Forecaster GTM Research predicted that the price of building big solar farms will drop below $1 a watt by 2020. That’s seen as the threshold below which building solar power arrays becomes competitive, without subsidies, with the cost of fossil-fuel plants. It’s also the target set in 2011 by the U.S. Department of Energy’s SunShot Initiative.
A dollar per watt is not the “true cost” of solar. That figure is the price that a construction firm would bid to a utility or developer to build the solar installation, in other words, the upfront capital costs of installed solar capacity. Solar power brings with it a range of other costs, such as transmission lines to deliver the power, software to regulate the flow of intermittent solar power onto the grid, energy storage systems, and so on.
A $1-per-watt [solar] plant will have a cost [of energy] in the neighborhood of 6 cents a kilowatt-hour. Intermittency and the need for backup power can add around 20 percent to the “real” cost of solar power.
Solar power is the fastest-growing form of power generation in the U.S., but it still accounts for just over 1 percent of U.S. electricity. Even with the robust growth rates forecast for utility-scale solar, that percentage will barely reach double digits by 2020. Power from all forms of renewable generation, including wind, solar, biomass, and hydroelectric, will total 15.6 percent of U.S. generation by 2020, according to the EIA’s Annual Energy Outlook 2016. Coal and natural gas will still account for 65 percent of our electricity, even with utility solar at $1 per watt.