Due to several drivers, including favorable economics and environmental benefits, utilities, businesses, consumers, and state and local governments are all focused on renewable energy – especially solar power. This is a major macro trend that should continue for decades to come.
Renewable energy consumption in 2019 grew for the 4th year in a row to a record 11% of total US energy consumption. This data comes from the US Energy Information Administration (EIA). The renewable portfolio includes hydro and biofuels/biomass, which have been steady, but solar power and wind power have been increasing dramatically in recent years. Solar now makes up 9% of the US renewable energy portfolio. Fun fact: solar still has some catching up to do as wind has surpassed hydro to be the most-consumed renewable energy source in the US.
Solar had the largest percentage growth among renewable sources in 2019. From July 2019 to July 2020, solar consumption has increased about 25%.
Why is solar increasing? Read on for several reasons that we are seeing…
Grid Reliability Demanded by Consumers. More residential customers are relying on solar with battery storage for emergency power during grid outages than ever before, which is an attractive option in areas with extended power outages. California continues to lead the rest of the nation in solar use. Interest in solar has increased lately there as a result of public safety power shutoffs to reduce the risk of wildfires and related disasters.
Renewable energy prices continued falling fast. In 2019, wind and solar prices achieved new lows. Utility-scale renewable energy prices are significantly below those for coal and natural gas generation, and less than half the cost of nuclear. Utility scale battery storage cost has decreased significantly – from $2152/kWh in 2015 to $625/kWh in 2018. Renewable energy has become so competitive that the idea of a 100% carbon-free grid is not just a crazy dream.
State and local governments have set renewable energy targets. Nearly 40 states have set renewable energy standards or targets. More than 100 cities (including my own city of Atlanta) have pledged to run on 100% renewable energy. Several of these jurisdictions are concerned about climate change, but their main drivers for change are job growth and the hope of lower utility prices for low-income households.
Growing corporate demand for renewable energy. The SEIA reported in 2019 that Apple is the leading installer of solar capacity among businesses in America with 393 MW to power its data centers. Other top corporations investing in solar energy have been Amazon, Target, Walmart and Google. Last year was the second largest year on record for corporate solar investments. US companies have now invested in 8,300 MW of solar power. This increase in solar power is driven largely by economics, but also good PR, as solar power can save businesses money and could drive positive improvements in brand and reputation.
Regulatory mandates and policy incentives. Utilities in states like California, New York, Arizona, North Carolina, Florida, Colorado, Oregon, and Hawaii lead the way with renewables, and that is driven partly because of supportive regulatory environments. For example, California has mandated that most new homes must be installed with solar panels. Colorado has been recognized for utility regulation that has encouraged a large number of solar and wind projects. Hawaii has also been lauded for creating a framework that will help the state achieve its 100% renewable energy target.
Lower construction costs and less risk. Southern Company is in the midst of constructing two nuclear reactors – the country’s lone nuclear project. These types of projects are multi-billion-dollar endeavors filled with substantial risk – risk of delays and overruns. Compare that with solar projects: Tesla completed a large 100MW energy storage project in under 100 days following blackouts in Australia. New solar projects are smaller and can be deployed more rapidly and in smaller increments than traditional generating plants. In addition, solar installations typically are very cheap to run once built.
Utilities are leading the way with renewable energy production. Utilities like SCE, Duke Energy, Xcel Energy, and NextEra are investing in solar (and wind) projects and adding solar capacity to the grid at a rapid pace. Over 96 percent of net new energy generation capacity in 2021 will come from solar and wind sources, according to Deloitte. Renewable energy investment rose 28% to a record $55.5B in 2019. US utility-scale solar has risen from about 11GW installed in 2013 to 62GW installed in 2018 and expected to more than double over the next 5 years, and regulators estimate 300 GW of wind and solar will come online by end of this decade.
Looking ahead to 2021 and beyond, what is in store for solar?
Declining prices for solar panels and batteries will continue, attracting consumers who are price conscious.
The proliferation of electric vehicles will continue as additional auto companies produce EV’s that are in demand. Electric vehicle use should reach 11M in 2020 and expand to 97M in 2025. Utilities will continue deploying EV infrastructure in their service territories which will continue to drive consumer acceptance of electric vehicles.
Some of my clients point to community solar projects as a driver for the increase in solar power. These are smaller solar projects located to serve local residents (or businesses) and are typically privately owned.
Big businesses will continue to invest in solar power to reduce operating expenses. Once big businesses catch on to a practical idea, it is hard to derail such a trend unless a better idea comes along.
As regulatory bodies continue to catch on, we may see more of a shift to pro-renewable market-based rulemaking as well as a continued increase in transmission capacity to accommodate the surge in renewables (the lack of transmission infrastructure connecting regions of the country with wind and solar generating locations is a factor holding back renewable energy).
2021 may be the year when it becomes common to say that it is cheaper to save the planet – and solve our climate crisis – than to destroy it.
Despite the pro-fossil fuel stance from the current White House administration, solar power is here to stay, and a change in White House leadership in 2021 could provide for a more supportive climate for solar power and propel the country toward rapid acceptance and deployment of renewables.
The author, Chris Testa, is a top recruiter focusing on the utility industry. He has an MBA and an engineering degree and has spent 30 years in the utility sector. He currently leads Testa Search Partners, a company headquartered in Atlanta and serving all 50 states. He can be reached at [email protected]