The next phase of growth for large-scale, grid-connected solar electric technologies could be the federally sponsored Solar Enterprise Zone (SEZ) in southern Nevada. SEZ has proposals for 1,016 megawatts of projects, including 175 megawatts of photovoltaic and 841 megawatts of solar thermal-electric systems. Construction could begin in 1996, and the full target capacity could to be on line by 2003. Preliminary proposals submitted by the solar industry for inclusion in the SEZ program included an offer by the natural gas giant Enron Corporation of Houston, Texas. Enron surprised the solar industry by proposing to build a $150 million, 100-megawatt (peak) photovoltaic power plant at a per-kilowatthour cost well below the currently accepted industry cost. Enron believes it can lower electricity production costs with nonconcentrating thin-film photovoltaics to just 5.5 cents per kilowatthour over 15 years beginning in 1996, claiming that several recent breakthroughs in the thin-film photovoltaic technology make the future much brighter for large-scale photovoltaic developments.(9)
While the success of Enron's proposal is speculative at this time, it provides an example of the type of radical technological breakthroughs that have occurred in the solar and photovoltaic industries over the past several decades. The price of electricity from solar thermal trough technologies has fallen from more than 25 cents per kilowatthour in 1980 to less than 8 cents today. Costs must continue to fall, however, in order to bring the solar technologies closer to full cost-competitiveness with conventional energy technologies. The marginal cost of electricity from advanced combined-cycle gas-fired plants is around 2.5 cents per kilowatthour or less, and the total cost of power, including capital costs, is around 4 cents per kilowatthour. Grid-connected solar thermal-electric and photovoltaic plants are, therefore, not currently cost-competitive with new combined-cycle gas-fired plants. Advanced coal-fired power plants can also underprice solar power plants.
Nevertheless, as solar thermal and photovoltaic energy technologies continue to be developed, costs will continue to fall, and solar energy has the potential to become more competitive. In addition, if national concerns for the environment and quality of life continue to increase, new opportunities for solar energy will be presented. Solar energy could also gain a competitive advantage if the external benefits of the technology (e.g., no air emissions) and the external costs of other technologies (air and water pollution from fossil fuel emissions) were reflected in generating costs. The use of such "environmental externality adders" to change the relative prices of energy at the State level has, however, recently been rejected by the Federal Energy Regulatory Commission (FERC), which ruled that while a State could support renewables through broad tax or other mechanisms, it could not explicitly use environmental adders in the calculation of avoided-cost rates. (See the feature article in this report, "Renewable Resource Electricity in the Changing Regulatory Environment.")
The partnerships between the solar industry, electric utilities, and DOE are also hastening the development of cost-effective solar energy. The ability to further reduce the cost of solar energy will largely determine its future, but the treatment of these technologies in the regulatory and financial worlds will also have a major impact on the solar component of the future national energy composition.