A Credit Suisse report suggests that from 2025 through 2032, the United States could see solar and wind PPAs regularly signed for under 1¢/kWh, due to a combination of manufacturing and project tax credits.
The Inflation Reduction Act (IRA) may become a transformative document, enabling a grand experiment in energy generation at a national level. A report from Credit Suisse suggests as much. The organization believes that the United States has an opportunity to become a global leader in clean energy, much like it is already in the fossil industry.
Among the many ideas discussed in the document is a striking prediction – there may be solar power projects whose levelized cost of electricity (LCOE) drops below a penny per kilowatt hour, bottoming around 0.4¢/kWh ($4/MWh) in 2029. We could see these prices as soon as 2025, and they could persist beyond 2030.
If we combine a few data points, we can see how this number is possible – and might even have room to go lower.
First, the IRA will pay solar panel manufacturers up to 18¢/W when manufacturing modules. Each item along the module supply chain gets a piece – polysilicon, wafers, cells, and modules.
Consider that it has only been a few years since First Solar told Bloomberg that their manufacturing costs were around 20¢/W – with the IRA, they’re on a pathway to a 2¢/W product. Since First Solar has nearly sold out for the upcoming few years, and may not feel enough pressure to reach pricing that low, this author doesn’t expect the most extreme lows to materialize. But according to this report, there are plenty of other solar module manufacturers that could get to an essential cost of 6-10¢/W.
The lowest number could be pushed upward by demand, as some market projections suggest that we could see 100 GW of solar demand by the end of the decade.
The report also suggests that the United States might become a net exporter of solar modules to the global market, while pushing our natural cost of manufacturing modules toward 20¢/W near the end of the 2030s. That is still 33% greater than estimates for China’s estimated costs (per the chart, above).
Second, we have to layer on the Production Tax Credit (PTC). Adjusted for inflation, the PTC is valued at 2.6¢/kWh. For ten years after a project is constructed, the project will receive an inflation adjusted tax credit for every kWh generated. Larger projects tend to take the PTC in lieu of the Investment Tax Credit, mostly due to project scale and capacity factor.
Last year, Lazard suggested that the unsubsidized LCOE of large-scale PV was 3-4.2¢/kWh for crystalline silicon, and 2.8-3.7¢/kWh for thin-film. If subtract out the PTC value, we get an LCOE 0.4-1.6¢/kWh for standard modules, and 0.2-1.1¢/kWh for thin film.
Additionally – we can increase the PTC two times, by about a third (0.87¢/kWh) each time. The first increase will come from modules manufactured with domestic content, and second will come from building solar in energy communities. That hikes the 2.6¢/kWh all the way up to a total of 4.34¢/kWh in PTC for qualifying projects.
When we combine the cheap IRA solar panels with the PTC, we’ll start to see domestic solar power PPAs at 0¢/kWh, sometime in the second half of the decade. PPAs below zero have happened before.
If we take a few minutes to digest that, it becomes clear why Credit Suisse spent over a hundred pages going far beyond just wind and solar in the document. That includes a lot of discussion about cheaply manufactured green hydrogen as well. (Will the hydrogen be produced with $0/kWh solar?) Hydrogen will have its own additional incentive of $3/kg.
