Solar energy shines bright in Texas

The Electric Reliability Council of Texas (ERCOT) is the electric grid operator for about 80 percent of Texas’s land mass, and 90 percent of the state’s power use. 

Over the last fifty years, most of the power in ERCOT has come from natural gas and coal, with some from two large nuclear power plants. The traditional Big Three—natural gas, coal, and nuclear—however, are getting competition from cleaner and more sustainable renewable resources. 

Wind Sets the Stage

In 1999, the Texas Legislature made the decision to deregulate most of the electricity industry in Texas. It also set a goal for utilities to achieve a small percentage of electricity from renewable energy. 

The Texas Renewable Portfolio Standard (RPS) was expanded by the Legislature again in 2005, along with the decision to build out hundreds of miles of large transmission lines through what is called Competitive Renewable Energy Zones (CREZ). 

Virtually completed today, the five CREZ areas—along with federal and state incentives—have led to a stunning growth in wind power. Large-scale wind power virtually did not exist in 2000 in Texas. Now there are more than 14,000 MW of wind power installed in ERCOT, and more than 10 percent of our electricity in ERCOT was generated from wind in 2014. 

If you take into account what is projected over the next two years, there could be more than 25,000 MW of wind installed in Texas by 2018, producing nearly 20 percent of our electricity.  

Solar Emerges, Hits the Big Time

So what about solar? One cannot argue with solar power’s potential in Texas, given our vast land availability and our excellent solar energy resource. The sun just shines brighter in Texas. 

Official confirmation that solar is “big time” came earlier this year, when the state’s largest private energy company—Luminant—yes, the former TXU that owns the state’s oldest, largest, and dirtiest coal plants—inked a deal to get 116 MW of solar power from SunEdison’s West Texas solar PV power plant. 

Why was this special? 

Luminant was not trying to “green” their image. Their decision was based on the fact that the cost of solar PV plants has decreased so much in such a short time that it made economic sense for them to invest. 

In doing so, they were following in the footsteps of a variety of public utilities, which, in part because of pressure from their citizens and public officials, made a stunning leap into the world of solar. Over the last few years, CPS Energy, Austin Energy, Denton Municipal Electric, and Georgetown Utilities have all signed new contracts for solar power. 

What’s On Tap in 2016?

While private and public utilities are not done signing contracts with solar companies, here is a brief list of the new solar contracts signed in the last few years in Texas:

• In 2012, CPS Energy signed a contract for 400 MW with OCI solar. In 2015, they increased the contract to 450 MW due to favorable pricing for a West Texas plant. 

• In 2014, Austin Energy signed a contract for 150 MW of solar with Recurrent Energy.

• In March 2015, Georgetown Utilities signed a contract for 150 MW of solar with SunEdison.

• In September 2015, Denton Municipal Electric signed a contract for 173 MW of solar with Bluebell Solar.

• In October 2015, Austin Energy signed contracts for an additional 450 MW with four different solar companies.

In addition to these contracts, in 2015, First Solar began operating the first “merchant” solar plant—a 22 MW array near Fort Stockton that competes on the open market with no signed PPA for the majority of the energy it produces. Recently, First Solar announced they are adding more capacity at the site to bring the total capacity up to 40 MW. 

Prices Keep Falling – With the Federal Tax Incentive

As solar costs have come down, solar companies are benefitting from the Investment Tax Credit (ITC)—a federal program that allows private solar developers to reduce their taxes by 30 percent of the cost of the power plant. 

The ITC itself is scheduled to be reduced from 30 percent to 10 percent of project costs after 2016, so there is essentially a buyer’s market for utilities. However, analysts report that even if the ITC is reduced to 10 percent as expected, the price of solar panels, inverters, and other components will continue to come down, and solar is expected to continue to enjoy its rise as a major energy resource in Texas. 

To put solar’s increasing affordability into perspective, when Austin Energy signed its first major contract for large-scale solar back in 2011 (the 30 MW Webberville solar plant), it reportedly got a deal in the range of $160 per MWh of solar energy. 

Just three years later, it signed a deal with Recurrent Energy for roughly $50 per MWh—a 300 percent drop in costs in three years. 

This year, the announced prices for its next 450 MW of solar was reportedly $38-$40 per MWh, a 20 percent decrease in less than a year. In comparison, a proposed natural gas plant that Austin Energy is proposing to build is reported to cost $74 per MWh. 

In other words, solar projects are now being signed for prices less than the proposed prices being obtained for modern natural gas power plants. Solar has come a long way in a short amount of time. 

Will 2016 Be the Tip of the Iceberg?

While the present go-round of contracts will lead to significant solar power being put on the Texas grid—approximately 1.5 GW in all—projections suggest much more is coming. 

First, look at the ERCOT interconnection queue, published in a monthly report, showing what companies are in the process of obtaining an interconnection agreement with local transmission companies. While many of these projects may never come to fruition, the GIR (Generation Interconnection Report) now has over 9,300 MW of solar in it, compared to 28,000 MW of gas and 24,750 MW of wind. 

Secondly, ERCOT also projects likely outcomes of energy production based on scenarios it develops. 

Recently, in 2014, as part of its Long-Term Study Assessment, it projected that Texas would likely add over 8,000 MW of solar over the next 20 years. More recently, in 2015, ERCOT looked at the likely impacts of the Environmental Protection Agency’s Clean Power Plan (CPP), and found that in all likely scenarios with implementation of the CPP, Texas would develop solar to an even greater extent than wind to reduce carbon pollution from fossil fuel plants. 

• Business as Usual scenario: Solar adds 13,000 MW by 2030.

• Carbon-constrained limits on power plants: Solar adds 13,400 MW by 2030. 

• Texas imposes carbon tax: Solar grows by 13,700 MW by 2030. 

• Texas imposes carbon tax and reduces haze emissions from coal plants: Solar grows by 14,100 MW by 2030. 

In other words, ERCOT predicts solar power going up in Texas no matter what. 

Solar contracts are getting signed today and solar is booming in West Texas. With new nationwide carbon pollution standards, public and private utilities are increasingly turning to solar as an affordable, clean, and sustainable energy resource. 

That’s good news for solar-rich Texas. It means local jobs, it means electricity that doesn’t take massive amounts of our precious water, and it means electricity that doesn’t produce any carbon dioxide or ozone-forming pollution. Large-scale solar PV plants will be part of the solution to meeting our electricity needs.

 

Cyrus Reed, Ph.D., is conservation director of the Sierra Club’s Lone Star Chapter. Cyrus has a Ph.D. in Geography from the University of Texas at Austin, with a focus on water policy and the dispute over the Rio Grande water with Mexico. He has also served as Sierra Club's lobbyist on energy and air quality issues during the 2005 and 2007 Texas legislative sessions, and directed the Texas Center for Policy Studies, an environmental policy and advocacy organization based in Austin, for five years. He is presently working on energy issues and their impacts. Cyrus has also worked as a journalist and has spent considerable time in Mexico, Costa Rica and Nicaragua. For more information, follow Cyrus on Twitter @CyrusTx.

 

 

The views expressed by contributors to the Cynthia and George Mitchell Foundation's blogging initiative, "Achieving a Sustainable Texas," are those of the authors and do not necessarily represent the views of the foundation. 


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