With only 77 MW of utility-driven solar PV projects currently operating, US utilities have announced a pipeline of more than 4.8 GW of large, utility-scale solar PV projects. This explosion of activity highlights the solar PV sector’s changing landscape and the key role utilities are expected to play going forward, according to EER.
The scaling adoption and newfound acceptance of solar PV technology by US utilities has been catalysed by four primary factors:
- Regulatory pressures at the state and national levels;
- Widespread cost reductions in the PV sector;
- Fossil fuel price volatility and overarching carbon concerns; and
- Solar PV’s siting flexibility allowing utilities to leverage multi-pronged strategies.
EER has forecasted that utilities will add 21.5 GW of solar PV to their generation portfolios between 2009 and 2020. Led by utility involvement, the US solar PV market will accelerate between 2011 and 2015, growing from 2 GW in 2011 to 12 GW in 2015, a more than 460% increase.
“At this early stage of PV adoption in the US, utilities are under significant regulatory and planning pressure to address their solar procurement strategies going forward,” says EER Solar Research Director Reese Tisdale. “Unlike other larger, centralised power generation technologies such as natural gas, wind, concentrated solar power, and geothermal, PV offers scale and unique siting versatility. These key differentiators allow PV to be deployed in a wide range of geographies.”
Furthermore, solar PV’s versatility potentially circumvents transmission build-out bottlenecks that pose significant hurdles in the path of centralized renewables deployment, according to Tisdale.
In the immediate term, the primary driver for SOLAR PV utility deployment is state-level renewable portfolio standards (RPSs). Of the top 20 states in which utilities have signed SOLAR PV agreements, 18 have an RPS in place, and 13 have a distributed generation or solar carve-out.
Already facing a shortfall to meet the state’s 20% renewables by 2010 target and its recently formalised 33% 2020 target, California utilities have begun adding solar PV to their pipelines at scale – Pacific Gas and Electric Co., Southern California Edison, Los Angeles Department of Water and Power, and San Diego Gas & Electric account for approximately 75% of the US solar PV pipeline. Despite the lack of a distributed generation or solar carve-out target, California utilities have announced a 2.3 GW solar PV pipeline, or 48% of announced utility projects, according to EER.
In the wake of California activity, a wave of utilities in Florida, North Carolina, Illinois, Ohio, and New Jersey are following suit. The largest plant in the US totalling 25 MW has been commissioned in Florida in November by Florida Power & Light, with another 10 MW expected to go online in 2010.
Cost barrier
According to EER’s analysis, cost remains the most significant barrier to widespread utility solar PV penetration. While costs are rapidly declining through improved manufacturing, technology improvements and supply and demand imbalance, the cost of energy for solar PV in most cases remains far from competitive prices in the wholesale market, according to EER.
“Because of the high costs, utility PV adoption – particularly where other renewables such as wind, biomass, and geothermal are available makes PV less compelling for meeting general RPS mandates,” says Tisdale. “However, if PV’s declining economic forecasts come to fruition to foster more widespread demand – centralised, commercial, and residential – utilities will want to be at the industry’s forefront to shape the market in their favour.”