One of the more positive opportunities afforded by COVID-19 was the chance to reflect on where the industry is going. While most are on the consumption side of the curve, some work on the supply side of the electricity equation. The supply side has had a tough run in the past few decades with nuclear, coal, and even natural gas plants falling out of favor in the face of regional regulation, development opposition, and the public’s desire for cleaner energy.
On the opposite side of the generation equation from coal and natural gas is renewable energy — primarily wind and solar but certainly including hydro, biomass, and thermal. Renewables, by definition, generate power without hauling a limited resource out of the ground or harvesting it, and they have no carbon footprint. The U.S. government considers hydroelectric a renewable energy source. Some refer to it as sustainable. Many will argue that captive water for hydroelectric use has significant negative environmental impacts. Today, the focus is on utility-scale photovoltaic solar and the emerging accompaniment of colocated energy storage.
When one considers the amount of PV on a global basis, it is significant. The U.S. Energy Information Agency (EIA) indicates that 17.3 GW (pre-COVID-19 projection) will be added in 2020.
Solar represents 13.48% of all new generation capacity in 2020 but represents 32% of new generation facilities. Considering solar is historically only 1.8% of the U.S. generation basis, this indicates both a larger percentage of generation going solar and a considerably higher growth rate than the past. The 84 GW-dc of solar coming online during the five-year forecast (2019-2024) will double the installed capacity over the preceding 10 years (2008-2018). The forward-looking projections for solar are equally optimistic.
It is easy to understand why PV and battery industrial capacity lagged — there was no motivation with the modest PV and energy storage systems (ESS) demands that existed before 2008. Furthermore, the silicon fabrication capacity and battery chemistry technologies required for today’s volume of panel and battery solutions did not exist. Voluntary procurement is driving PV growth, either by the utility seeking renewable production goals or the customer looking for carbon offsets. Utilities’ renewable portfolio standards (RPS) and consumer choice patterns are now driving a majority of existing and proposed solar work in this business.
When one combines consumers and operators choosing renewables for both ROI and environmental reasons with the ability to deliver large MW/GW capacity plants quickly, the synergistic result presents an excellent business opportunity for engineering, procurement, and construction (EPC) contracts and investors.
Seeing the 2020 PV numbers and knowing that solar represents less than 2% of U.S. generation, the growth is substantial. What’s driving this? Aside from customer’s desire for renewable/carbon-neutral production (aka decarbonization), the two most significant growth factors are lowest cost for power (MWh) and speed to market.
Decarbonization brings about some vexing market dynamics. This represents a major shift in energy policy that affects all aspects of public, corporate, and old-guard utility planning. This transition from fossil fuel to renewable energy generation has not moved as fast as the constituents and resulting markets demand, leading to acute constrained decarbonization. It is no longer a demand issue, it is a fulfillment issue.
Ultimately, this will be worked out as the EPC and manufacturing bases increase throughput. It is unlikely that most state-defined decarbonization goals will be met due to manufacturing and construction constraints that exist today and for the medium-term future.
An ESS is a near-term requirement for utility-scale solar projects for voltage and frequency transient stability and ride though. In addition, ESSs provide ramping control and peak load shifting on a wholesale basis. Occasionally, ESSs stand alone in service areas where mature renewable power systems exist. Today, nearly every utility-level solar project being built and in preconstruction development has a significant energy storage component that is co-developed or immediately follows the solar power plant. Overwhelmingly, these ESSs are lithium-ion batteries, with several varying chemistries.
Whatever cost-per-MW is realized (and battery prices are dropping), ESS is a compelling business at this scale. Solar remains on a large GW-per-year growth rate for the foreseeable future. Worldwide, solar offers great promise in undeveloped areas, such as rural Africa. A handful of panels can run critical water purification, sanitation, and basic domicile electrification in areas where traditional power plants and transmission and distribution systems have no hope of reaching for years, if ever. It also skips the pollution problems of bunker oil-fueled local power systems. Solar and wind offer relatively fast times to market when compared to every other power plant.
There are sound financial reasons for solar power. Today’s renewable power pricing is at-par or less than NG-fired production solutions. The primary market force driving early adoption of solar and wind projects was the Investment Tax Credits (ITC)/Production Tax Credits (PTC) for solar and wind respectively. Up until the past few years, successfully funding and building wind and solar projects hinged on the availability of these ITCs/PTCs, presenting an upfront build cost subsidy of over 35% (when combining the impact of the tax credits and accelerated depreciation benefits). However, these tax credit benefits are falling off, settling in at only 10% by the end of 2021. These federally mandated tax credit incentives combined with various state and local incentives drove the renewable projects industry for over 10 years, which allowed solar module and other key component manufacturers to reach scale economies necessary to achieve sustainable growth without ongoing subsidies.
