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Texas to outshine California in utility scale PV installations in 2020
17 September 2020Maria Jose Chea
As COVID-19 continues to cast a cloud on industries around the
world, the utility scale PV segment in the United states has
continued to grow despite the pandemic and policy challenges the
industry has been facing.
In the southern region of the country, PV project installations
have surged mainly through utility driven demand. IHS Markit
forecasts that the Southeast and the Southwestern regions in the
United States will account for 31% and 23% of total utility-scale
demand from 2020 through 2024, respectively. Opportunities for
large scale utility PV projects in the South are vast, given the
region's strong solar resource and high land availability. During
the 2020-24 period, demand will continue to come from large
procurement programs directed by utilities, along with demand
generated by the Public Utility Regulatory Policies Act (PURPA)
mechanisms in states like North and South Carolina.
In 2020, utility-scale growth in the Southeastern market will be
led by Florida and Virginia, with each state forecast to install
over 1 GWdc of PV in 2020, while growth in the Southwestern market
will be dominated by Texas, which is forecast to install a record 3
GWdc this year.
Texas to install more PV than California during the
2020-2024 period
Texas established a voluntary RPS goal in 1999 of 10 GW of
renewable energy generation by 2025. The state was able to exceed
that goal in 2009 due to the large number of wind projects put
online. Like many southern states, Texas does not have a statewide
policy to promote solar. Historically, demand for PV has stemmed
from the state's two large public utilities, Austin Energy and CPS
Energy, both of whom have mandated RPS goals. This has changed in
the past few years, with large developers spearheading the
development of massive utility scale plants.
As the installed base of PV has grown in Texas, a flurry of
investors have become active in the market. At the end of July
2020, Japanese gas utility Tokyo Gas announced its acquisition of a
631MWdc PV farm in Texas which is expected to come online in 2021.
At the beginning of August, J-Power and AP Solar announced they had
entered into a joint venture (JV) to develop a 400 MWac project in
the state which is expected to be completed in 2023. Recently,
state utility, CPS Energy announced it will seek to install 1 GW of
solar to bring the utility closer to its 50% by 2040 goal.
Financial closings have also been taking place during COVID-19,
with Recurrent Energy recently securing funding in July for its 327
MWdc plant in West Texas, which will deliver power to Anheuser-Bush
under a Power Purchase Agreement (PPA).
Declining PV system costs, the state's deregulated electricity
market, a streamlined permitting and connection process,
transmission lines designed to handle renewable power, and the vast
land and solar resources have made Texas an ideal place for solar
to flourish.
Utility-scale construction has continued to move forward
throughout the state since lockdown measures began to be enacted in
March, as it was quickly deemed an essential service. Although a
handful of projects have reported delays due to COVID-19, most of
the Texas PV pipeline is expected to be completed this year. IHS
Markit expects utility scale projects in Texas to account for 96%
of large-scale PV installations in 2020 totaling 3 GWdc, by
contrast, California is expected to install over 2 GWdc of utility
scale projects in 2020.
Utility-scale solar installations remain strong in the
United State despite challenges of COVID-19
The resiliency of the US PV industry not only lies at the
federal and state level, with policies like the Investment Tax
Credit (ITC), PURPA, and state-level Renewable Portfolio Standards
bolstering renewables. The industry's strength is also due to
decreasing solar capex costs, attractive wholesale power prices,
and voluntary cost competitive procurement by utilities that have
further encouraged the growth of PV in the country.
IHS Markit estimates that by the end of July 2020, the United
States had installed nearly 6 GWdc of large-scale solar
installations, 4 GW more than what was installed by July of last
year. Moreover, over 6.5 GWdc of utility PV projects are under
construction, all expected to be completed this year. However, the
strength of this segment has not translated to residential and
commercial installations. The distributed PV segment in the United
States is expected to be impacted the most by COVID-19 due to the
challenges faced with its in-person sales approach. Furthermore,
many individuals and businesses will push out making long-term
investments in PV in their homes or businesses due to the uncertain
economic environment.
The PV market in the United States has not only had to face the
challenges brought on by COVID-19, but also protectionist policies
that have increased tariffs on virtually all components that make
up PV systems. For example, in Q2 2020, the average sales price of
a mono facial PERC module in the United States stood at $0.35/W,
while the price outside the US fell to $0.23/W. Notwithstanding the
premium in the US market, the country is still one of the leading
solar markets in the world, with cumulative installations reaching
over 76 GWdc to date.
Procurement by corporates and utilities bolster
utility-scale solar growth
While the ITC has been an important incentive for tax equity
investors to finance renewable energy, investor-owned and public
utilities have seen the opportunity and cost advantages of solar.
Through their Integrated Resource Plans (IRPs) and Request for
Proposals (RFPs), many states have maintained a robust PV pipeline.
Solar is also attractive to investors in search of low-risk and
stable-yield opportunities.
Several utilities across the country have set varying renewable
energy goals through 2050, indicating that the PV market will
continue to grow even as the ITC steps down in 2024. For example,
Duke Energy Corp. is seeking to reduce its carbon emissions at
least 50% by 2030, while Xcel Energy is aiming to reduce
company-wide emissions by 80% by 2030. Dominion Energy hopes to
achieve 100% net zero greenhouse gas emissions by 2050, and in its
latest IRP, the utility is looking to add between 7 to 19 GW of
solar in the next 15 years.
Corporations have also helped the expansion of large solar in
the United States. At the end of 2019, Google announced it was
partnering with AES Corporation to push renewable projects forward
in the United States. Recently in its latest RFP, AES is seeking to
award contracts for up to 1 GW of new renewable power. Similarly,
Facebook and Rocky Mountain Power announced they would work
together to build nearly 700 MW of solar projects in Utah.
The impetus of the utility-scale PV market in Texas and across
the country proves that the appetite for solar remains strong
through the near term. According to IHS Markit's Solar Deal
Tracker, the United States is estimated to have a
utility-scale PV development pipeline of over 85 GW from 2020
through 2024.
