A recent report by Credit Suisse suggests that from 2025 to 2032, combined with manufacturing and project tax credits, the US is expected to sign regular power purchase agreements for solar and wind energy that could be priced below $0.01/kWh.
The US Inflation Reduction Act (IRA) will be a transformative document, advancing a major experiment in energy generation at the national level, according to a new report released by Credit Suisse. The agency believes that the US has the opportunity to become a global leader in clean energy, just as it once was in the fossil energy industry.
Among the many ideas discussed in the bill is a startling projection - that the levelised cost of energy (LCOE) for solar projects will fall to about $0.04/kWh ($4/MWh) by 2029, and eventually to less than 1 cent per kWh. These projected prices will become a reality as soon as 2025 and will continue beyond 2030.
The Inflation Reduction Act will provide PV module manufacturers with subsidies of up to $0.18/watt at the time of module manufacture. And every link in the PV module supply chain will benefit, including polysilicon, wafers, solar cells and PV modules.
Just a few years ago, America First Solar told Bloomberg that their manufacturing costs were down to around $0.20/watt. And after the Inflation Reduction Act, their manufacturing costs are moving towards $0.02/watt. But the authors don't think First Solar will see extremely low prices because it has almost all of its capacity sold for the next few years and there may not be enough pressure to bring the price down that low. But this report points out that many other solar module manufacturers could reach production costs of $0.06 to $0.10 per watt.
And some market forecasts suggest that solar demand will reach 100 GW by 2030, which could push up the minimum price of PV modules.
The report also notes that the US could become a net exporter of solar modules to the global market, while reducing PV module manufacturing costs to US$0.20/W by the end of the 2130s. However, it is estimated that this would still be 33% higher than the cost of manufacturing Chinese modules (as shown in the graph above).
Second, the US must increase the Production Tax Credit (PTC). PV projects are required to receive an inflation-adjusted tax credit for 10 years after completion. Depending on the size and capacity of the project, larger projects tend to use the Production Tax Credit (PTC) in lieu of the Investment Tax Credit.
In addition, there are potentially two growth opportunities for the adoption of the PTC, each increasing by approximately one-third. The first increase is for the production of PV modules within the US, and the second increase is when more PV systems are installed in the energy community.
Combining PTC with the reduction in solar panel production costs under the Inflation Reduction Act, we will see US solar PPA prices reach $0.00/kWh by sometime after 2025. There have been instances of PPAs below $0.00 before.
In addition to wind and solar, Credit Suisse devotes more than 100 pages of this report to many other areas, such as a detailed look at green hydrogen, which is cheaper to manufacture, for obvious reasons. Will we be using $0/kWh solar power to produce hydrogen in the future? Besides, green hydrogen itself is subsidised at $3/kg.