According to the Conference Board, a member-driven, nonpartisan, not-for-profit think tank, solar photovoltaic (PV) is currently the lowest-cost source of electricity in most places globally.

While it should be good news to learn that a renewable energy source is more affordable than ever, with residential prices down 64% and utility-level prices down 84% since 2010, it has raised some concern in the energy industry.

Their January 2024 report, Too Much Sun? Heavy Focus on Solar Might Create Volatile US Electricity Markets, presents the idea that if solar becomes the dominant energy source without adequate storage capacity, increased volatility in U.S. electricity wholesale markets may ensue, resulting in destabilization and undermining energy investments.

Because peak demand for solar energy in most markets begins in the early evening as the sun goes down, daytime wholesale electricity prices are often negative in markets like California. Thus, there’s no need to dispatch additional energy to the grid until sunset. Low daytime wholesale prices are reducing the financial appeal of investments to balance the demand, such as fossil fuel and wind energy power plants.

“Cheap solar power will be key to meeting renewable energy goals, but the intermittent nature of the technology poses serious challenges,” said Alex Heil, senior economist at The Conference Board. “Ensuring the U.S. grid is not overwhelmed by a glut of energy in the daytime—followed by shortages when the sun isn’t shining—will require extensive foresight from policymakers and industry alike.”

Heil said investment in baseload power sources, grid upgrades and energy storage solutions needs to keep up with the solar buildout. The report expands on that idea, claiming that sufficient utility-level storage capacity could reduce price fluctuations and volatile market conditions.

However, batteries and grid storage remain expensive, so a proposition to incentivize residential and commercial customers to use electricity in the middle of the day when supply is greatest may be needed to offset the imbalance.

Tax credits and other incentives remain in place to encourage solar installation. Falling costs of installation over the last 10 years also encourage adoption, as does a lower all-in cost of $29–$96 per megawatt-hour (MWh), compared with $30–$101 per MWh for natural gas. Even the cost of PV panel manufacturing has decreased from $5 per watt to less than $0.25 per watt in the past 23 years. The Inflation Reduction Act of 2022 added incentives for on-shore PV production as a way to incentivize solar installation through subsidies.

As of 2022, solar accounted for 4.8% of all electricity generated in the United States.

Image by andreas160578 from Pixabay