Similar Cost, Less Risk: The Argument for Solar Photovoltaic as a Preferred Resource

By: Natascha Smith, Energy Fellow

Since solar photovoltaic technology became popular in the 1950s, many critics have questioned the economic viability of solar energy. For decades, utility-scale solar generation failed to reach grid parity, or the point at which the levelized cost of solar energy matches the market price of electricity, without the need for subsidies or incentives. Luckily, recent investments in solar research and development have yielded substantial benefits to this growing energy sector. The Department of Energy’s SunShot initiative announced on September 12^th that the cost of utility-scale photovoltaic power reached its 2020 goal of $0.06 per kilowatt-hour three years early. This means that utility-scale solar energy is now at a price point that is market-competitive with traditional forms of electricity.

Achieving grid parity has done more than allay the concerns of solar critics; it has also set up solar to take on a new role as a preferred generation resource in the integrated resource planning process. An Integrated Resource Plan (IRP) acts as a roadmap for how a utility plans to meet its long-term energy needs, with the end goal of identifying the best mix of resources to provide a reliable supply of energy at the least cost and risk to the utility and its customers. To achieve this goal, the Oregon Public Utility Commission, which oversees and approves IRPs developed by Oregon’s investor-owned utilities, requires utilities to examine all environmental compliance costs associated with energy resource options, including state and federal energy policies.

Now is arguably solar energy’s chance to shine. Having reached a competitive price point, utility-scale solar generation has similar costs as fossil-fuel resources, but with fewer risks. With solar, utilities can evade the lengthy and often expensive process of meeting pollution control standards, plus they avoid the risk that the external costs of carbon may be internalized by future regulation. For Oregon utilities subject to the coal-to-clean bill, which the state adopted in 2016, solar has the added benefit of helping utilities meet the requirement of producing at least 50 percent of electricity from renewable sources by 2040. When determining what mix of resources will help it meet its long-term needs, utilities cannot ignore that solar’s cost competitiveness and low risk gives it a leg up on traditional generation resources, namely coal and natural gas plants. The IRP process is sure to show that utility-scale solar is a key component of a least cost/ least risk resource portfolio.

With Oregon utilities required to complete an IRP every two years, utility-scale solar should be playing a larger role in Oregon’s electricity generation in the relatively near future. The solar industry has done its part to reach grid parity; now it is time for the utilities and Public Utility Commission to do theirs by ensuring that utility-scale solar is treated as a preferred generation resource in utility resource plans.