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utilities in 8 different states made either the annual or cumulative
2008 rankings of top solar users. The top 10 utilities’ installed
capacity went from 711 megawatts to 882 megawatts in 2008, a 25%
increase. The average utility increased capacity by 2 megawatts, enough
electricity for 300 homes. California utilities Pacific Gas and
Electric (PG&E) and Southern California Edison (SCE), with big head
starts and lots of sun in their regions, continue to lead the lists.
PG&E and SCE added more megawatts in 2008 than the whole country’s
megawatts in 2006. And the lists are widening. Public power and
investor owned utilities in every region of the country are showing
more involvement.
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The
solar marketplace is determined by 3 major factors: (1) The solar
resource, (2) the retail price of electricity, and (3) state policy and
market conditions. The first factor is not likely to change much but
the retail price of electricity is beginning to go up, especially in
urban markets. Utilities in those markets are taking an interest in
solar energy as a means of stabilizing price and managing peak demand
price spikes. In the Southeast, where electricity generated from coal
remains cheap, there is less involvement from utilities.
State
policies are changing a lot and fast. 28 states have instituted
Renewable Electricity Standards (RESs) requiring utilities to obtain a
specific portion of their power from New Energy sources. Many of the
state RESs include a solar carve-out, requiring a specific portion of
the New Energy to be solar energy. Florida, North Carolina, Maryland
and New York utilities are all responding to such policies with
increased solar development.
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On
the whole, growth is enormous. Utilities have announced or have pending
some 5,000+ megawatts of concentrating solar power plant (CSPP)
projects and another 2,400+ megawatts of solar photovoltaic (PV)
projects (up from 300 megawatts of pending and announced projects in
last year’s SEPA utility report).
The CSPP concept appeals to
utilities because its fits their existing business model of selling
power generated from large, centralized sources. It also holds the
promise of storage capacity and 24/7 availability. But CSPPs require a
solar saturation not available very many places and distant from many
of the biggest, most important load centers.
Until a national
transmission system can deliver the Southwestern Deserts' sun to the
rest of the country, rooftop PV systems will remain important in the
solar energy world. Added to utilities’ other reasons to get involved
with solar, a new model is emerging. Dubbed the distributed solar power
plant, it combines the CSPP aggregated source concept with the
advantages of PV and distributed generation.
Projects
announced by Duke Energy in North Carolina and Public Service Electric
and Gas (PSE&G) in New Jersey exemplify the distributed solar power
plant idea: The utilities acquire rooftop space across a widespread
urban region and use their capital to facilitate PV installations. In
return, the utilities get the excess power generated from the rooftop
systems.
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The
implication is that the CSPP and rooftop PV business models are
compatible. Utilities will be investing in both and both will play a
role in the solar energy industry and utilities' engagement with it
going forward.
Because the economic downturn has caused a
retreat to cautious investing this year, utilities' investment in solar
energy has temporarily leveled off. But utilities have their own quite
substantial sources of capital, called ratepayers. Spurred by favorable
state and federal policies, rising electricity rates and consumer
demand for New Energy-generated power, their engagement with solar is
expected to rise rapidly from 2010-11 through 2016.
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COMMENTARY
The
growing number of state RESs is one of the key drivers of increased
utility activity. Many of the state RESs include a solar carve-out,
requiring a specific portion of the New Energy to be solar energy.
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other drivers are at least as important, though their impact is just
beginning to be felt. A national RES and cap™ (or some other price on
emissions) are coming. Even if the Democrats are unable to push through
their energy and climate legislation this year, the changes are coming
and utilities are beginning to prepare for them.
Finally, the
extension and broadening of the 30% solar investment tax to cover the
full price of solar systems and, more importantly to allow utilities to
make use of it, has added a big new financial value for utilities that
invest in solar.
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As
utilities enter the solar energy market, there is a shift away from the
image of the industry as driven by the individual customer and the
residential rooftop system. It portends enormous changes in the
industry.
The emergence of CSPPs is based on their appeal to utilities because:
(1) The scale of CSPPs is familiar.
(2)
CSPP-generated electricity can be more smoothly integrated into the
grid, even without storage capability, because when solar energy is
used to boil water it allows for some slowing down and speeding up of
generation to compensate for momentary changes in demand and supply.
(3)
Tracking systems in CSPPs, by adjusting to the angle of the early
morning, midday and late afternoon sun, allow for generation during
more of the day.
