Texas Set To Become Solar Powerhouse

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By Nick Cunningham for Oilprice.com

Texas could finally become a leader in solar, thanks to a new resolution passed by the city council of Austin.

The bill will require the municipal utility, Austin Energy, to obtain 60 percent of its electricity generation from renewables over the next decade, and to be completely carbon-free by 2030. It calls on Austin Energy to build 600 megawatts of solar power by 2017, and it mandates the city support the build out of 200 megawatts of distributed solar on rooftops.

The council resolution, passed on August 28, could directly lead to the installation of an additional 800 megawatts of solar power, or about four times the total installed capacity in the entire state.

Most importantly, the strategy was done for the sake of economics, says GreentechMedia. Austin Energy signed a power purchase agreement (PPA) earlier this year with Recurrent Energy, a solar developer, for rock bottom prices. The five-cent per kilowatt-hour rate is one of the lowest solar deals around. The low price prompted the city council to look more deeply at solar power as a way to save on costs, which led to the most recent resolution.

Not only is solar generation becoming much more affordable, but it also acts as a hedge against fluctuating natural gas prices. Texas is still a monster when it comes to the production and generation of electricity from coal and natural gas. But with solar generating the most electricity around mid-day, it can shave off some of the load at times of peak demand. Austin decided to allow the Decker Power Plant to shutter as a result, an old natural gas plant that is largely used just for peak power.

The Austin city council move is also indicative of the improving trend for solar. The Wall Street Journal reports that the global solar market is finally tightening, after years of oversupply. Generous support from governments in China, Germany, and the U.S., led to a dramatic expansion of solar manufacturing over the last five years. That caused prices panel prices to collapse as the world was left with a glut of solar modules.

But, lower costs are a boon for consumers – evidenced by the low-cost PPA signed in Austin. That has global demand increasing fast, which is finally soaking up the glut of extra solar panels. Solar demand is now rising twice as fast as manufacturing companies can produce them.

This will provide a huge boost to some of the major solar producers out there, such as First Solar, Yingli Solar, and Suntech. After several years of weak prices, the industry is poised for growth.

In fact, in 2014 the largest solar manufacturers are expected to see their sales rise by more than 50 percent over 2013’s figures.

And that is all because more and more places are doing what Texas is doing – turning to solar for cheap electricity generation.

Texas is already the nation’s leader in installed wind capacity with 12,755 megawatts in operation. But it has been a laggard in solar power, largely because the policy environment has not been supportive.

Beyond federal incentives, Texas offered little more to the solar industry. Their renewable portfolio standard required a set amount of renewable capacity, rather than a percentage of total electricity. As a result, Texas has already surpassed its 2025 requirement of 10,000 megawatts of renewable capacity, more than a decade early.

With little other incentives in place, solar floundered in Texas. It currently has just 213 megawatts installed, still enough to rank it thirteenth in the country.

But the solar deal in Austin will by itself launch the state of Texas into the top five solar states within a few years. And that could set the stage for future growth, both within Austin, and in other parts of Texas and beyond.

This article was originally published on Oilprice.com.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities , Technology , US Markets

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