US Solar Heads East

By Richard Baillie, Contributor
April 26, 2012

The U.S. solar market's centre of gravity is shifting from the southwest towards the east coast and Florida, in particular.

While traditional solar markets have relied on distributed PV for most new capacity, these days it is the centralised large-scale projects that are gaining traction

LONDON -- New capacity also increasingly comes as centralised projects rather than distributed PV — another major structural change for U.S. utilities.

A recent survey by the Solar Electric Power Association (SEPA) showed that in 2011 around 63% of new solar capacity in the U.S. came from utilities outside California, the largest percentage on record. Moreover, a total of seven of the year’s top 10 utilities were from outside California, and four of the top-ranking utilities were located in the east.

But not only is the geography changing — so is the very structure of the industry, with Florida again leading the way.

While traditional solar markets have relied on distributed PV for most new capacity, these days it is the centralised large-scale projects that are gaining traction. In 2010 alone, eight centralised projects greater than 10 MW each were installed.

Florida is now focusing closely on utility-owned or purchased solar power, as opposed to the smaller customer-owned, net-metered systems that have characterised the west coast market.

Utility-owned Development

Already operational is the DeSoto Next Generation Solar Energy Center in DeSoto County, which opened in late 2009 and has a nameplate capacity of 25 MW. The plant consists of over 90,000 solar panels across 235 acres (95 ha).

Following that development, Florida Power and Light (FPL) installed 87 MW in 2010, largely based on two projects – a 10 MW photovoltaic (PV) project at the Kennedy Space Center and a 75 MW hybrid concentrating solar power (CSP) plant at a combined-cycle natural gas plant across 500 acres (202 ha) north of West Palm Beach.

The US$476 million (€367 million) project, known as the Martin Next Generation Solar Energy Center is essentially an experiment to determine whether conventional power generation can be married with significant solar power resources. What makes the plant noteworthy is that this is one of the few currently operating examples of a conventional plant being retrofitted with the latest solar technology on such a large scale.

The plant also serves as a real-life test bed as developers attempt to reduce the cost of solar power, which remains much more expensive than most other forms of electrical generation. FPL Group, the parent company of Florida Power and Light, expects to cut costs by about 20% compared with a typical stand-alone concentrating solar power facility, since it does not have to build a new steam turbine, new high-power transmission lines or other common infrastructure shared with the neighbouring gas-fired installation.

‘We’d love to tell you that solar power is as economic as fossil fuels, but the reality is that it is not,’ Lewis Hay III, FP&L’s chairman and chief executive, explained on a recent tour of the plant. ‘We have got to figure out ways to get costs down. As we saw with wind power, a lot has to do with scale,’ he added.

As always with solar, the importance of scale has to be put in context. Despite the size of the Martin Center its 75 MW — impressive for a solar facility — is nevertheless barely a drop in the ocean when compared with the adjacent gas plant, which can produce about 3800 MW.

Other larger-scale solar projects coming to fruition include Florida-based National Solar Power’s plan to build a 200 MW solar farm in Hardee County at a cost of around $700 million. Construction of this installation, which is due to begin in the second quarter of 2012, is expected to take six months for each of the 20 MW ‘modular’ plants.

This is the second project that National Power has announced in Florida. The company is planning an even bigger one in Gadsden County, a $1.5 billion, 400 MW project that will also consist of 20 smaller plants, each on a 200 acre (81 ha) site.

Similarly, and also in Florida, BlueChip Energy has broken ground on the 120 MW Sorrento Solar Farm in Lake County with Taiwan-based Neo Solar Power providing its high-efficiency solar modules in exchange for equity participation. Earlier this year, BlueChip also built a 1.2-MW phase of the Rinehart Solar Farm in Seminole County, the largest rooftop PV installation in the state of Florida to date.

Legislative Roadblocks

Smaller-scale solar facilities have also been making inroads in Florida, but again these have been thwarted in many cases by legislative roadblocks. As things stand, a despite its wealth of solar resources, Florida lags behind virtually every other major state in its support of renewable energy.

Many states leverage federal clean energy tax credits and grants to help stimulate demand in their states through incentive programmes, but Florida’s rebate programme expired in June 2010 and there is no talk of reinstating it.

Part of the reason for Florida’s tardiness in implementing legislation that would benefit solar power development by utility groups is because a lot of debate in Florida has focused on attempts by FP&L to push legislation through the state senate, notably Senate Bill 2078. This would have provided Florida’s major power companies with more incentives to increase their solar portfolios by allowing them to pass the costs of constructing renewable energy plants on to their consumers.

But 2078 is also seen as a double-edged sword by the solar community, as it does not provide for any kind of feed-in tariff (FiT) by which power companies would buy power produced by smaller renewable companies.

Susan Glickman, a lobbyist for the Southern Alliance for Clean Energy, says that more should be done to level the playing field. She said that in the twentieth century there was a drive for universal service, but that thinking is increasingly outdated.

‘We are in a different world; we have many different ways to provide energy. There’s so much energy efficiency opportunity out there that we don’t take advantage of because utilities are incentivised to build power plants, because they put that into their rate base and that’s how they make money.’

Glickman argues that the state should be at the forefront of developing renewables, but expresses concern that if Florida writes policies favouring giant utilities, it would drive away companies that innovate.

Rapid Growth

Despite the legislative hurdles, SEPA confirms that distributed solar is growing fast in Florida, albeit from a smaller base.

Partly this is because, in 2007, in an attempt to promote customer-owned renewable generation, the Florida Public Service Commission (PSC) established rules making it easier to interconnect a customer’s system with the utility’s grid.

