THE BLOG

Solar Is Coming to Town -- Price Shifts, Market Changes And Policy Opportunities to Grow the Midwest's Green Economy

03/18/2010 05:12 am 05:12:02 | Updated May 25, 2011

The confluence of multiple economic and policy factors creates a huge strategic opportunity to advance solar power installations in the Midwest. This window of opportunity will likely be open for about two years while solar photovoltaic (PV) module prices are very low due to excess global supply. Soon after, hoped-for technology curve improvements will reduce module costs and key policy drivers, such as Illinois' solar procurement legislation, will kick in. Here are the combined factors that are driving today's solar PV opportunities:

 Solar PV module prices have come down to $3 per watt, or less, due to the excess supply in global markets. For several years, solar-friendly policies in Germany, Spain and other countries drove new global manufacturing plant investments to ramp up supply for the expected markets. Germany and Spain shifted their subsidy policies -- designed to catalyze markets, not support mature markets -- just as ramped up manufacturing came on line. The current excess supply has driven down solar PV panel prices to the lowest level in years.

 Solar will find a niche supplying peak power in Midwest electricity markets. Solar is available at peak times when regional power market prices are highest. As the Midwest power market has transformed from vertically-integrated utilities to a wholesale market dominated more by merchant generators and power auction-type processes, prices for generation are increasingly reflecting time-of-day and time-of-year. In short, solar energy matches well at pricey peak demand times.

 Fairly lush federal subsidies for solar energy through the Investment Tax Credit, loan guarantees and various other tax credits and grants are making a difference. Recent federal energy legislation and the economic stimulus package provide significant price support and investment value for solar projects.

 Federal and state policy support for solar energy is making a difference. For example, the Illinois RPS "solar carve-out" in the state's renewable energy procurement standard will drive a new market for 700 MW-750 MW of solar power supply in 2015. Net metering standards and interconnection standards in several Midwest states are creating more favorable pricing for distributed solar-generated power. Expanding net metering policies to cover larger projects will boost solar even more.

 Solar development is finding a sweet spot with 10 MW - 20 MW projects on former industrial sites with nearby substations. These projects are large enough to achieve economies of scale on module purchases and installation costs. Locating systems on older industrial sites provides ready low-cost access to transmission substations in open areas with little blockages to sunlight. In some cases, brownfield redevelopment, recovery bonds and other tax credits and subsidies are available. In addition to SunPower's 10 MW solar project on the old U.S. Steel site on the South Side of Chicago, there are at least three more developers seeking to move forward with 10 MW - 20 MW solar projects in Illinois. These solar projects are big enough to obtain economies of scale, but small enough to fit onto the transmission grid as well as provide grid support when needed most.

 Skilled electrical and other workers are available in the current economic downturn for solar installation "green jobs." With the 10 MW - 20 MW projects, there is enough volume to bring down the per-panel installation costs and, thereby, improve the overall economic robustness of projects. Moreover, in some cases, various federal and state job creation grants, subsidies and credits are available, as are federal job training programs directed to new "green jobs." Because of the excess worldwide manufacturing capacity, the solar green jobs opportunities are predominantly installation jobs, rather than new manufacturing jobs in the Midwest. The International Brotherhood of Electrical Workers is (re-) training new skilled solar installers at facilities in Illinois, Indiana and other states.

 Solar intensity in the Midwest is better than that of both Germany and Japan, the world's largest solar markets. All right, Illinois and Nebraska are not the same as Arizona and Nevada, but there are some good solar sites here.

 New state policies can provide continued support for solar expansion as module prices increase after about two years when there is less excess supply. The Environmental Law & Policy Center and our colleagues are advocating a new ramp-up in 2010 - 2014 prior to the 700 MW - 750 MW Renewable Energy Portfolio Standard (RPS) solar carve out now set to begin in Illinois in 2015. We are working on feed-in tariff models in Michigan and with colleagues in Iowa to improve the state's net metering policies. As Wisconsin considers boosting its RPS in 2010, there may also be opportunities to include solar provisions. We have a two-year window of opportunity to gain solar policy improvements as the unusually low module prices, combined with federal economic stimulus incentives, can drive significant new development.

Solar PV is primed for take-off in the Midwest, and especially in Illinois. Let's seize these strategic opportunities and move forward with solar power development that creates new jobs, spurs economic growth and helps to solve our global warming pollution problems.

Howard A. Learner is the executive director of the Environmental Law and Policy Center, the Midwest's leading environmental and economic development advocacy organization. www.elpc.org and www.globalwarmingsolutions.org