Houston — After climbing 15% in 2018, utility-scale solar capacity in the southeastern US is expected to surge another 25% this year, but the geographic concentration of such growth is driven more by policy than by the quality of the sunshine, S&P Global Platts analysis shows.
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S&P Global Platts Analytics data show the region encompassing Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Mississippi, South Carolina and Tennessee had about 5.6 GW of solar capacity in 2017. That is estimated to have grown to about 6.5 GW in 2018, surging to 8.1 GW in 2019 and almost 9 GW in 2020.
By 2021, the Tennessee Valley Authority plans to have 377 MW of solar capacity in Alabama and Tennessee to serve Google and Facebook data centers, TVA spokesman Scott Fiedler said.
"Our 2019 integrated resource plan, which provides direction on how to best meet the valley's future energy needs, indicates solar growth up to 14 GW in our region over the next 20 years," Fiedler said.
Robert Patrylak, a Navigant Consulting managing director and North American energy markets fundamental analyst, said: "The Southeast is seeing a significant expansion of utility solar," largely driven by generation retirements, "most notably ... in coal capacity."
But Andrew Larson, a Platts Analytics power market analyst, said the "primary" reason is "the steep cost declines for solar resources in the last few years."
"Installed prices for solar have fallen from $5.52/W in 2010, to $1.13/W in 2018," Larson said in an email Monday. "There is finally enough economic incentive to build these renewables in the Southeast."
Manan Ahuja, Platts Analytics senior director of North American power, said "access to fossil fuels in some of the southeastern markets has also" contributed to demand for solar power.
The "delivered cost of coal is quite high and also building a gas pipeline hasn't been easy there," Ahuja said.
Industry observers differ on the wholesale pricing effects of the shifting supply mix.
Coal-fired generation retirement is likely to boost wholesale power prices in the near future, Patrylak said, but would likely "flatten before restarting a slower growth upward beginning in ... 2024 due to limited natural gas price growth and a significant growth in renewables, specifically solar."
But Joshua Rhodes, a University of Texas Energy Institute research fellow and senior energy systems analyst at Boulder, Colorado-based Vibrant Clean Energy, said, power prices are likely to weaken "given where solar [power purchase agreements] are these days."
The Los Angeles Department of Water and Power is preparing a PPA for 400 MW of solar and 800 MWh of storage at a cost of $19.97/MWh for the solar and $13/MWh for the storage.
POLICY VS. FUNDAMENTALS
North Carolina is expected to retain its solar lead with about 3.8 GW through the period, but Florida is expected to just overtake Georgia's 1.6 GW this year before jumping solidly into second place with 2.5 GW in 2020, according to Platts Analytics.
In contrast, Louisiana has virtually zero solar capacity throughout the period, and Arkansas is estimated to have added 1 MW in 2018 but no more through 2020.
According to the National Renewable Energy Laboratory, Louisiana has some of the strongest solar power potential in the southeastern states, while North Carolina has some of the weakest.
But North Carolina's renewable portfolio standard requires investor-owned utilities to supply 12.5% of their load with renewable energy by 2021, and several municipals and cooperatives had a 10% RPS by the end of 2018.
The Georgia Public Service Commission on July 19 approved Georgia Power's modified integrated resource plan mandating 2,000 MW of renewable generation by 2021, Patrylak said.
Neil McAndrews, an energy market consultant based in Austin, Texas, attributed the growth pattern to a "first-mover, second-mover effect."
"North Carolina was the first to build a large amount of solar due to their Renewable Portfolio Standard regulations," McAndrews said. "None of the other states have this requirement. Since 2017, prices have materially declined. So other larger states are developing additional solar to help meet growth. Smaller states will gradually adopt."
Entergy New Orleans plans to build or buy the output from 90 MW of solar facilities by the end of 2020 as a result of the plan's approval in July by the New Orleans City Council's Utility Committee.
One factor that may slow solar power development in much of the southeastern US is the lack of competition.
"[The region] is characterized by large market actors with little incentive to change," McAndrews said.
Rhodes added: "Most areas in the Southeast have been dragging their feet with utility-scale solar because of their regulated utility status."
Larson said the region has "relatively cheap power prices," which means "there are no external incentives to build out new capacity beyond load growth," and "much of the Southeast load is actually declining in weather-adjusted terms."
-- Mark Watson, firstname.lastname@example.org
-- Edited by Keiron Greenhalgh, email@example.com
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