(4) The potential for storage is very real, it is
already being used on a limited basis in Spain and a 6-hour storage
system is planned for an Arizona plant. Storage of this capacity makes
CSPP-generated electricity more than a peak demand supplement and a
reasonable alternative to traditional generation.
The solar
industry is entering a growth phase similar to what the wind industry
has gone through over the last 5 years. By the middle of the coming
decade, solar energy-generated electricity is expected to be price
competitive and a major power generation source. And the growth phase
has several advantages over wind's 5-year spurt, thanks to the wind
industry's pioneering:
(1) Solar will not have to struggle to make the need for new transmission known and to get policymakers involved.
(2)
The distributed power plant concept allows solar to occupy smaller,
urban niches and continue growing without the needed new transmission
and new sites.
(3) The solar resource is strongest at periods of
peak demand on hot summer afternoons, making grid integration less
challenging than it was for wind (which is often strongest when demand
is weakest).
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The
distributed power plant model has raised some contentions between
utilities and solar installers over who will do and own what. The first
glimmers of resolution to the conflict have emerged in California where
utilities and installers have reportedly agreed to share.
Transmission
and storage remain major “ifs” in large-scale development of New
Energy. SEPA and utility representatives are watching Spain very
carefully for further reports on the CSPP storage experiment. They are
also watching Spain carefully because the Spanish now get 17% of their
electricity from wind. That much New Energy challenges the limits of
grid integration technology. Last year’s DOE report finding it entirely
feasible for the U.S. to get 20% of its power from wind stipulated no
need for storage but a high need for adequate grid integration. Utility
scale solar will be subject to similar parameters.
A final and
crucial point about the emerging distributed solar power plant concept:
It is driving economies of scale and, as a result, the cost of solar
panels is falling. It is down 25% at present and solar energy industry
experts predict it will be down as much as 50% by 2011. When
supply-demand factors catch up, the price of solar energy-generated
electricity will also fall.
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QUOTES
-
From the SEPA report on utilities and solar in 2008: “What is notable
about this year’s rankings is the amount of solar growth at a number of
different utilities across the country. A doubling or more of solar
megawatts in a utility’s portfolio was not unusual… Solar technologies
are emerging as a generation solution for utilities and their customers
with a wide variety of creative business partnerships.”
- From the
SEPA report on utilities and solar in 2008: “There were not many
changes in the cumulative Top Ten, with only two utilities switching
places and no new entrants. In fact, the Top Ten utilities strengthened
their “market share” to 94% of the survey total, only a slight decline
over last year. Overall, utilities in six different states placed in
the Top Ten.”
- From the SEPA report on utilities and solar in 2008:
“The last 12 months have seen both utility-driven and utility-scale
project/program announcements emerge as a new and significant solar
market, on the order of 7500 MW…There is a likelihood that not all of
these announced projects will come to fruition. Only time and the hard
determination of the emerging solar economy will tell…. What can be
said, however, is this: Utility-scale solar electric projects have
entered a new phase of market development in which they will be the
primary solar industry megawatts and cash-flow drivers. In addition,
utility-driven projects are a new and emerging dynamic in the solar
industry whose impact is still being played out. Significant additional
market expansion is anticipated.”
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From the SEPA report on utilities and solar in 2008: “Residential and
commercial photovoltaic projects will continue to be important market
segments, especially in secondary markets with small-business job
creation, but the solar industry is diversifying away from rooftop net
metered projects as its primary economic means. That is not to say that
“solar farms” are taking over, just that the industry is becoming more
diverse and expanding into new financial project propositions…”
-
From the SEPA report on utilities and solar in 2008: “…the industry is
growing rapidly, moving beyond the iconic vision of a residential solar
rooftop future. The growth is still predicated on incentives, as much
of the electricity industry is, in one way or another. The passage of
the eight-year federal solar investment tax credit, with utility
utilization included, will go a long way toward providing market
certainty for utility and utility-scale projects, as well as
manufacturing investment, job growth, and associated benefits.
Certainly the economy, financing markets, transmission, and permitting
are significant risks that can impact implementation. But the
impressive list of solar projects in the queue provides a significant
amount of market activity in the coming years, even utilizing
conservative estimates.”
posted by Herman K. Trabish
Electric Utilities Rise to Meet Solar Call-to-Action
Jopsephine Mooney, May 28, 2009 (Solar Electric Power Association)
