Duke Energy's 14-megawatt Blue Wing Solar Project in San Antonio

Solar Power Could See Explosive Growth in Texas over Coming Decades


Of late, there’s been a spate of good news for the fledgling solar industry in Texas.

First, the rooftop solar markets in Austin and San Antonio are humming along, thanks to growing consumer demand, rapidly falling costs and the cities’ rebate programs. Bottom-line: More and more homeowners and businesses are installing solar systems on their roofs.

In 2012, Austin Energy issued more rebates, 463, than any year since the program started in 2004. That represented a 40 percent increase over last year, even though the rebate, currently pegged at $2 per watt, has been cut dramatically as the cost of panels just keeps falling. CPS Energy, San Antonio’s giant city-owned utility, paid rebates for 333 systems between February 2012 and mid-January, for a total of 3.85 megawatts. Over that same time period last year, CPS Energy customers installed 2.7 megawatts.

“Each year as the price of solar comes down, we see more and more people installing solar,” said Andrew Wood of Solar San Antonio. “With the CPS rebate, the economics make the systems enticing to many homeowners and business owners.”

San Antonio also broke ground this month on what will eventually be, by far, the largest solar power project in Texas. Last year, CPS Energy inked a closely-watched deal with OCI Solar to build 400 MWs of utility-scale solar. OCI agreed to move its U.S. headquarters to San Antonio, build the panels in San Antonio and guarantee 800 local jobs. Currently, there are fewer than 100 megawatts of solar power installed in the state. OCI Solar, the company building the solar farm for San Antonio, will more than quadruple that number.

Still, solar is just a tiny sliver—less than 1 percent—of Texas’  electricity mix, which is dominated by coal (34 percent) and natural gas (45 percent). Wind, with a 9 percent share, is a giant compared to solar.

Yet, the economics are becoming increasingly favorable for solar to take off in a big way. The question is probably when, not if. And a recent analysis by ERCOT—the industry-funded, technocratic grid operator—has some very rosy projections for the future of the solar industry in Texas. (And some very sour news for nuclear, coal and maybe even natural gas.)

The analysis, first flagged by Colin Meehan of Environmental Defense Fund of Texas, looks at potential transmission needs in the next two decades. But, as Meehan wrote, ERCOT “found that if you use updated wind and solar power characteristics like cost and actual output to reflect real world conditions… wind and solar are more competitive than natural gas over the next 20 years.”

By using up-to-date figures on costs and performance, ERCOT projected that an additional 17,000 MWs of wind would be built in Texas by 2032. Perhaps more astounding, ERCOT estimated that 10,000 MW of solar could come online over the next two decades. That’s well over 100 times the amount of solar right now.

The model also found that firing up all that renewable generation would lead to “lower market prices in many hours.”

Next, ERCOT modeled what would happen if natural gas prices rose modestly (from $3.50 to $5/mmbtu) and Congress maintained the wind industry’s main subsidy, the production tax credit. In that scenario, Texas could be looking at an additional 35,000 MWs of wind units by 2032 as well as 3,600 MW of geothermal and 13,000 MW of solar power. That, to use a technical term, is a shit-ton of renewable energy. And it really flies in the face of almost everything you hear at the Legislature and the Texas Public Utility Commission, where renewables, especially solar power, are treated like expensive hippie Tinkertoys. But that’s often because regulators and lawmakers are using outdated cost figures for solar. The drop in panel costs is truly astounding, on a historical par with the microchip, even.

Screen Shot 2013-01-31 at 4.23.14 PM

Now, it’s true that these projections are just that—educated guesses about the future that rely on a host of assumptions. Any prediction of the future is inherently fraught with uncertainty and the likelihood of what Donald Rumsfeld would call “unknown unknowns.” Still, Meehan says the analysis is important because it reflects a new empirical reality for renewables.

“The numbers themselves are going to be wrong one way or the other but they do tell us the direction we’re going. ERCOT has never seen anything like this before,” Meehan told me. The message to the Legislature and the PUC? “These are real and highly competitive technologies and will be even more so in the future.”

Finally, as always, context is important here. The risk of blackouts in Texas is rising because investors aren’t building new power plants right now in the deregulated ERCOT market. The Public Utility Commission, loathe to violate its laissez-faire ethos, has responded by jacking a cap on wholesale power prices, even though its own consultants have warned that the move is unlikely to spur enough new generation.

Environmentalists and the solar industry think solar could dramatically reduce the risk of a grid failure. Solar power performs best during times of peak power, those hot, bluebird-sky days when everyone is cranking their A/C. However, they’ve been unable to convince the Public Utility Commission, run by three Perry appointees, to implement a target (some would call it a mandate) for 500 megawatts of non-wind renewable energy. Advocates I’ve spoken to are not terribly optimistic that the Legislature will force the PUC into action this session. However, key lawmakers are making it clear to the PUC that something must be done. State Sen. John Carona even used the ‘C’ word at a hearing this week.

“I don’t think Texans are prepared to accept California brownouts and that’s where we’re going to be if we don’t address this problem,” Carona told PUC Chairman Donna Nelson. “We have to have the political courage, I’m convinced, to deal with this issue before we find ourselves explaining to the public why we have these rolling brownouts.”