Solar has evolved to a point where it will survive and win based on the cost of production alone, depending on the situation. In the past 55 years, panel prices have collapsed to almost nothing as demonstrated in Figure 1.
There is a confluence of other factors lubricating development on an unprecedented scale, including:
- Collapsing panel prices to commodity levels;
- More efficient panels;
- State and local governments, regulators, and utilities setting aggressive renewable energy goals;
- Entry and retention of large EPC contractors;
- Inconsistent but omnipresent tax credits;
- Realistic pay in tariffs for new suppliers; and
- Large institutional money looking for stable safe haven investments, which has expanded development and funding options.
Figure 2 shows PV system costs on a dollar/W-dc basis. What’s not clearly shown is the drop in solar from $3.00 per W to 85 cents per W over the last 10 years. Other power generation technologies can’t offer the same cost efficiency when compared to panel pricing over the past 50 years.
The Renewable Industry
Even with the best efforts of the U.S. to drive energy efficiency in commercial construction, consumption continues to increase. The industry needs geopolitical demands of decarbonization.
Renewable energy now represents 17.5% of all U.S. production. In 2019, about 4,118 billion kWh, or 4.12 trillion kWh, of electricity was generated at utility-scale electricity generation facilities. About 63% of this electricity generation was from fossil fuels — coal, natural gas, petroleum, and other gases — 20% from nuclear energy, and about 18% from renewable energy sources.
The EIA estimates an additional 35 billion kWh of electricity generation was from small-scale solar photovoltaic systems in 2019.
Some states still fuel their power plants with biomass or petroleum. Many of those states are pushing for rapid production conversion for both load growth and environmental reasons, Hawaii chiefly amongst them. The EIA has confirmed what industry watchers predicted a year ago — that wind and solar power will expand on their already-large share of new U.S. generation capacity in 2020. According to recent data from the organization, wind and solar will make up 32 GW of the 42 GW of new generation capacity additions expected to start commercial operation in 2020, dwarfing the 9.3 GW coming from natural-gas-fired plants.
EIA’s numbers also break records for both wind and solar in terms of annual capacity additions. The 18.5 GW of wind power capacity set to come online in 2020 surpasses 2012’s record of 13.2 GW and pushes total U.S. production well past the 100-gigawatt milestone set in the third quarter of 2019.
Noting that U.S. power consumption is still growing by about 3% per year, solar power is rooted in electrical consumption wheeled via the grid and RTCs. The EIA notes that 44% of renewable energy is directly sent to end users in transportation, residential, industrial, and commercial loads, mixing solar with other renewable sources.
Today, solar goes about anywhere it can fit. With a space requirement of approximately 4 acres per MW-dc, larger plots of land are needed for utility-scale installations. For distributed generation (DG) systems, large roof areas are an excellent space for panels.
Cloud services providers (CSPs) and hyperscalers drive a majority of data center development worldwide in both owned and leased facilities. These firms have a proclivity for purchasing renewable energy. Colo providers are following suit in response to customer demands for cost certainty and carbon reduction.
Understanding where the solar market is going requires an examination of underlying market forces that are driving solar adoption from the data and technology businesses. Depending on the source, the consensus indicates that data centers and technology companies are consuming 2% of the U.S.’s generated power annually. When this large a power contingent moves to a 100% carbon-neutral production, it will move markets, especially when they are piling on demand every year. There is a consistent, top-down goal and plan for the industry’s luminaries for carbon-neutral/negative power, including:
- Google’s Data Centers Renewable Energy Approach
- Microsoft’s Plan for Going Carbon-Negative
- Apple’s Renewable Approach
- Digital Realty’s Renewable Energy Position
In 2016, Lawrence Berkeley Lab produced a seminal work on data center energy usage. From that report, data center energy aspects support several viewpoints of an aggregate 4% annualized growth rate of consumed data center energy, even when considering IT program growth is countered by increased hardware and infrastructure efficiencies. And a great perspective of the colo market can be found in CBRE’s Colo Predictions.
Design and Construction
When compared to a combined-cycle power plant, a utility solar facility is remarkably simple. What’s changed in the past couple of years is the grid storage and stability demands required of solar-based energy. A few trends have emerged recently and appear to be irreversible:
- Panels are a commodity, batteries are getting there;
- Projects are getting a lot bigger;
- Projects are located in the same service area as the load;
- Renewable energy is part of utility capacity development and corporate energy goals; and
- Energy storage is nearly compulsory today.
In this business, EPCs often have to plan and price work to a contractually binding cost and schedule with nothing more than a geotechnical survey, a topo map of the area, a set of specs, and the stated output MW and MWh for storage.
