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Utility solar’s record 2014 Q4: More projects, more diversity

By Ryan Edge

The utility-scale solar market, the segment that has led the dramatic growth of solar in the United States over the past few years, continued to expand in the fourth quarter of 2014, according to analysis conducted by the Solar Electric Power Association (SEPA). Beyond newly added solar capacity, we see signs of emerging markets for solar outside California and the Southwest, and some significant changes in the contractual structure of projects.

The final quarter of 2014 saw a record-setting 54 projects completed, a 46 percent increase over the 37 projects completed in the same quarter the year before. Total solar capacity completed in Q4 of 2014  hit 1,617 megawatts (MW), a 39-percent increase over the 1,183 MW delivered in the fourth quarter of 2013.

Q4 is also notable for the growing diversity we are seeing in the market for utility-scale plants of 5 MW or greater. Among this quarter’s completed projects are photovoltaic (PV) and concentrating  solar power (CSP) technologies, utility-owned and systems with power purchase agreements (PPAs), non-utility PPA offtakers and merchant power plants.

The record for largest solar power plant in the world was set not once but twice in Q4, with the commissioning of the final phases of the Topaz and Desert Sunlight projects in southern California — both rated at 550 MW.

Continuing growth includes Midwest and East Coast states

Beyond completed projects, data from this quarter revealed a swell in projects under construction and new project announcements. Both categories have varied widely since SEPA began tracking the utility-scale market om 2011. This quarter, projects totaling 1,670 MW were announced, the highest since Q4 2012, when project announcements hit 1,700 MW.

How does 2014 Q4 compare with Q3? Read Ryan Edge’s analysis here.

Capacity under construction exploded to the highest level ever recorded —2,897 MW — more than double the second highest quarter, 1,433 MW in Q3 2011. (See Figure 1.)

Figure 1. Quarterly Utility-Scale Solar Project Activity

Of the 54 projects completed in Q4, California accounted for 20, closely followed by North Carolina with 18 new projects online. Tennessee was the newcomer on the list with Dominion Energy building two projects totalling 32 MW for the Tennessee Valley Authority. The Midwest was also represented by projects completed in Indiana and Missouri.

In capacity terms, California led with 1,251.1 MW, three-quarters of all new capacity in Q4. North Carolina added 121.37 MW, followed by Nevada with just under 100 MW. (See Table 1.)

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Table 1. Q4 2014 Utility-Scale Solar Project Completions By State

A shift away from PPAs

PPAs still drive the vast majority of utility-scale projects, but evidence from the Q4 data indicates this is starting to weaken. Of the 54 projects completed, 47 had PPA offtakers, including three with multiple offtakers, and three others with non-utility offtakers. Of the remaining seven power plants without PPAs, five are utility-owned and two are unregulated merchant power plants.

California’s three investor-owned utilities were clearly the offtakers of choice in Q4. Pacific Gas & Electric (PG&E) again leads with PPAs for 674.96 MW from nine projects. Southern California Edison (SCE) took the No. 2 spot with 341.8 MW from seven projects, followed by San Diego Gas & Electric with 161.3 MW from three projects. (See Table 2.)

Table 2. Q4 2014 Completed Project PPA Offtakers

Marin Clean Energy (MCE) is a notable offtaker because it is not a typical utility but an organization for community choice aggregation. Consumers in Marin County, parts of Napa County, and the City of Richmond collectively founded MCE for the purpose of pooling their resources and buying clean energy for their communities at competitive prices. Participants choose either 50 percent or 100 percent renewable energy, or they may opt out and resume service from PG&E.

Similar to how MCE signs renewable energy PPAs to serve residential customers, corporations can enter into PPAs for themselves. These non-utility offtakers for large-scale solar projects have been newsworthy examples of corporate America’s commitment to renewable energy and reducing their contributions to climate change.

It’s where utilities talk solar: SEPA’s Utility Solar Conference, April 27-29 in San Diego.  Find out more here.

Recent high profile announcements include First Solar’s partnership with Apple for 130 MW to power a new data center in Arizona and NRG Energy’s partnership with Kaiser Permanente for 70 MW of solar power.

Three similar projects were completed in Q4. The California Department of Water Resources signed a 45-MW PPA with Dominion Resources. The U.S. Army contracted for 14 MW with Tucson Electric Power at Fort Huachuca, Arizona. And on the Las Vegas strip, the Mandalay Bay Hotel and Casino signed a 5-MW PPA with NRG.

Owning versus contracting for power plants has been a utility choice longer than solar power has been a viable option. Both offer advantages and disadvantages. With utility-scale solar power plants, however, the PPA clearly has been the preferred procurement option, but the four utilities and the five projects they own, listed in Table 3, are notable exceptions.

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Table 3. Utility-Owned Solar Plants Completed In Q4 2014

Current phase of CSP construction tapering off

Abengoa completed its 280-MW Mojave Solar Project in southern California in December. It uses parabolic trough CSP technology so it was brought online in a single phase unlike many photovoltaic projects that have come online incrementally.

Only one project remains in the CSP pipeline: Crescent Dunes, SolarReserve’s 110-MW power tower project with molten salt thermal energy storage, now under construction in Tonopah, Nevada. Given the longer development time required for these plants, it is the last projectnone are expected to be built between now and the end of 2016 when the federal Investment Tax Credit is scheduled to expire.

Opting for additional delivered energy over maximum capacity

The Topaz and Desert Sunlight projects are notable for more than their rated sizes of 550 MW. Data for both plants also revealed slight discrepancies in their functional capacities. Desert Sunlight added 66.8 MW in Q4, which brought its total capacity to 563.4 MW, while Topaz added its final 254.6 MW bringing its total capacity to 566.6 MW.

Desert Sunlight and Topaz are both subject to PPAs for 550 MW. The difference in installed versus nameplate capacity results from the inverter loading ratios and the AC derating calculation used by SNL, the provider of the source data used here. By oversizing the module capacity relative to the inverter capacity, the power plants will produce their maximum 550 MW more regularly and for a longer duration. Primarily, arrays are oversized to increase energy production not capacity, which allows the developers to increase the total megawatt-hours sold. More megawatt-hours equates to greater operating revenue from the power plant. (See Figure 2.)

Oversizing graphic.jpg

Figure 2. Effect Of Array Oversizing On Plant Output

In Figure 2, points along the curves are instantaneous power output during an ideal solar production day. The left curve reaches 550 MW only momentarily, but the right curve produces that amount of power for a longer period of time. The area under the curves shaded in blue represents the energy output. The blue area of the right curve is larger than the left curve meaning more energy was generated despite subtracting the small red portion of the curve that would be curtailed by the inverter.

SEPA’s Utility Solar Database — the source for the latest information on utility solar projects. Take a look here.

In conclusion, Q4 2014 saw the completion of the most projects, the most megawatts and the largest projects on record in the U.S. Projects serving new customer classes, merchant power plans and utility-owned projects  provide more evidence that solar is competitive in wholesale markets and more and more moving into the energy mainstream.

Disclaimers: SEPA drew its primary data for this article from SNL Energy and independent sources. SEPA’s quarterly or annual totals may differ from other sources for a variety of reasons. All SEPA megawatts are utility-compatible grid capacity (AC). SEPA’s totals also include only projects 5 MW or greater. Project announcement, construction and completion dates can be interpreted differently and assigned to differing quarters or years.

Ryan Edge is a research analyst with SEPA. He can be reached [email protected].