The writing is on the wall for electricity generation as we know it.
This week, three major news items could have shared a single headline – solar energy is taking over. This week, these news items hit the Web:
• Solar will reach parity with coal-fired generation in China by 2016
• Barclays downgraded the entire electric sector because of the threat solar poses to its monopoly business model
• A whopping 74 percent of new electricity generation installed in the US during the first quarter of 2014 was solar.
These are all major news pieces that should signal to the world that things aren’t just changing, they already have changed.
Solar beating coal in China
Wuxi Suntech Power announced this week that it expects the levelised cost of solar PV to be the same as coal-fired generation in China by 2016 – 2017 at the latest.
While coal is plentiful, China’s supply of it has become increasingly expensive to mine and has experienced dramatic fluctuations in supply, according to a Telegraph article. While the country gets more than 69 percent of its energy from coal and there has been little indication the dependence would ever wane, this news could mean China will increasingly invest in solar.
Barclays downgraded electric companies
Barclays dropped the electric sector’s high-grade bond market rating to underweight this week. The financial institution specifically stated that the downgrade is the result of an imminent threat to the industry’s business model from solar power.
“The cost of solar + storage for residential consumers of electricity s already competitive with the price of utility grid power in Hawaii,” the statement reads. “Of the other major markets, California could follow in 2017, New York and Arizona in 2018, and many other states soon after.
In the 100+ year history of the electric utility industry, there has never before been a truly cost-competitive substitute available for grid power … We see near-term risks to credit from regulators and utilities falling behind the solar + storage adoption curve and long-term risks from a comprehensive re-imagining of the role utilities play in providing electric power.”
While the downgrade hasn’t impacted bond investor behavior yet, the fact that a major financial institution like Barclays is backing off utilities could be the harbinger of things to come.
Everyone is installing solar
These headlines aren’t coming from nowhere. Solar is growing fast. The Solar Energy Industries Association reported this week that 74 percent of all new electricity generation installed in the US during the first quarter of 2014 was solar.
While most of the solar installations were utility-scale projects, about a quarter were rooftop solar arrays.
Perhaps the sliver of news in the SEIA report that should really indicate solar is becoming a viable alternative to traditional electricity generation is the fact that more than a third of the first quarter residential solar installations didn’t receive any state or local incentives.