Economics of Solar Power in Canada – Methods
A breakeven price is the price of electricity a project requires to pay for all its costs. These breakevens are then compared against local electricity prices to get a sense of whether solar makes financial sense to build. The overall economics of solar power depend on:
- The costs of solar systems, such as the costs of panels and installation.
- The solar resource, which is how much sunlight a location receives and determines how much electricity a solar project will produce. This varies widely across Canada.
- The relative price of comparable electricity, which is how much it costs to generate or buy electricity from other sources.
Because equipment and installation costs for solar have been falling over the long term, breakevens were also analyzed in three ways: the cost to install now, the cost to install in the near future, and the cost to install in a low cost future if costs keep rapidly falling.
|Type||Current Installation ($/W)||Near Future Installation ($/W)||Low Cost Future Installation ($/W)|
|Residential (5 kW)||$3.197||$2.595||$2.252|
|Commercial and Community (200 kW)||$2.210||$1.772||$1.529|
|Utility – Fixed Mount (50 MW)||$1.458||$1.001||$0.753|
|Utility – Tracker Mount (50 MW)||$1.557||$1.067||$0.803|
This table shows the assumed costs to install residential, commercial, community, and utility-scale solar (fixed mount and tracker mount) in Canada.
Residential costs are currently $3.197 for a 5 kW array, which could fall to $2.252/W in a low cost future. Commercial and Community costs are currently $2.210/W for a 200 kW array, which could fall to $1.529/W in a lost cost future. Utility-scale arrays with fixed mounts are currently $1.458/W for a 50 MW array, which could fall to $0.753/W in a low cost future. Utility-scale arrays with tracker mounts currently cost $1.557/W, which could fall to $0.803/W in a lost cost future.
Another important factor is how pricing for solar electricity is determined. ESPC looks at this in two ways:
- One way assumes prices remain the same every hour of the day. These “flat” prices are common for many consumers.
- ESPC also looks at “time of day” pricing, where prices change depending on what time it is. Time-of-day prices are typically higher during daytime hours because of higher demand, while time-of-day prices are typically lower overnight because of lower demand. Time-of-day prices apply to consumers who have smart meters. While not every province in Canada has widely deployed smart meters, ESPC estimates time-of-day prices for every province and territory in order to better understand overall economics.
Utility-scale projects can also have tariff costs. These are the costs required to transmit energy over provincial electricity grids and to maintain grid stability. For utility-scale projects, ESPC has a scenario where tariff costs are included and another scenario where tariff costs are not included.
Other costs include motivation. For example, utility-scale solar seeks to recover their costs, as well as earn a profit, while residential, commercial, and community projects are only interested in recovering their costs. Further, the cost of financing a project differs by project type. Commercial, community, and utility-scale projects have costs of capital. This includes the cost of borrowing money and other financing. Otherwise, residential projects are assumed to have an opportunity cost. An opportunity cost is how much money that funding could make in another investment.
While many remote places may not have the demand needed for utility-scale generation, or be close enough to transmission systems so the electricity can make it to markets, these breakeven economics were still calculated. This was done, because the results could show something about how Canada’s utility-scale economics change with the solar resource across the country.
However, this was not a grid-integration study. Therefore, the other costs of solar power, such as balancing demand and supply on the grid by adding battery storage, were not examined.
Many of ESPC’s charts compare solar breakevens to reference lines labeled “Electricity Price”. These reference lines are estimated prices for electricity currently available from the grid. Reference lines are meant to help readers understand whether the breakevens of solar projects are lower than prices for electricity bought from the grid, and whether projects would help save money or not.
Some provinces and territories have rebate programs for residential, commercial, and community projects. Because these programs are not always permanent, ESPC does not include rebate programs in the cost to install now. However, when rebates are applied to the cost to install now, they typically create installation costs closer to those in the near-future or a low-cost future. Though they are more complex than shown here and can become quickly outdated, Table 2 summarizes provincial and territorial programs. People interested in residential, commercial, or community solar should always check with their provincial or territorial governments for the most recent information.
|Newfoundland and Labrador||None||None||None|
|Prince Edward Island||None||None||None|
|British Columbia||No PST||No PST||No PST|
For more information on the methods, please see Appendix A.
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