Solar and wind power purchase agreements (PPAs) in the United States could be signed for less than one cent per kilowatt-hour (kWh) thanks to Inflation Reduction Act funding, concludes an analysis by investment banking giant Crédit Suisse.
“There may be solar power projects whose levelized cost of electricity (LCOE) drops below a penny per kilowatt hour, bottoming around US0.4¢/kWh (US$4 per megawatt-hour) in 2029,” reported PV Magazine. That pricing could begin as early as 2025 and persist beyond 2030.
The low costs would result from a combination of manufacturing and project tax credits available through the IRA, Crédit Suisse says. The credits are expected to offset a large portion of the costs usually borne by renewable power developers. For instance, photovoltaic panel manufacturers will receive 18 cents per watt when making solar modules.
Considering that solar manufacturing costs were around 20¢ per watt in 2018, the tax credit could cut that down to two cents, or even less if costs have fallen otherwise. Demand pressures might keep prices higher, but the report indicates that many solar module manufacturers could have essential costs of roughly 6¢ to 7¢ per watt.
A production tax credit (PTC) could further shave off about 2.6¢ per watt. And it can be increased twice—by about a third each time—first for modules manufactured with domestic content, then for building solar in “energy communities”. Taken together, qualifying projects could receive around 4.34¢/kWh from the PTC.
Combining the IRA’s manufacturing credits and the production tax credit, Crédit Suisse finds that domestic solar PPAs could fall to 0¢/kWh at some point in the second half of the decade.