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GTM Research Explains “The Complex, Evolving Solar-Utility Nexus”

Posted By MarkS on October 21st, 2014

by Mark Sokolove, Executive Vice President of Tigercomm

As you may have seen, GTM Research has been doing superb work covering the intersection of growing distributed, residential solar on the one hand, and the evolving utility business model on the other (what it calls the “Grid Edge”).  Their work is extremely valuable, as this is a critical, rapidly changing and complex space. Which is why we always look forward to webinars like the one presented by GTM Research Senior Vice President Shayle Kann on September 25, covering “The Complex, Evolving Solar-Utility Nexus.”  The entire webinar is well worth listening to, but for now, here are a few key points to highlight.

THE LAY OF THE LAND

  • It makes little sense to “silo” coverage of distributed solar PV on the one hand, and the future of the utility business model (including the smart grid, demand response, energy storage, etc.) on the other, as these two areas increasingly are increasingly converging.
  • The U.S. solar market is growing, but not uniformly across the country or in terms of the specific sub-segment (residential, non-residential, utility) of that market.
  • Growth was down a bit in the first two quarters of 2014 compared to the final quarter of 2013, but Shayle Kann advises that we not draw too much from that, as the U.S. solar market – particularly utility – is “lumpy.” If you take out the variability of the utility projects, trend lines for distributed solar are steadily increasing, with around 6.5 GW expected to be installed in the US in 2014, up about 35% from 2013, and about 17 times what it was 5 years ago.
  • Why are utilities so worried about solar now, even though solar generally doesn’t comprises a huge portion of their energy mix as of now? In short, it has to do with the impact of distributed solar installations on utility demand growth.  With US electric demand growth having slowed sharply, from about 10% per year back in the 1950s to just 1% per year now, large proportions of increased load growth could easily be taken up by distributed, solar PV (GTM estimates 50% or more of load growth could get eaten up by solar installations in the top 5 states).

POLICY BATTLES:  THE SOLAR INDUSTRY SHOULDN’T LET DOWN ITS GUARD

  • The result has been net energy metering (NEM) battles — some legislative, some regulatory, some both — in more than 20 states.  What’s fascinating, and also encouraging, is that so far at least, the solar industry has been faring impressively well in these battles, especially for being a relatively small industry going up powerful, incumbent industry. Part of the reason for this success has been that rooftop solar has strong public appeal. Of course, this could change, as solar penetration increases and has more meaningful ratepayer impacts, so the solar industry should certainly not let its guard down.
  • A likely outcome to utilities’ concerns about the economics of increased distributed solar penetration could very well include imposing a minimum monthly bill on consumers for use of the grid. The impact of this could be substantially less than imposing a fixed charge, which the solar industry has been fighting against, and could be part of a NEM compromise in numerous states.
  • One option for utilities might be to “steer into the skid,” so to speak, by getting into the distributed solar game themselves. The question is whether regulated utilities will ultimately play a significant role in the distributed solar market, or remain outside it as grid operators?

DISTRIBUTED ENERGY MANAGEMENT SYSTEMS (DERMS) ARE A MAJOR GROWTH AREA

  • There are also questions about utility interaction with distributed PV from a technical perspective, which is why every utility will need some version of capabilities that Distributed Energy Management Resource Systems (DERMS) provides. That includes reconfiguration of grid equipment, consumer-sited solutions such as smart inverters), network management such as market-based demand response, etc.  This will undoubtedly be a major growth area in coming years, and something we all will be paying a great deal of attention to.

All in all, it’s a fascinating, dynamic time to be a participant in the evolving U.S. solar-utility nexus. With the help of analysts like the ones at GTM (and also smart grid experts like Paul De Martini, who I interviewed last spring), we look forward to continuing to track it, and also to help our clients navigate their way through it effectively, in years to come.

Is Your State Benefiting From, or Missing Out on, the U.S. Solar Power Boom?

Posted By Lowell F. on October 15th, 2014

Is your state benefiting from, or missing out on, the national solar power boom that’s well underway (note: click on the map to enlarge). That question is at least partly answered by the new Solar Means Business Report, released this morning by the Solar Energy Industries Association (SEIA). Among other things, the report finds that the “average price of a completed commercial [solar] PV project in Q2 2014 has dropped by 14 percent year over year and by more than 45 percent since 2012.” That’s great news, of course, and a continuation of the long-term trend which has seen solar power costs fall by 99% since 1977 – a trend that’s continuing.

Here are a few more factoids from the SEIA report:

  • “Since 2010, U.S. businesses have installed solar systems at their facilities more than 32,000 times.”
  • “For the second straight year, U.S. businesses, non-profits and government organizations added more than 1,000 MW of new PV solar installations. As of mid-2014, there were 4,531 MW of commercial solar PV installed on 41,803 business, non-profit and government locations throughout the U.S.”
  • “American businesses are turning to solar because it’s good for their bottom line. For many companies, electricity costs represent a significant operating expense, and solar provides the means to reduce costs and hedge against electricity price increases.”
  • “While retailers have installed the most capacity, auto manufacturers, pharmaceuticals and food servicers, as well as companies in many other industries, have all looked to solar to lower operating costs.”
  • “The rest of the U.S. is catching up to the likes of California and New Jersey, the first and second largest state markets for commercial solar. Leaders in those states and others like them have put in place smart, effective policies that have enabled businesses to invest in solar.” Has your state put into place “smart, effective policies that have enabled businesses to invest in solar?”
  • “In total, 129 million people in 33 states and Puerto Rico live within 20 miles of at least one of the 1,110 commercial solar installations that were analyzed in this report.”

