US gas-fired power targeted for future displacement by solar generation could remain relevant in the generation stack for longer than previously anticipated following a recent decision by the US Commerce Department to investigate possible import tariff circumvention by solar manufactures in Southeast Asia.
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Legacy gas generation in ERCOT and the California ISO, where solar capacity is expected to grow most aggressively over the next several years, could stand to benefit most from the investigation which has already had far-reaching impacts on the US solar industry, according to a recent survey published by the Solar Energy Industries Association, SEIA.
Nearly 75% of SEIA's 200 survey respondents reported recent cancellation or delay of their photovoltaic module supply as a result of the investigation, which seeks to determine whether Chinese PV manufacturers are evading tariffs, first imposed by the Obama administration in 2012, by setting up shop Cambodia, Malaysia, Thailand and Vietnam. As reported by SEIA, the four countries deliver about 84% all US solar modular imports and are critical suppliers to the US market which lacks sufficient domestic module production, according to SEIA vice president of markets and research, Justin Baca.
Solar capacity, gas displacement
Planned solar capacity in ERCOT faces potentially the biggest risk from the ongoing tariff probe, while capacity in CAISO is a close runner up, according to S&P Global Commodity Insights analysts.
"If we consider only ERCOT solar projects with an interconnection agreement and financial security – and despite potential delays caused by the new Department of Commerce investigation on solar equipment from Cambodia, Malaysia, Thailand and Vietnam – there are 7 GW planned to come online by the end of the year and another 8.7 GW in 2023," said S&P Global lead power analyst Giuliano Bordignon.
Based on the latest ERCOT interconnection queue update, total installed solar capacity in the primary Texas power market was 11.6 GW at the end of March.
According to Bordignon, new solar capacity in ERCOT displaces primarily gas, rather than coal – which is also the case in CAISO where 2 GW of capacity planned capacity for 2022 is already under construction. Another 1 GW of solar capacity in CAISO is currently in the planning stages for 2022 to be followed by an additional 3 GW planned for 2023 – all of which is now potentially at risk.
"Assuming a 30% capacity factor, which is typical in California and Texas, and that the solar is displacing relatively efficient gas generation, each gigawatt of solar would displace about 50 MMcf/d of gas generation," said Morris Greenberg, S&P Global Commodity Insights senior manager, North American power analytics.
According to S&P Global forecasts that pre-date the Commerce Department's tariff investigation, monthly average solar power generation in ERCOT was expected to grow by nearly 70% in 2022 to just over 3 GW and reach 5.1 GW by 2023. In CAISO, solar generation was forecast to grow just 8% this year to 4.6 GW, followed by another 27% annual growth in 2023 to nearly 5.9 GW.
Including other planned solar generating capacity across the US, total monthly average solar generation from the Lower 48 states was previously expected to roughly double from 2021 to 2023 to nearly 24 GW, though much of the planned new capacity is now at risk.
Assuming the tariff probe results in additional tariffs on solar equipment suppliers from Cambodia, Malaysia, Thailand and Vietnam, substantially more of the US' planned solar capacity could be at risk longer term, potentially giving gas a longer runway to its eventual phase out in the domestic power sector.