The recent evolution of the US PV business

In the US, after lagging the rest of the world for many years, utility scale PV has grown rapidly over the last few years. The initial impetus was the drop in PV panel prices in 2010-2011. This coincided with stimulus money from the recovery act and the combination jump started a utility scale solar business that had not previously existed. Investment reduced BOS costs significantly, especially for large scale utility scale projects. This coincided with a historically low interest rate environment. As utility scale PV became accepted as a low risk investment the cost of finance reduced significantly. This was a combination of two factors; low interest rates and a higher ratio of debt to equity. Historically utility scale energy projects have had a 50/50 debt to equity ratio, but some PV projects are now 80% debt to 20% equity. For the project developer this is a very high leverage which magnifies the return on his investment. Projects in Qatar have low 2% financing at 4 to 1 debt to equity ratio. This enables decent investment returns with an unsubsidized LCOE of $0.05/kWh.  The low financing and high leverage are not generally available and are a form of subsidy.

The US is not as supportive as Qatar, but the investment tax credit (ITC) and accelerated depreciation have enabled profitable projects with PPAs of $0.05/kWh. As well as reducing BOS costs and increasing efficiency with 1 axis tracking, large developers like SunEdison have been playing with leverage and may be in the 80% debt, 20% equity category for some projects. All of these developments show the rapid acceptance of utility scale PV as a safe investment. However, they have created the impression that PV prices are on a continuous trend of cost reduction that will continue indefinitely at the current rapid rate. This is highly unlikely. PV panel prices have not reduced significantly since 2011. The reduction in BOS costs cannot continue at its previous rate and the favorable financing regime has little room to reduce further. Optimists in the industry forecast that continuing improvements will make PV viable without the 30% ITC when it is reduced to 10% over the next five years.  This is unlikely, but acceptance will only come after prices have failed to decline, not before.

The establishment of the utility scale PV business is positive for StratoSolar. However, it seems likely that PV will have to actually encounter its problems with cost and intermittency before the need for a solution like StratoSolar will become accepted. To replace fossil fuels just for electricity generation PV will have to grow to over 10 times its current US yearly installations. To replace all fossil fuels is two or three times more again. PV without low cost storage can only replace less than half of current generation and even this will involve a lot of curtailment of PV generation which will increase the cost. Normally theses issues are brought up by opponents of alternative energy as an argument for eliminating it. Advocates take the attitude that problems will be solved and naysayers should be ignored. This attitude has proven successful so far. However, the issues are real and ignoring them will not solve the problems. StratoSolar, by solving PV problems is a savior of PV, not a naysayer. 

​By Edmund Kelly