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Texas PV – the fastest draw in the west

Since Recharge wrote last year about Texas becoming the next big thing in solar power, the state’s PV industry has grown at a far faster pace than anyone had predicted.

Ercot, which operates 90% of the Texas grid, predicts that cumulative PV capacity will jump from 290MW to 1GW this year within its service territory, before a surge of activity over the following 15 years.

In June, it updated its forecasts for solar installations, predicting 14.5-28.1GW by 2031; only last October it was expecting 10.1-14.1GW by 2030.In all eight of Ercot’s forecast scenarios, PV emerged as the cheapest source of utility-scale electricity by 2031.

Although the deeply Republican state has few incentives for renewable energy, the cost of solar energy in Texas has fallen so far that it is now cheaper than new combined-cycle gas plants. Insolation levels are among the best in the country, while the solar power curve closely matches the demand curve for much of the year — consumers tend to turn up their air-conditioning when the sun is blazing.

Texas also has low taxes and little red tape, not to mention a host of recently built high-voltage transmission lines (erected to service the growing wind sector). Also, the costs of labour, material and services are below the national average, further reducing the levelised cost of energy.

Industry leaders such as First Solar, Hanwha Q Cells, Recurrent Energy and RES Americas have been busy building, developing or scouting locations for projects, leasing land and sealing tax-abatement deals with local officials across West Texas.

A unit of utility giant Southern Power has bought hundreds of megawatts of PV projects in the state, while New York’s ConEdison owns two large Texas PV projects and is working on five more, including a 200MW facility with municipal utility Austin Energy.

“It’s no longer a question of, ‘we’re environmentally superior, quieter, shinier’, or something like that. It’s come down to ‘can we compete on price?’” says Randy Jenks, director of commercial development at San Antonio-based developer OCI Solar Power.

Last October, Austin Energy contracted 288MW of PV for under $40/MWh. In 2009, it had paid $165/MWh for power from a 34MW plant. Few contracts signed since have disclosed their energy prices, but they are thought to be among the lowest in the country.

Luminant, the largest power generator and miner of lignite coal in Texas, is buying 116MW of solar in a long-term deal with SunEdison (which is going ahead regardless of the latter’s bankruptcy).

“It’s historic in that Luminant, which primarily generates its energy from coal, is buying the energy from a solar project because the solar power is actually competitive with other energy sources,” Luminant chief executive Mac McFarland told the Dallas Morning News.

“Solar energy was previously viewed as being an expensive alternative to fossil fuels. Those days are ancient history.”

Annise Parker, the former mayor of oil city Houston, which is buying 30MW of solar under a 20-year power-purchase agreement (PPA), said: “What I’ve discovered is that, almost every time, doing the right thing environmentally is also the right thing to do financially.”

Yet on a per-MWh basis, utility-scale solar still costs 15-20% more than both wind power ($21-28/MWh) and natural gas ($22-24/MWh), but is cheaper than the latest combined-cycle technology.

Although gas prices have almost doubled since the record lows seen in March, it is likely they will remain low enough for gas to remain the state’s dominant baseload fuel for at least the next two decades, according to Jenks.

But at the same time, signing long-term solar PPAs at set prices acts as a hedge against future fossil-fuel price volatility.As the cost of solar falls, and the price of gas rises, the Texas PV sector is expected to grow at the expense of new natural-gas capacity while replacing ageing coal power stations — which are expected to be hit by higher costs and a tougher regulatory environment under a potential Hillary Clinton presidency.

As much as 60% of the state’s 12GW coal fleet could be shuttered by 2022, according to Massachusetts-based Brattle consultancy group.

But even the competition is finding value in solar. Wind farm owners are increasingly looking to install PV capacity on land they already lease, utilising existing substations and transmission lines and to improve overall asset economics.

Solar projects have also begun competing in the liquid short-term Ercot market, where the industry and wholesale market players are collaborating to innovate with new, longer-term products. Demand is already starting to surge from the commercial and industrial market, and traditional generators are wanting to offer renewable electricity to greener-minded cities.

“This is a kind of revolutionary time in the solar industry here,” says Raina Hornaday, general manager of Austin-based developer Caprock Renewables. “[It’s] very similar to where wind was a dozen years ago.” 

Texas solar deals in 2016

Southern Power has bought two large projects — the 102MW Lamesa and 120MW East Pecos from RES Americas and First Solar respectively — as well as a 51% stake in Recurrent Energy’s 212MW Roserock project. All three facilities have power-purchase agreements (PPAs) with municipal utilities.

Luminant, the largest power generator and miner of lignite coal in Texas, has agreed to buy 116MW from SunEdison’s Castle Gap solar farm in Upton County under a long-term PPA. Hanwha Q Cells USA has signed a 25-year PPA with municipal utility Austin Energy for an unnamed 170MW PV project in Pecos County.

Apex Clean Energy signed a 28-year PPA with the US Army for a 15.4MW PV facility at the Fort Hood garrison in the city of Killeen, along with 50.4MW of wind from a facility about 300 miles (480km) away.

Hecate Energy sealed a 20-year PPA with the city of Houston for 30MW at $48/MWh, far lower than the average $67/MWh the city has paid for conventional energy over the past five years.

OCI Solar Power will sell power from its under-construction 50MW Pearl project in Pecos County to San Antonio municipal utility CPS Energy. The project will use inverters, modules and single-axis tracker systems made in Texas.