Other potential sources of funding for distributed solar in Florida include the Property Assessed Clean Energy (PACE) programme, which was approved by the 2010 legislature and allows residential and commercial property owners to seek financing for solar energy projects through a special assessment by their local government. The property owner pays back the loan over a period of years through their property tax bills.

Then there are the Qualified Energy Conservation Bonds, which are available to state and local governments to finance qualified energy conservation projects, including those that involve the production of electricity from renewable energy resources. Effectively, the US Treasury Department subsidises the bond issuer’s borrowing costs.

That said, it is the net-metering rules that appear to be having the biggest impact at the moment. In 2010, nearly 3000 solar energy systems with a capacity of more than 20 MW were interconnected across the state, with customers often selling the energy back to the grid.

This is a significant jump from 2009, when only 1625 customer-owned renewable systems representing some 13 MW of electrical generation capacity were connected to the utility grid.

Distributed Solar in the West

On the face of it the situation in California couldn’t be more different. Solar in the Golden State has long benefited from a system of distributed generation. But California utilities are obliged to obtain 33 percent of their energy supply from renewables by 2020 (up from 20 percent in 2010) and that is also helping to fuel the development of larger-scale utility-backed solar projects.

These include out-of-state projects such as the massive Copper Mountain project in Boulder City, Nevada, which was officially opened by Sempra Generation in March 2011 and produces 48 MW from 750,000 solar panels spread out over 380 acres (154 ha).

The project began as a 10-MW pilot installation in 2008. Since then, Sempra has sold the energy to one of California’s major utilities, Pacific Gas and Electric (PG&E).

Sempra hired First Solar as the contractor for the large-scale project, and as Sempra had already leased the necessary land, and because Boulder City had a ‘solar zone’ in place, permitting went relatively quickly.

Boulder City was also keen to have the plant built there. ‘The town is exceptionally great at communicating; there are no surprises, and they’re genuinely interested and enthusiastic and want us there, and that makes a huge difference,’ says Engelbrecht.

Sempra was also able to attain some tax abatements through the state of Nevada, as well as a federal tax credit and an investment tax credit on the construction. The company now has a 20-year contract with PG&E for the facility and the 10-MW power plant, but Sempra also announced recently approved plans to expand the plant by 200 MW.

‘We’re about to start construction on a 150-MW project in Arizona, and that power is also going to Pacific Gas and Electric,’ says Engelbrecht. This is just the start. Sempra Generation says it is ready to embrace solar on a large scale.

‘We have well over 1,000 MW in our solar pipeline of projects we’re developing,’ says Engelbrecht. ‘Our Mesquite project — the 150 MW project in Arizona — is simply phase one. The site is actually large enough to accommodate 600 MW-700 MW of solar.’

What is so surprising about Copper Mountain is that it makes quite a departure for PG&E, given that, in 2010, the company’s solar portfolio was about two-thirds distributed customer PV projects, with more than 10,000 projects totaling more than 104 MW. But the Copper Mountain project provides ample evidence that large centralised projects and ownership are on the rise, even in the western US.

‘We expect the growth in utility solar power to continue,’ said Julia Hamm, SEPA president and CEO commenting on a recent analysis. ‘Our findings show that utilities are continuing to find new, viable business models,’ Hamm added.

That’s not to say that distributed solar generation doesn’t have a role to play in the west. For instance the California Public Utilities Commission (PUC) has approved Southern California Edison’s plan to install scores of 1-2 MW grid-connected systems scattered across the rooftops of commercial buildings throughout its southern California service area — eventually totaling some 500 MW.

SCE says it will now add another 50 MW each year in what will create a boom for local solar businesses.

Economies of scale will never reach those achieved at the likes of Copper Mountain, but solar on large commercial roofs is relatively cheap, costing about half the price of individual home installations and doesn’t usually require the building of additional transmission infrastructure. Moreover, with the economic crisis hitting the state hard, distributed solar could be a positive way to make use of derelict buildings.

California's Issues

Distributed solar could also help to fill the gaps caused by the frequent delays that California currently faces in realising its many signed contracts for mega solar projects.

In many cases these stem from environmental disputes. For example, in 2009 California state Senator Dianne Feinstein introduced legislation to protect a million acres (0.4 million ha) of the Mojave Desert, effectively causing the abandonment of some 13 big solar projects in the area.

Feinstein also heads the Senate subcommittee that oversees the Interior Department’s budget, giving her a large say in the siting of solar projects. The decision to protect the Mojave from development puts pressure on California to come up with other means of achieving its goal of obtaining a third of its power from renewables by 2020.

Steven L. Kline, chief sustainability officer for PG&E, noted that the loss of the planned solar projects would hurt his company’s efforts to comply with state renewable energy mandates. The utility was planning a solar farm in the Monument area.

‘In the near term, it would have a very substantial impact,’ he said, emphasising that in principle PG&E supports Feinstein’s efforts to preserve sensitive desert lands. ‘Over time those projects will be built somewhere else and we’ll have benefits of the power.’

But until that happens, it seems that distributed generation and the ‘virtual’ solar plant can supply at least some of the answers. ‘Distributed solar is faster on permitting, on environmental issues and interconnection to the grid,’ said Arno Harris, Recurrent’s chief executive. ‘It offers a safety valve for utilities who don’t want to put all their eggs in one basket.’

Image: Tobias Machhaus via Shutterstock

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US Solar Heads East

The U.S. solar market's centre of gravity is shifting from the southwest towards the east coast and Florida, in particular. While traditional solar markets have relied on distributed PV for most new capacity, these days it is the centralised large-scale projects that are gaining traction

The U.S. solar market's centre of gravity is shifting from the southwest towards the east coast and Florida, in particular.

While traditional solar markets have relied on distributed PV for most new capacity, these days it is the centralised large-scale projects that are gaining traction