Solar Energy’s Next Act: Parity
01 Sep, 2012
By Rachel Duran
For developers of solar energy farms, the ability to tap into incentives to support developments is essential in moving forward — but not for much longer. Parity, the ability of the solar energy industry to compete with traditional energy sources without subsidies, is less than three years away, according to some research. Other research says it could be another four years to eight years before parity is achieved.
While we have to wait to see how things play out, at this point in the solar energy industry’s development, the ideal solar energy generation locations would be places with abundant amounts of sunshine, as well as incentives to inspire the build out of this solar generation.
The Solar Energy Industries Association (SEIA) says the cumulative installed solar energy capacity is more than 4,460 megawatts, enough clean electricity to power more than 661,000 average American homes. SEIA also finds that in 2011 there were a record 1,855 megawatts of direct current of flat plate photovoltaics, and 12 megawatts of alternating current concentrating photovoltaics capacity installed. This number doubled the previous record set in 2010.
The solar energy industry, when built out, could provide 10 percent to 20 percent of the nation’s power, says Michael Gorton, CEO, Principal Solar Inc., based in Addison, Texas. Although there are those that would challenge this figure, some say it is too high, and others believe it is too low.
“Solar energy has an almost 1:1 correlation of when we can generate and when you need the electricity,” Gorton says. For instance, one of the advantages of photovoltaics is that there are no moving parts. In all other generating resources there are hundreds or thousands of gears, bearings, bushings and other engineering phenomenon that move, and consequently, wear out. This is even true of other renewables like wind turbines or hydroelectricity. “Solar, simplified, is a rock that converts sunlight into electricity with no moving parts,” Gorton adds.
States with strong incentives in place to support solar energy generation include California, Massachusetts and New Jersey.
“If I were developing solar, I would look at where it would make the most sense,” Gorton says. “A good comparison might be the desert in Texas or Massachusetts. Today the answer would likely be Massachusetts. This may seem counter-intuitive since there is significantly more sunshine in the Texas desert, but electricity costs more in Massachusetts, and the state is paying incentives to solar developers while Texas is not.”
Gorton says he doesn’t believe this scenario will last much longer. “Principal Solar believes the cost of the parts, those silicon cells that we call PVs, will continue coming down to the point where solar is competitive with traditional generation,” he says. “We believe we will be able to build solar generation facilities in the desert and compete with coal, nuclear and natural gas power plants. If the current trends continue, we expect that to happen approximately two years from now.”
Robert Reichenberger, vice president of the utility segment at SunEdison, a wholly-owned subsidiary of MEMC Electronic Materials, concurs with Gorton on the timeline to reach parity. “It is important to get to the point where costs have come down enough where we can compete with other generation sources without having those incentives,” Reichenberger says. “And we are close to that. We believe we are within a couple of years of grid parity in some of the primary markets we serve.”
Reichenberger works from SunEdison’s Denver office; the firm is headquartered in Belmont, Calif. The company offers solar renewable energy services, which includes site selection, engineering, operations and long-term maintenance of solar arrays. The company works with utilities or other commercial entities to site solar energy at locations and sells the electricity generated by the solar arrays.
In addition to significant solar array deployments in the United States and Canada, SunEdison also works in Europe, Asia, India, Africa and South America. In 2011, the company interconnected 300 megawatts of solar energy throughout the world. This summer the company successfully interconnected a 70 megawatt power plant in Rovigo, Italy.
Officials from Strata Solar, based in Chapel Hill, N.C., are excited to be involved in the dynamic and growing solar energy industry. “This industry is still in its infancy and the momentum that has been created owes a lot to the tax credits that are in place to help firmly establish this sector,” writes Blair Schooff, vice president of marketing and sales, Strata Solar, in an email correspondence. “Suffice it to say, all of us who are in this business who are thoughtful planners and business minded people are building towards a day when we will not need any direct subsidy to maintain the current levels of growth. We’re getting close but we are not there yet.”
A challenge to the solar energy industry would be to prematurely remove incentives, which “would truly jeopardize thousands and thousands of jobs that we are so proud to be contributing toward and that are so important to this country in such a trying time,” Schooff notes. “That uncertainty is a significant challenge to us and our industry at large.”
Strata Solar provides development services, engineering, procurement and construction and financing, working in the residential, commercial and utility scale spaces. The company has focused on developing a solar energy cluster in the Southeastern United States. The company’s location in North Carolina allows it to tap into tax incentives, and work with “world-class utilities that truly support solar and renewables at large,” Schooff notes.
