Is Solar the New Wind in Texas?

By Cyrus Reed

No one can dispute the rapid rise of wind power in Texas, which is expected to become the third largest source of electricity in Texas this year. From rather humble beginnings in the late 1990s, the wind industry in Texas has grown at an outstanding rate over the last five years, and generated 9.9% of the electricity in the ERCOT market, which covers most of Texas (see chart). In 2014, to date, wind has produced more electricity than nuclear power, according to ERCOT’s Electricity and Demand Report, in which wind produced 22.5 million MWh compared to 22.3 million MWh for nuclear power. Is solar next?

Chart – Fuel Use in ERCOT, 2013

There’s no doubt that the future still looks windy. ERCOT keeps a running tab of projects in the electricity queue, and it reports that by 2018, if every project with financing and an interconnection agreement is actually built, the total capacity of wind will rise from 11,200 MW to more than 20,000 MW (see chart below).

At that rate, wind would approach 15-20% of the electricity market. Indeed, in certain months of the year, wind is already providing more than 15% of the electricity and there are hours when it approaches 40%.

So where is solar in the picture? Solar should be a major player in sunny Texas for a number of reasons. Most of our electricity is consumed during daylight hours, we have lots of sun, and we have lots of land on which to build PV utility-scale plants.

The answer: it is already in the picture and will soon be much bigger.

Currently, there are six major utility-scale plants (each with more than 10 MW of capacity) operating in the ERCOT market, including one connected to Austin Energy, three to CPS Energy in San Antonio, and most recently, First Solar’s Barilla Project in West Texas. At 18 MW, Barilla is the first solar plant in Texas to be competing in the wholesale market (i.e. rather than securing a power purchase agreement with a utility, First Solar will compete with merchant power plants to sell its power on the open market). First Solar announced this week the plant had begun operations.

With Barilla operational, Texas now has approximately 170 MW of utility-scale solar operating within ERCOT and the Western interconnect, which is a far cry from wind, but impressive nonetheless considering a few years ago, there was zero. 

So why is the future so bright? Because, in addition to solar’s growing market competitiveness, utilities are becoming interested in establishing long-term contracts with solar plants because they can provide stable electricity during the daylight hours. Moreover, prices have come down and solar can be a price hedge if gas and electricity prices rise, and solar can also help provide other services, like voltage stability.

CPS Energy, an early adopter, has a contract with OCI to build a series of utility-scale solar plants over the coming years, with the goal of having at least 400 MW of solar. Thus far, it has approximately 75 MW of utility-scale solar powering San Antonio.

Austin Energy has also made an important commitment as well. After securing a power contract with the 30 MW Webberville facility east of town in 2010 (at an admittedly high price) AE recently finalized a contract with Recurrent Energy for 150 MW of West Texas sun that is expected to be built over the next year. The announced price – hovering somewhere around $50 per MWh – is significantly below what it would cost to build and operate a modern combined cycle natural gas plant. Moreover, through the recent Austin City Council resolution, AE is being tasked with purchasing up to 600 MW of utility-scale solar – which would mean an additional 450 MW. In addition, there is a goal of 200 MW of local solar (it has about 50 MW right now). While this City Council resolution is subject to affordability metrics and other contingencies, these ambitious goals represent a significant bet on solar continuing to be a good long-term economic investment.

Other utilities in Texas are also investing in the sun. Georgetown Utility Systems and the City of Georgetown recently announced a Request for Proposals for 150 MW of solar power, while El Paso Electric, which is already buying solar electric power from plants in Texas and New Mexico, just put out an ask for 50 MW of additional solar. El Paso Electric is on course to get more power from the sun than from coal in the next few years.

And let’s look at ERCOT’s queue. A review of the most recent ERCOT monthly report finds that nearly 4,000 MW of solar power is scheduled to be built in ERCOT within the next five years. While all of these plants may not be built, the numbers suggest investors are at least willing to pay for studies, invest in land, and support interconnection agreements with transmission companies. You don't do that unless you are serious.

ERCOT’s Long-Term System Assessment also suggests they believe much more large-scale solar is coming. Thus, according to a recent presentation that ERCOT made at a July 22nd Regional Planning Workgroup, their draft “Current Trends” scenario shows that up to 10,100 MW, or 6% of total ERCOT electric generation, will be built over the next 15 years, assuming no change in policy or prices. That is, even if many of the environmental regulations being considered by the EPA and the Obama administration (which generally impact coal and gas plants) do not go forward, ERCOT believes solar power will continue to grow in Texas. When you do factor in those proposed regulations – what ERCOT refers to as its Environmental Restrictions Scenario – solar power shoots up even more, and would be expected to meet about 9% of our electricity needs by 2030, up from less than 0.2% today. ERCOT’s long-term system assessment can be found athttp://www.ercot.com/calendar/2014/07/20140722-RPG.

Folks, the future’s so bright I got to wear shades.

Photo: El Paso Electric