If that’s not enough to make you wonder why your state has not seized this tremendous opportunity, see an article which just came out this morning, Georgia Is the Latest State to Procure Dirt-Cheap Solar Power, by Greentech Media.  According to this article: “After a second round of bidding from developers seeking to build hundreds of megawatts’ worth of solar plants in the state, Georgia Power reported that the average price of electricity came in at 6.5 cents per kilowatt-hour. That’s 2 cents cheaper than last year’s bids.

How cheap is 6.5 cents per kilowatt-hour? To put it in perspective, the U.S. Energy Information Administration reports that the Average Retail Price of Electricity to U.S. residential users as of July 2014 was 13.05 cents per kilowatt-hour, while the average cost to all U.S. power users was 11.01 cents per kilowatt-hour. Again, the new solar power bidding in Georgia came in at 6.5 cents per kilowatt-hour — far lower than the national average retail price of electricity.  So, if your state isn’t going solar big-time, you probably should ask your state legislators and utilities why that’s the case. The answer, or lack thereof, could be a real eye opener.

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Three Graphics from Lazard Study Show How Competitive Clean Energy’s Gotten

Posted By Lowell F. on September 30th, 2014

The following three graphics (click on the images to enlarge) are from a recent “Levelized Cost of Energy” (LCOE) study by Lazard – one of the world’s leading financial advisory and asset management firms. I’m posting the graphics here because they demonstrate how competitive clean energy’s become (even with massive implicit and explicit subsidies to fossil fuels), and also how much cheaper renewable power is going to get over the next few years.  No wonder why the International Energy Agency just explained how solar “could be the world’s largest source of electricity by 2050,” with coal just about extinct (see the slide “Solar’s share varies significantly by region”). Great stuff; now let’s get on with the transition from dirty, dangerous, fossil-fuel-based energy to clean, renewable power.



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Five Energy Stories Worth Reading Today (9/30/14)

Posted By Lowell F. on September 30th, 2014

Here are five recommended reads for today (9/30/14).

  1. Reuters reports, “Solar energy could be the top source of electricity by 2050, aided by plummeting costs of the equipment to generate it, a report from the International Energy Agency (IEA), the West’s energy watchdog, said on Monday.”
  2. According to Vox, “Solar power is growing so fast that older energy companies are trying to stop it.”
  3. RenewEconomy reports, “The highly conservative International Energy Agency predicts the cost of solar energy will fall to around 4c/kWh in coming decades as the sun becomes the dominant source of power generation across the world.”
  4. According to Greentech Media, “A groundbreaking agreement between Arizona Public Service (APS) and Arizona’s ratepayer advocate could create a surge of new storage deployment in the state over the next seven years.”
  5. The Guardian asks, “Can Narendra Modi bring the solar power revolution to India?”
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SEIA Report: U.S. Solar PV Installation Growing Fast, Becoming “Mainstream” Power Source

Posted By Lowell F. on September 7th, 2014


The Solar Energy Industries Association (SEIA) is out with its Solar Market Insight Report for the 2nd quarter of 2014, and it’s overwhelmingly “sunny” news. Here are a few highlights:

  • “The U.S. solar market had another strong quarter in Q2 2014. Photovoltaic (PV) installations reached 1,133 MWdc in Q2, up 21% over the same quarter in 2013.”
  • Solar power accounted for 53% of new U.S. electric generation capacity in the first half of 2014. That put solar ahead of natural gas (30%) and wind power (14%).
  • Utility PV procurement is surging, as “utility-scale solar project developers have amassed more than 3 gigawatts of new contracts over the past twelve months” This is a result of solar’s “increasing cost-competitiveness, along with a variety of new procurement mechanisms.”
  • The “residential solar juggernaut continues,” and “its momentum shows no signs of slowing.”
  • The top five states for solar PV installation in the 2nd quarter of 2014 were: California, Massachusetts, New Mexico, New Jersey and North Carolina.
  • Solar power in the U.S. is increasingly becoming “mainstream,” as “solar PV has moved light years ahead of where it stood back in the first half of 2012″ (e.g., utility solar PV cumulative installations have quadrupled).
  • Utilities are starting to jump into the residential solar power market: “the two major utilities in Arizona (Arizona Public Service and Tucson Electric Power) are now the first utilities in the U.S. to formally propose plans to own rooftop solar on residential customers’ homes.”
  • As you can see in the graph above, U.S. PV installations will hit 6.5 GW in 2014, up 36% from 2013.  PV installations are projected to surpass 8 GW in 2015 and 12 GW in 2016.
  • One cloud in the otherwise bright outlook: “looking ahead, systemic challenges to growth loom both in the near term (e.g., the recent U.S.-China tariff decision) and medium term (e.g., the federal ITC’s scheduled dropdown at the end of 2016). Nevertheless, the first half of 2014 showcased innovative financing strategies, evolving utility business models, and solar’s increasing economic competitiveness with fossil fuels, all of which offer encouraging signs of the U.S. market’s ability to weather barriers to growth and further push solar PV into the mainstream.”
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