Continued prosperity of the West depends on strong economic growth, which in turn requires a secure and predictable energy supply. The recent volatility of wholesale natural gas prices, which have risen from under $3.00/MBTU in 20011 to more than
2 $14/MBTU in October of 2005 , are having a dramatic impact on natural gas and electricity prices facing citizens in the Western states, prompting many to look for alternative sources of energy to meet their needs. The solar radiation in the West is the most abundant of all the renewable sources and a practical energy resource of great economic value. Solar energy can make a major contribution to the 2015 goal of 30,000 MW of clean energy adopted by the Western Governors’ Association in 2004. In fact, we project that as much as 8,000 MW of capacity could be installed with a combination of distributed solar electricity systems and central concentrating solar power (CSP) plants by 2015, and an additional 2,000 MWth of solar thermal systems could be installed in the same timeframe. At that point, the cost of electricity from future CSP plants should be on a par with that from plants burning costly natural gas, and distributed systems should have declined in price to the point that they should be able to produce electricity below retail utility rates in most parts of the West. Best of all, the fuel source for these systems is free. Once the systems are installed, all price volatility is removed, yielding the secure and predictable energy supply so critical to the region’s growth.
Initial system expense is currently the single biggest barrier to widespread deployment of solar. Worldwide experience has shown, however, that these costs can be driven down through accelerated growth sparked by temporary economic-development policies. The recently enacted two-year, 30 percent federal investment tax credit is a case in point. For distributed solar technologies, this credit will provide short-term help to increase the number of systems installed throughout the states of the Western Governors' Association. It will have little effect on central-station solar installations not already well underway, however, because the two-year duration is too short relative to the time needed to develop projects and bring them into operation. It is imperative, therefore, that Western Governors use their considerable leverage in Washington to ensure that this credit is extended for a full 10 years. Without the assurance of this support, large central systems will find it difficult to attract financial backers, and manufacturers of components used in distributed solar systems will not have the confidence to make investments to expand production capacity that will ultimately drive down costs for everyone.
This report outlines additional initiatives needed at the state and federal level to unleash private investment in solar. Many involve changes in policies or regulations with little or no budgetary impact. Where direct incentives are involved, they are designed to decline over the next 10 years to the point that they are no longer needed to sustain a rapidly expanding industry.
The Solar Task Force offers the following set of recommendations to the Governors that, if enacted, will enable solar technologies to make a meaningful contribution to the 30,000 MW of new clean, diversified energy.