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Solar power will account for nearly half of US generation
capacity installations in 2022, more than natural gas and wind
power combined, according to the US Energy Information
Administration (EIA).
Based on surveys of utilities and independent power producers,
EIA said it expects 46.1 GW of utility-scale generating
capacity to be added to the US power grid in 2022, of which
21.5 GW (46%) will be solar. Natural gas will contribute 9.6 GW
(21%), wind 7.6 GW (17%), and 5.1 GW (11%) will come from the
fast-emerging category of battery power.
When 2.2 GW of nuclear power is included from two units coming
onstream at Southern Company's Vogtle Electric Generating Plant in
Georgia, carbon-free power will account for nearly 80% of US
installations in 2022, marking a significant step towards the
country's goal of transitioning to only clean energy production by
2035.
Source: EIA
"Wind, solar, and battery storage have been the top choice for
new power capacity for six of the last seven years in the US," said
John Hensley, vice president for research and analytics at The
American Clean Power Association, a US trade group.
"Falling costs, improving efficiency, and customer demand
support the strong growth this industry is experiencing, and we
expect those drivers to continue shaping the energy transition
underway," he added.
Growth can be further accelerated by supportive federal policy,
Hensley said. "This growth can be accelerated with the passage of
the Build Back Better Act coupled with the infrastructure
package—putting the country in a better position to meet
climate targets and deliver clean energy to Americans," he
said.
Build Back Better is the Biden
administration's $1.75-trillion spending plan that would include
about $550 billion in incentives and loans for a wide range of
renewable energy, from electric vehicle tax breaks to investments
in transmission lines to extensions of tax credits for new wind and
solar projects. The bill has been held up in the US Senate for
several months due to objections raised about its overall price tag
by US Senator Joe Manchin, Democrat-West Virginia, and is likely to
be subject to significant modifications if it is passed at all.
Solar
For solar, the 21.5 GW of expected new capacity continues a
strong three-year trend. In COVID-marred 2020 and 2021, the
industry added 13.5 GW and 15 GW, respectively, according to EIA.
Texas (6.1 GW, or 28% of the national total) and California (4.0
GW) will be the busiest states this year.
Solar's growth can be attributed to two key factors: cost and
opportunity.
"Solar is super cheap … and its cost has come down very fast in
the last few years," IHS Markit Power Research and Analysis
Associate Director Sam Huntington said. "Plus, you have a lot of
markets where there is very low solar penetration."
IHS Markit said the benchmark levelized cost of energy (LCOE)
for a new solar installation in the US in 2016 was about $50/MWh.
Now, it's closer to $25/MWh, Huntington said. "That's important
because the average dispatch cost of coal and gas is in the
$30-$40/MWh range, so solar has in recent years come in below it,"
which enables new solar entrants to underbid many existing coal and
gas plants, he said.
While wind projects also show favorable economics, Huntington
pointed out that solar carries advantages over its renewable
competitor. "Wind projects take years. They are huge industrial
projects, with large components having to be brought onsite, often
imported," he said. "Solar is much more modular, and easy to
install."
But the growth of solar eventually creates new issues for grid
operators because of solar's tendency to overproduce during the
sunniest hours and, of course, not produce at all during the
evening. This creates a phenomenon known as the "Duck Curve," with
wide swings in solar power forcing the need for equally substantial
changes in flows from other forms of power generation to offset
solar's ups and downs. It can also cause power prices to fluctuate
widely during the day, even reaching negative levels when
production peaks.
Source: California Independent System Operator
In California, solar is about 15% of the state's installed
capacity, providing about 10% of the state's generation in 2020,
according to the California Energy Commission.
It's the one state with enough solar where the Duck Curve comes
into play occasionally. California's hourly power supply on 24
April 2021 (see below) shows how the increase in renewable supplies
led to a moderate reduction in gas-fired power production and a
reversal of imports from other states in the middle of the day.
Then, as solar dropped off in the evening, other resources had to
fill the gap.
While California works on managing its Duck Curve, Huntington
noted that such circumstances are a long way from affecting solar's
growth elsewhere in the country. "We see very favorable economics
for new solar and plenty of room to add solar before it starts to
have an effect," Huntington said.
Battery power
Battery energy storage is one solution to the Duck Curve because
it can be charged with excess power during the middle of the day
and release that power in the evening.
So, it's not a coincidence that the EIA is forecasting an
increase of nearly 20% in US battery storage installation capacity
in 2022. EIA's survey found about 5.1 GW of battery installations
are planned for 2022, compared with 4.3 GW in 2021 and less than 1
GW in 2020.
If anything, IHS Markit says EIA's number is too cautious, as
the company believes as much as 7 GW of new battery storage could
be installed in the US in 2022.
"Several factors have helped expand US battery storage,
including declining costs of battery storage, deploying battery
storage with renewable generation, and adding value through
regional transmission organization markets," EIA said.
