Beyond the essential role it plays in the fight against climate change, renewable energy is also being developed for economic reasons. Through a combination of fast-growing economies of scale in equipment production and increasingly experienced project developers and installation companies, the costs of wind and solar power have plummeted in recent years. According to the solar industry, their installed costs have dropped more than 73% on average since 2006, and the wind industry claims cost reductions of 66% since 2009. These cost cuts have made renewables an appealing economic choice for more and more energy suppliers as well as energy consumers like businesses and homeowners.
(Source: SEIA/GTM Research)
Early adoption of renewable energy by U.S. power utilities was often driven by state Renewable Portfolio Standard (RPS) policies, which mandated procurement of a certain amount of power from solar, wind, geothermal, and other renewable resources. However, renewable energy is increasingly being developed for purely economic reasons as utilities seek to take advantage of federal tax incentives, avoid exposure to fossil fuel price volatility, and meet environmental performance requirements cost-effectively.
Wind energy is emerging as the choice for new utility generation in many regions of the U.S., particularly the windy midwest. Xcel Energy, one of the largest utilities in the country, claims that building wind farms today will beat investments in combined cycle natural gas plants given their projections for future gas prices. Given this expectation, Xcel has contracted for 6.5 GW of wind capacity on its system, more than any other utility in America. And Berkshire Hathaway Energy, owned by Warren Buffet – who isn’t exactly known for making bad investments – is close behind with 5.5 GW of wind on its system, including a U.S.-leading 4.4 GW that it owns directly.
While large-scale solar is less well-established than wind as a utility power option, it’s catching up quickly as a similar value proposition begins to emerge. According to research from Greentech Media, over half of new utility solar development will be driven not by policy mandates but by cost, as utility-scale generation contracts have dropped from $200/MW in 2007 to as low as $40-60/MW in 2015. This declining cost curve drove utility solar installations to a record 4 GW installed in 2015 according to SEIA’s year-end statistics. Solar is expected to be a particularly appealing option going forward for states in the southeast and Texas, where sunshine is plentiful and utilities are increasingly retiring their aging coal plants.
Energy-savvy businesses are increasingly aware of the attractive value proposition presented by renewables and are looking to develop their own wind and solar energy supplies to lock in low, predictable long-term electricity costs. Non-utility customers, including numerous Fortune 500 companies, have contracted for over 4.5 GW of wind power in the U.S. – including more than half of the new power purchase agreements (PPAs) for wind signed in 2015. And, according to SEIA’s Solar Means Business report, major U.S. corporations have installed nearly 1 GW of solar power at their own facilities. These businesses looking to save money by going solar include many of the largest companies in America, including Walmart (the largest business user of solar), IKEA, and Macy’s.
(Source: SEIA, Solar Means Business 2015)
Even if they’re not developing their own renewable energy, more and more companies are looking to buy it from third parties to make their operations more sustainable and profitable. Greenpeace’s “Click Clean” reports document how leading tech companies like Apple, Facebook, and Google are laying out detailed plans to get to 100% renewable energy, and the RE100 organization has signed up dozens of leading companies from around the world to commit to going to 100% renewable energy procurement, including BMW, Coca Cola, Johnson & Johnson, Nike, Philips, P&G, and Unilever.
While installing massive wind turbines on your property isn’t an option for most homeowners, solar panels are a perfect small-scale technology for those that want to be on the front lines of the renewable energy revolution. A 2015 investor’s report by Deutsche Bank estimated that solar is at grid parity – that is, equal to the cost of electricity purchased from the grid – in half of the 60 countries they surveyed around the world. In the U.S., DB projects that 47 out of 50 states will be at grid parity by the end of 2016 thanks to steady cost reductions, the continuation of the 30% investment tax credit (ITC) for solar, and the expansion of financing options for residential solar customers.
Similarly, a recent Department of Energy-funded study by the North Carolina Clean Technology Center projects that using a loan to go solar can save you money on your utility bills in 42 of America’s 50 largest cities. Not only that, but the study estimates that a fully-financed solar system is likely to be a better investment than the S&P 500 stock index in 46 out of 50 of those cities! It’s no wonder 2015 saw the home solar market exceed 2 GW of installations for the first time, according to SEIA.
Save On Your Utility Bills With Mosaic
Mosaic is one of the leading providers of home solar loans in the U.S. If you want to learn just how much you could be saving by investing in solar, click here to get started with a free quote!