Solar Is Gaining in Wind Markets as the PTC Steps Down

Over the years, top-ranking wind and solar markets have
overlapped in just a few states. Where wind flourished, solar
usually hung back, and vice versa.

“Each of our technologies has largely had their own
playpen,” said Anthony Logan, a North American wind analyst at
energy and consulting company Wood Mackenzie Power &
Renewables.

But now, analysts say that’s changing. “Dirt cheap” solar
costs, record-setting growth and movement into new markets, plus
the ability for solar to complement wind production, mean the
technology is now encroaching on onshore wind’s territory. 

Solar is poised to grow by the highest percentage of any U.S.
generation source in 2020, according
to the federal U.S. Energy Information Administration (EIA). Wind
will be close behind — EIA says it’ll show the largest
percentage growth in 2019 and the second in 2020 — but solar
prices are dropping enough that the resource is comparable and even
cheaper than wind in some formerly wind-oriented markets. 

The sunset of the federal production tax credit (PTC) for wind,
which begins phasing down in 2021, will only increase that
edge. 

“Just looking at the tax credits alone, there is a time when
[the] solar phaseout is delayed a bit. So, you can build a fully
[Investment Tax Credited] solar project in 2023, whereas the only
wind project you can build is at a 40 percent PTC,” said Logan.
“Forty percent is just pretty weak.”

Logan said the trend will be felt first in highly-saturated wind
markets like West Texas and in areas where wholesale price spikes
coincide with peak solar production. 

In Iowa — which the American Wind Energy Association (AWEA)
ranks
as the second wind market in the nation by capacity installed —
150-megawatt solar projects will narrowly edge out wind in 2023 on
projected levelized cost of energy: $25.36 per megawatt hour
compared to $25.46. In Texas the shift won’t come until 2024,
when WoodMac projects $21.13 per megawatt-hour for utility-scale
solar and $24.15 for wind. 

Overall, the U.S. will add between 11 and 12 gigawatts of
onshore wind in 2019 and 2022, but those installations drop to
between 4.4 and 7.4 gigawatts between 2021 and 2023. Meanwhile,
solar will reach or exceed about 14 gigawatts through 2023,
according to WoodMac forecasts.

The view from developers

Developers are taking note of the trend. 

“This probably speaks to this better than a lot of other
indicators,” said Logan. “Pretty much any traditional wind
developer is now entering solar development if they haven’t
already. This is across the board.”

Sean Gallagher, vice president of state affairs at the Solar
Energy Industries Association (SEIA), affirms that shift. 

“A number of [SEIA’s] member companies will say to us things
like: our operating portfolio is mostly wind, our pipeline is
mostly solar,” he said. 

Late last month, North Dakota’s Public Service Commission

approved
the state’s first commercial solar project. At 200
megawatts, it’s over 400 times greater than the state’s entire
current installed capacity (0.47 megawatts according to SEIA). AWEA
ranks North Dakota tenth in the U.S. for installed wind
capacity. 

While one utility-scale project does not a market make, the
project’s developer, Minnesota-based Geronimo Energy, started as
a wind developer. It now has over 250 megawatts of solar in
operation.

“Solar energy technology has advanced significantly in recent
years, which has driven down costs,” said Betsy Engelking, the
company’s vice president of policy and strategy, in an email.
“This has made solar energy projects more and more competitive
with not only traditional electric generation, but also, in some
areas, competitive with wind.”

That’s because solar can complement wind, producing at
different times of day. Too much wind on the grid depresses
wholesale prices. And, according to Logan, building wind in a
saturated market may cost more than returns from renewable energy
credit purchases, the tax credit or capacity markets.

“If you’re one of a bunch of different wind farms out in
West Texas spinning your wheels off at 3 a.m., when nobody needs
power, yeah, you’re not going to hit that bonanza of income the
way a solar project would or that a coastal wind farm would,” he
said. 

Geronimo began developing solar in 2013, nine years after its
founding. It says its current portfolio of 7 gigawatts is spread
across the U.S. and the capacity is made up fairly evenly with wind
and solar projects. National Grid acquired the developer in
March. 

In November, offshore wind power-house
Ørsted
announced it would
provide
ExxonMobil with 500 megawatts of solar and wind. The
European renewable energy company also acquired Chicago-based
onshore wind and solar developer Lincoln Clean Energy last summer.
And in 2017 the company set up a solar and battery storage
development office in Texas. 

Though Ørsted said wind remains its core business, it
recognized a growing role for solar.

“While wind power will remain our central focus, solar will
become a larger part of our onshore operations going forward,”
said spokesperson Ulrik Frøhlke in an email.

“Don’t underestimate wind”

Logan said wind shouldn’t be sidelined, though. While solar
may be growing, experts said wind will continue to play a key
role. 

“[Solar] is a really promising technology, and it’s dirt
cheap, but don’t underestimate wind — especially in its core
markets,” said Logan. “There are certain states where wind is
really well positioned.” 

There are also relatively untapped markets where the technology
can reap the same benefits that solar is now enjoying in wind
territory. California, for instance, far outranks any state in
solar installations. And though AWEA ranks the state fourth for
wind capacity, Logan said the market has room for more. 

“The most severe places where these technologies are going to
kind of swap places is where there’s oversaturation of one or the
other,” said Logan. 

Logan said the wind industry is also making “herculean
efforts” to speed further LCOE reductions. U.S. wind installers,
for instance, have lagged behind their European counterparts in
adopting big turbines. But they’re now looking to larger
models.   

“Solar is rumbling along down the hill, really killing it,”
said Logan. But, he added, “There’s a lot that the wind side
can do, and right now is the R&D and the prototyping phases for
the things that are going to be the saviors for early 2020s wind.
There’s a huge question on whether they can make it work, and
whether they can make it work in [the U.S.].”

Source: FS – GreenTech Media
Solar Is Gaining in Wind Markets as the PTC Steps Down