Commentary: Market economics shining on Texas solar power
Updated: Jul 13, 2020
Texas has always been America’s energy leader. From oil to natural gas and wind power, everything is bigger here, except for one technology – solar power. Given tremendous solar resource in Texas, decreasing cost of building solar power plants and increasing solar PV technology efficiency that could change soon.
It’s ironic solar power hasn’t shined here yet, considering more energy from the sun reaches Texas in one month than the combined energy of all oil and natural gas collected in the state’s history. Through 2016, however, we only ranked ninth nationally for installed solar capacity with 1.2 gigawatts. That’s enough to power about 140,000 homes, but well behind northern states like New Jersey and Massachusetts.
Economics are changing this equation. The cost to build new solar plants capable of powering homes and business has fallen 64 percent in Texas over the past five years, making it cost-competitive with natural gas and cheaper than coal. Solar’s also most productive on hot sunny days when power prices are highest, but because solar doesn’t rely on a commodity like natural gas or coal, consumers are spared from price spikes.
Solar prices are falling just as demand for electricity is growing. Half a million people move to Texas every year, adding countless air conditioners, appliances, and big-screen televisions. The pharmaceutical manufacturers, data storage providers, and big box retailers attracted to the state’s pro-business environment all increasing electricity demand because they require massive amounts of electricity.
Combine lower costs with higher demand, and you get a solar surge. Texas’ grid operator ERCOT forecasts 14-27 gigawatts will be added statewide by 2030, and the Solar Energy Industries Association forecasts 4.6 gigawatts will be added by 2020. The actual amount that’ll come online is likely somewhere between those two forecasts, but they both mean we’ll see solar panels sprout on roofs and fields.
The same pro-business environment attracting these new residents and business to Texas also make it one of the best places to build solar power in America. The massive CREZ power transmission lines that have connected wind power from north and west Texas to cities in south and east Texas are also helping large solar plants connect to meet this demand.
Without some of the regulatory red tape that exists in other states, solar can also be built faster in Texas than other major markets. For instance, a utility scale solar farm takes three to five years to develop in California, but just two years in Texas from start to finish.
Because Texas has a competitive retail electricity market for 85 percent of all utility customers statewide, the cheapest power sources are usually the ones chosen to meet demand. This means electricity generation is selected on cost instead of which technology is mandated by the state Legislature. This means solar expansion is being driven by market economics, compared to government mandated Renewable Portfolio Standard policies in states like California.