Strata Solar has completed two 6.4 megawatt solar farms, and is building two more 6.4 megawatt solar farms in North Carolina. The company has also constructed a 1 megawatt solar project at its property in Chapel Hill. The company was able to offer hands-on training to its staff, in addition to classroom training. “It was an excellent way to bring the team together and get prepared for the massive job ahead,” Schooff writes. “The energy from this farm [Farrington Farms] is being sold to the grid.”
At this time, Strata Solar has a pipeline of more than 150 megawatts of solar energy projects under construction and/or in development.
Up Next, And Site Considerations
Principal Solar is focused today on a national rollup of existing solar generation facilities. The company is also reviewing sites and developing relationships with entities that have large pieces of land in the areas the company has identified as ideal for solar farms, which spans from west Texas to California. “When we get to grid parity, we will start building large-scale solar generation,” Gorton says. The company has worked on projects in Massachusetts and Vermont, and is part of one of the nation’s largest design projects breaking ground in the Westlands region of central California. “We are also looking at the Texas-New Mexico border [to build solar farms].” It is feasible to generate electricity in Texas and send it as far as New York. Gorton says Principal Solar is evaluating construction in locations near existing transmission lines. “But as the industry evolves we will find locations that make sense strictly from a solar perspective and we will build out the transmission to the primary grid.”
Gorton is currently writing a white paper where he analyzes ideal locations and site considerations for solar generation facilities. The list of criteria includes inexpensive land and flat topography, which basically doesn’t have anything growing on it. What’s more, because the solar arrays are above ground, solar developers do not need the mineral rights to any oil and gas that may exist beneath the surface.
Gorton says Principal Solar has conducted its own site selection searches for its first few projects. They might reach out to a real estate stakeholder to clarify any questions.
The first place Gorton’s team begins is with a review of solar insolation maps, which measures solar radiation energy, in order to gauge opportunities across the country.
They also review access to transportation such as highway and rail; and access to the transmission grid.
“These steps are how we pare down from a very broad map of the United States to locations between Midland, Texas, and Needles, Calif.,” Gorton says.
SunEdison’s Reichenberger says another important factor in the site selection process is selecting a community that is amenable to the solar energy industry, and eliminates barriers, such as with the permitting process. “Property tax items make it difficult for us to make things economically viable to play in those markets,” Reichenberger says.
This summer, SunEdison joined CPS Energy in dedicating a solar farm in San Antonio. CPS Energy is the nation’s largest municipal gas and electric utility, which serves the greater San Antonio region. “We have 444 megawatts of solar under contract, with 44 actually in operation,” says Cris Eugster, executive vice president and chief sustainability officer, CPS Energy.
The recent project with SunEdison is a 20-megawatt site located on nearly 200 acres of land at the Dos Rios Water Recycling Center, which is owned by the San Antonio Water System. “It is a great site because it is near a high demand load located near the city of San Antonio,” Reichenberger says. “The site was already being used for an industrial purpose so there were no cultural or environmental issues that would have delayed our execution timeline.”
Because the site is located adjacent to a substation the cost of interconnecting with the grid was relatively inexpensive compared to the costs of running transmission wires a significant distance. As part of the SunEdison/CPS effort, an additional 10 megawatts of solar energy will be brought online at another site in Bexar County.
Reichenberger says San Antonio’s officials and CPS Energy’s leadership is visionary, which creates a market conducive to the solar energy market. “We have a Vision 2020 strategy path for our company,” Eugster says. “We have a goal of 1,500 megawatts of renewable energy by 2020 and we are well on our way to achieving this goal. At this time, we are close to 1,100 megawatts of renewable energy.”
CPS Energy has added more solar energy to its renewables portfolio in recent years. In late July, CPS Energy and OCI Solar Power signed a deal to construct 400 megawatts of solar energy in five different locations. The first 50 megawatts will be within the CPS Energy service territory, and likely to be in San Antonio, by the end of 2013.
The 25-year power purchase and economic development agreement is a manufacturing-to-generation contract. OCI develops, owns and operates solar power plants in North America. The company is creating a consortium of partners to support the San Antonio project.
Says Reichenberger of Texas: “Texas, specifically, is a growing market for SunEdison and we are pleased to be in San Antonio and working with them to lead the charge to bring solar to the state,” he says. SunEdison has opened a regional office in San Antonio.
Additional solar energy industry assets in San Antonio include the University of Texas-San Antonio and the Alamo Academy, which further facilitates solar development.
As the solar energy industry continues its unprecedented growth rate in the installation of generation, Principal Solar’s officials can see a time when the cost of solar energy is less expensive than natural gas. “Because fronts and clouds can be forecasted, and because we know that the sun is going to rise and that it will set, we can structure natural gas generation around the knowledge of when solar energy will be available,” Gorton says.
For complete details about the organizations featured in this article, visit:
CPS Energy (San Antonio)
Principal Solar Inc.
Strata Solar LLC