "an untapped market and said that community solar was an "outstanding product that creates far less system issues."
GTM Research’s upcoming report, U.S. Community Solar Market Outlook 2015-2020, accounts for 21 megawatts of community solar going on-line in the U.S. in 2014. GTM Research forecasts 115 megawatts in 2015 and 534 megawatts in 2020.
"The large arrays that are built today are essentially a scaled-up rooftop system — because it’s what the code authorities in ancient years [understood]. If you were building a large scale array from scratch on a clean sheet of paper with no prior contamination — what you would build would look different than what we build today."
"I think over the next five years you’ll see the industry transition to a fundamentally different architecture with greater use of DC bus, use of AC conversion at higher voltages with fewer inverters…I also think we need tighter integration with the [way we] use electricity." He said there was an opportunity to do things on the DC side. "If you can co-locate or locate within in a reasonable distance, you can put DC right into the data center" resulting in "a 15 percent cost savings from avoiding the whole AC conversion side of the equation."
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