Researchers at Lawrence Berkeley National Laboratory surveyed solar project developers, sponsors, asset owners, and consultants – members of Wood Mackenzie Power & Renewables and the Solar Energy Industries Association – to assess the industry’s economics. What stood out was that big solar farms are getting much cheaper to run, and their operational lives keep getting longer.
Not only has cheaper modules brought solar plants into the energy mainstream, but the industry has also managed to slash the costs to operate projects by half. The levelized lifetime operational expenditures of projects built in 2007 was an average of $35 per kilowatt-year. By 2019, it was only $17/kW-year. Furthermore, the lifespan of a project has gone up from an average of 21.5 years in 2007 to 32.5 years today. Longer operating lives made projects better investments.
Berkeley Lab found that the levelized cost of electricity from utility-scale PV projects in the United States was an average of $305 per megawatt-hour for projects built-in 2007-2009. A decade later (in 2019), it was only $51/MWh. The researchers credit the drop in solar energy costs to less expensive PV modules, reduced upfront capital expenditures, and longer-lived, cheaper-to-run projects.
However, when the team calculated only the reduced cost of PV modules, then the levelized cost of energy for projects built in 2019 was an average of $73/MWh, which means that the operational expenditure improvements and the extended project lifespan have more to do with the decline in cost than the fact that solar panels are cheaper.
Daniel Liu, a principal analyst at Wood Mackenzie Power & Renewables, said in an email to Greentech Media:
We are not surprised to see operational lifespans increasing from the original 25-year design life. We’ve seen the same in wind: Some asset owners now expect to run the latest wind turbines for 30 years.
The useful life of a solar project refers to the period during which ongoing revenue is higher than ongoing costs. This time frame, of course, is when the plant owners benefit. Longer lifetimes overall give plants more years of useful life and thus the owners more revenue to recover upfront capital costs. This (and less need for replacements or refurbishments) is how the levelized cost of energy drops due to longer-lasting equipment.
And now you may be wondering if the cost will just keep falling or if it will eventually hit a plateau. According to the researchers, the industry may be reaching its limit in lowering operations and maintenance (O&M) costs. If it hasn’t reached rock-bottom prices yet, it will in the next few years. What they expect is that costs may even increase as the industry pivots towards optimizing a plant’s performance. But that will be a good thing because the overall energy production will increase.
