Don't Mess With Texas Solar

Abstract

2020 was the year of the unexpected, but one constant in the energy industry remained the exponential growth of solar generation in Texas, which largely continued its expansion as predicted. Electric Reliability Council of Texas’s (“ERCOT”) 2019 State of the Grid Report noted that installed solar generation capacity in ERCOT stood at 2,281 megawatts (MW) at year-end 2019, with over 67,000 MW of further solar capacity under study, exceeding even the amount of wind generation capacity under study. By July 2020, installed capacity of solar generation increased by almost 1 gigawatt (GW) to a total of 3,275 MW, representing approximately 2.2% of generating capacity in ERCOT. Solar accounted for 43% of new installed capacity in 2020, the largest share among generation types. The Solar Energy Industries Association (“SEIA”) ranked Texas fifth among the states in installed solar generation capacity in 2019, but based on its high growth rate, Texas is projected to be second only to California within the next five years. Abundant land and consistent sun make Texas an obvious candidate for significant solar generation investment, but ERCOT’s energy-only market makes solar generation with its nonexistent fuel costs especially competitive. Adjustments to the Operating Reserve Demand Curve in 2019 by the Public Utility Commission of Texas have also increased scarcity pricing and made returns more lucrative for a resource that is at its apex when demand is highest on hot, sunny summer afternoons. As this Article was being finalized for publication, the ramifications to the electric power industry in Texas of Winter Storm Uri are not yet clear. However, a preliminary assessment by Pecan Street highlighted the benefits of solar generation in a such a crisis and may spur further interest both at the generation side and behind-the-meter.