Work is often remote and can be in deserts, alpine climates, or the hurricane belt. Direct labor crew sizes are large — often in the hundreds, which means sustaining a workforce is not a minor undertaking. Job sites can be hundreds to thousands of acres, so site logistics and movement are key. While this is not meant to dissuade people from entering the business, one needs to weigh their temperament and in-house skill sets against what can be described as a modest project definition delivered remotely and often in hard weather.
With larger MW-dc projects, civil work, surface water management, and access roads for fire and maintenance become larger efforts. Fire review by counties often requires a look by regional authorities, like Cal Fire in California. With forthcoming solar work on the Bureau of Land Management (BLM) lands (with the assumption of a negative declaration for species and the EIR on the whole), civil and land clearing work becomes more complex. It is not rocket science, but clearing a utility solar field is like grading for a 10,000-house development. Both the EPC and industry are taking a hard look at robotics and automated earthmoving, which offers labor and schedule risk relief with productivity gains.
Electrically, solar is a relatively simple electrical system, albeit at a very large scale. One caution for utility solar is the DC arc flash hazard levels on the line side of the inverter. At 600 VDC to 1,500 VDC and 1- to 4-MW per inverter, DC arc flash protection is serious business, and the same can be said for large-scale battery storage.
In a commercial context, solar farms are UPS power modules wired in reverse. Large solar farms are organized into dozens of inverters that convert the DC power of the solar panels to AC power. The major change over the past few years has been the increase in DC string voltage, which is now 1,500 VDC on average. Inverters are similar to UPS power modules with the exception that they do not possess significant power quality improvement filtering nor capacitors for subcycle DC buss voltage maintenance. Like UPS modules, inverters for utility-level solar systems are in the 1- to 4-MW range per module and use the same insulated gate bipolar transistor (IGBT)- or silicon controlled rectifier (SCR)-based technology.
The inverter passes power through a step-up transformer to a medium-voltage collection system. The transformer is a typical step-down transformer with the input on the low-voltage side. The collection buss voltage may be as low as 4.16 kV-ac, and as large as 35.0 kV-ac, depending on the size of the site and the constitution of the substation.
The solar farm is merely dozens, if not hundreds, of inverters strung together to achieve the output kW required by the development. Solar farms are typically sized in output MW-dc. One of the key skills of top-flight solar designers is reducing AC-side losses and minimizing voltage drop in their systems. Losses are always present but parasitic to the contracted system output. Drop may require active voltage management, which adds cost and power system complexity. Finally, substations are usually built on a dual-buss configuration, but some intertie agreements may demand otherwise.
New to utility solar is grid-level storage with large BESSs in a variety of MWh systems. When utility solar was widely employed in the European Union (EU) in the 1990s, one of the byproducts was loweredgrid stability in power, voltage, and frequency response. At that time, ESSs were not widely used and did not have the industrial basis it does today.
Panels have settled into a handful of substrate technologies and operating voltages in a narrow price range. Contrarily, batteries haven’t followed that trend yet, as they are newer on the scene at this scale. Batteries come in multiple lithium-ion technologies, all at varying prices. They have not been through the industrial scale build-up and subsequent price reduction that panels went through over the past 10 years.
BESSs are considered typical for large developments, and they are either AC-coupled or DC-coupled. Current flow to the BESS depends on whether it’s discharging or charging.
In an AC-coupled BESS solution, the BESS is in parallel to the solar array at the at the HV level of the plant.
DC-coupled systems are integrated at the DC combiner behind the inverter. By design, the BESS would be similar to or smaller than the output kW rating of the inverter.
The U.S. Market
The landscape of solar power development is bright and has some years to run. Market viability is local by state or RPSs, as indicated by the map in Figure 5.
With a majority of states and territories holding RPS goals, this offers a strong floor to the business. While this map is only a few months old, several states have increased their renewable generations targets, especially in solar.
While some states have strong RPS or clean energy goals, they don’t often align to power purchase agreements (PPAs). The current state of PPA affairs is shown in Figure 6.
An inability for PPAs to operate in an area may have a braking effect on a given RPA to secure their renewable energy goals. This simply means that the RPA itself undertakes solar development and is not letting renewable energy developers into the game.
Undoubtedly, renewable energy and solar power offer substantial opportunity for those who choose to engage in it. The industry is in heady times that portend a long run of large quality work.
1 Preliminary data for 2019. Utility-scale electricity generation is from power plants with at least 1 MW of total electricity generating capacity.
2 Small-scale solar photovoltaic systems are electricity generators with less than 1 MW of electricity generating capacity that are usually at or near the location where the electricity is consumed.
3 Pumped storage hydroelectricity generation is negative because most pumped storage electricity generation facilities use more electricity than they produce on an annual basis.