As with solar, Huntington said that battery costs have fallen
markedly in the last few years, making them competitive with oil-
and gas-fired power plants as a source of peak demand capacity. The
National Renewable Energy Laboratory (NREL) said the cost of a lithium-ion system that
provides four hours of storage fell from about $2,150/kWh in 2015
to $379/kWh by the end of 2020.
"But this is a tricky one to figure out because the [problems in
the global] supply chain are really affecting the availability of
batteries," Huntington said. "We are seeing cost premiums for
batteries right now."
Assuming supply chain issues are solved, the longer-term
prospect for battery storage is continued cost reduction. NREL
issued an update on its battery forecast in October 2021, saying that as
a mid-case scenario it expects the cost of storage to fall from
$379/kWh last year to about $248/kWh in 2025 and $198/kWh in 2030.
That's a 40% reduction in the next decade.
Wind
US wind power installations set a record in 2020 of 21 GW and
maintained a strong pace in 2021 of 17.1 GW. But EIA is predicting
that less than half that will be installed this year at 7.6 GW.
The ups and downs of wind installations can be attributed to the
sensitivity of the industry to federal tax credits. The Production Tax Credit, which is
most commonly used for onshore wind projects, is $15/MWh of power
produced for 10 years, and it's available for projects started by
31 December 2021. It had been scheduled to expire on 31 December
2020, leading to a rush of projects timed to meet that deadline,
but Congress extended the credit by a year, due to COVID-19.
The next big wave of wind projects, so to speak, will be
offshore facilities. Construction on the largest US offshore
project yet, Vineyard Wind 1, was
greenlighted in May 2021 off the Massachusetts coast, and auctions were held last fall
for numerous other promising locations off the US East Coast.
The offshore wind projects are not going to show up in EIA's
survey of expectations for 2022. And those projects are reliant on
the Investment Tax Credit, which expired on 31 December 2021 and
provided a rebate of up to 30% of the cost of a wind project.
Reinstatement of this credit also is part of the Build Back Better
bill that is now in limbo in the US Senate, but proponents are
looking to revive it through other legislative means.
Natural gas
Natural gas represents the second-largest source of new power in
2022, according to EIA. Its 9.6 GW estimate fits with the pattern
of 8.3 GW, 9.3 GW, and 6.6 GW observed in the years 2019-2021,
respectively.
"We see different regional attitudes towards natural gas. It's
hard to build a new gas unit in California or the Northeast, but
other regions are quite bullish," Huntington said.
EIA's data back that up, noting that 88% of the new capacity
expected in 2022 will be in four states: Florida, Illinois,
Michigan, and Ohio.
These new operations are doing one of two things, either meeting
growing demand in a state that's adding population (Florida), or
replacing baseload coal-fired power plants that are being retired.
"Renewables will pick up some of the slack of coal and nuclear
retirements, but gas also can pick up a lot of it too," Huntington
said. "We see the total US share of generation for gas increasing
through the next decade—and a lot of that is picking up from
coal."
While environmentalists might cry foul, Huntington said that
gas-fired power, especially new units, have a lot going for them.
"The fuel itself, despite price fluctuations in global markets, is
still cheap domestically in historical terms," he said. "And the
latest gas turbines are so efficient that it allows them to
outcompete even gas turbines installed five years ago."
Power purchase agreements and long-term
signals
Looking at this year and beyond, a few other issues could
influence the rate of growth of various power resources, in
addition to cost competitiveness and the extension of federal tax
credits.
"There's a robust and rising demand from corporate offtakers of
renewable power—big tech, companies with data centers, and just
companies that want to say they are powered by clean power,"
Huntington said. "That's a really significant part of the market.
It's been close to half of the contracted offtake in the last few
years."
Perhaps surprisingly, renewable portfolio standards (RPS), which
are mandated market share for renewable power that are imposed by
some US states, are not driving the market today, Huntington said.
"In the very near term, the economics of renewables are so
compelling that you probably don't need an RPS," he said.
A case in point is Texas, previously noted as forecast to have
the largest share in 2022 of new solar. It's also expected to
account for half of the new wind capacity in 2022. "Texas is a
market with no state support for solar … and we think they're going
to add 50 GW of solar in the next decade. That speaks to how
attractive the economics are," Huntington said.
But portfolio standards still play an important role for
renewables and will do so in the future, he added. "An RPS provides
a critical long-term demand signal. It says to the market that
there will be an offtaker for your project. Someone will buy your
power at some point," he said.
RPS programs are being expanded as states seek to achieve their
own net-zero emissions goals. In December, Massachusetts doubled
the scale of its Solar Massachusetts Renewable Target from 1,600 MW
to 3,200 MW. More than a dozen projects that had been proposed will
now go forward, according to the Solar Energy Industries
Association, a trade group.
Posted 13 January 2022 by Kevin Adler, Chief Editor
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