Solar power continues to gain ground in the expansion of renewable energies worldwide. Of the 576 gigawatts (GW) of newly installed capacity in 2023, 78%, or 447 GW, came from solar energy. The USA in particular, as the second largest solar market in the world, plays a crucial role in the current and future expansion of photovoltaics due to government support measures.
Status Quo of Energy Production in the USA
In 2023, the United States produced approximately 4,178 billion kilowatt hours (kWh) of electricity from utility-scale power plants. These are large-scale energy generation facilities that are used for mass production and feed the electricity into the public grid. Of the 4,178 billion kWh, around 60% came from fossil energy sources such as coal, petroleum, natural gas and other gases. Around 19% came from nuclear energy and around 21% from renewable energy. The US Energy Information Administration (EIA) also estimates that 73.62 billion kWh of electricity was generated from small-scale photovoltaic systems on home or business roofs or as part of community solar programs.
With 73.62 billion kWh of electricity, about 7 million average US households can be supplied for a year.
Solar boom due to government subsidies
In the USA, the signs in the renewable energy sector are pointing to growth even after the elections. The international classification society and risk management consultancy DNV expects the share of wind and solar energy in US primary energy production to increase tenfold. Photovoltaic capacities are expected to increase twelvefold in the same period. Not least thanks to the Inflation Reduction Act, worth several hundred billion dollars, launched by the Biden administration. This is intended to stimulate the expansion of green technologies: not on an ideal level, but on an economic level – through tax breaks and subsidies. 369 billion US dollars have been earmarked for this and are to flow into the photovoltaic and battery sectors as well as into electromobility, among other things. Even after the change to a Trump-led government, market observers assume that large parts of the IRA will continue to exist. Support from the ranks of the Republicans is too great and too many economic effects are already visible in Republican-governed states.
Solar power accessible to everyone
And at the state level, programs such as “Community Solar,” which are intended to allow the general public to participate in the energy transition, are also gaining momentum. They give private households, municipalities and small companies the opportunity to use a local solar park together. “Community Solar” programs can be initiated either by the state or by local energy suppliers and must be approved by the responsible state utility commission. Once an approved program has been established, solar companies such as hep solar develop photovoltaic systems and sell the electricity produced to local energy suppliers. They in turn distribute it to their customers. Participants in a “Community Solar” program ultimately receive a credit on their electricity bill.
Differentiating features of utility-scale and community solar
Solar projects that are part of a “community solar” program differ from traditional “utility-scale” projects in terms of size, development and marketing, among other things.
The Depot utility-scale solar park in the US state of Virginia has a total capacity of 21.4 MWp.
Utility-scale benefits from economies of scale
In terms of project size, utility-scale solar parks are among the most extensive photovoltaic systems that – depending on their output – can cover areas of more than 200 hectares. Their total output can be well over 100 megawatts peak (MWp) and is designed to produce electricity on a large scale at the lowest possible cost. According to the International Renewable Energy Agency (IRENA), the global average levelized cost of electricity for one kilowatt hour of solar power from utility-scale systems was US$0.044 in 2023.
For comparison, the costs for electricity from fossil fuels were about 56% higher.
Community solar projects, on the other hand, are smaller-scale systems that typically have a maximum capacity of up to 5 MWp. The respective capacity limit is reflected in the federal guidelines for community solar programs and enables better integration into local grids. According to the National Renewable Energy Laboratory (NREL), the levelized cost of electricity for community solar is on average 25-30% higher. Reasons for this may include the administration of program participants, lack of economies of scale, limited grid resources and higher insurance and financing costs.
Community Solar is less complex
Utility-scale project development is primarily determined by community solar’s location, grid connection, regulatory requirements and time horizon. While utility-scale project developers look for large, contiguous areas with high levels of solar irradiance in rural areas, community solar projects are often located in urban or suburban areas with limited land availability. The former are connected to high-voltage grids designed to minimize transmission losses and maximize feed-in to the national grid. Community solar, on the other hand, are connected directly to local low-voltage grids, resulting in less complex and less expensive grid requirements.
Extensive approval procedures at the local and state level, environmental assessments and grid capacity studies are particularly required in the development of utility-scale systems. These can be lengthy, resulting in development times – from greenfield site to finished solar park – of two to seven years. Community solar projects can usually be put into operation after one to two years, as key requirements and specifications are already clearly defined in the federal programs.
Fruitland Creek Solar Farm in Marion County, Oregon, is part of a community solar program.
Commonalities in financing and electricity marketing
Large-scale photovoltaic systems are often financed by professional investors and secured by long-term power purchase agreements with energy suppliers or major customers. These power purchase agreements (PPAs) usually have terms of 10-25 years and serve to minimize investment risk and facilitate financing by banks. Smaller community projects rely on differentiated financing. On the one hand, private and institutional investors as well as PPAs with local utility companies are used here, and on the other hand, government funding programs and tax incentives such as the Investment Tax Credit (ITC) make a significant contribution to their profitability.
Utility-scale and community solar projects offer solar energy investors different approaches to participate in a diversified energy transition.
Investing with experienced project partners
Both investing in and operating utility-scale and community solar projects require specific know-how and flexibility in a dynamic market such as the USA. A project partner such as hep solar, with many years of experience and offices in North America, offers decisive advantages here. Equipped with knowledge of local peculiarities and an extensive network, the solar specialist can react flexibly to regulatory changes and local conditions. The Alderson solar project in Alberta, Canada, impressively shows how German engineering can find efficient solutions even in the face of challenging environmental conditions. hep solar’s largest solar project to date combines knowledge and experience from almost two decades of project development worldwide. The industry magazine Solar Power World awarded hep solar a top spot on the “Top Solar Contractors 2023” list.
Sources: Solar Power World Online, EIA, IRENA, PV-Magazine, DNV, Solarpower Europe, NREL, Representative Andrew Garbarino, hep solar