Solar’s Growth Is Going South… And That’s A Good Thing
By Alex Kim
Thirty years ago, when the price of oil plummeted in Texas, it took the state’s economy down with it. But Texas prepared itself for the next oil price drop by diversifying its energy portfolio to include solar and wind. And when the price of oil fell sharply last year and analysts predicted a recession, Texas proved them wrong.
In the heart of oil and gas country, Texas solar is booming, powered by cities such as San Antonio, which ranked seventh across the U.S. for solar adoption, and which is helping position the state’s solar industry to expand into neighboring Mexico and the greater Latin American region.
Impressively, last year, $372 million was invested on solar installations in Texas, a 48% increase over 2014. The state ranked sixth in the U.S. in fourth quarter 2015 solar installations, and strong growth in solar is expected again this year.
How much potential is there for solar power in Texas? A recent study by the Electric Reliability Council of Texas (ERCOT) predicted that Texas will add 14 to 27 gigawatts of solar capacity in the next 15 years, with the Lone Star state second only to California in terms of installed solar power capacity due to technological innovations, cost reductions and vertical integration undertaken by my company, Mission Solar Energy (MSE) and Texas’ 499 other solar related companies.
Earlier this month, the Solar Energy Industries Association recognized Texas’ potential as a solar powerhouse when it convened almost 300 executives here for the first Solar Power Southwest conference.
However, solar power isn’t just booming in Texas and the Southwest but across Latin America as well.
According to GTM Research, supportive policies and “rising power demand, high electricity prices and exposure to volatile fuel prices” are contributing to Latin America’s role as “one of the fastest-growing solar markets worldwide.” These factors contributed to a 280 percent increase in solar installations in the region between 2014 and 2015.
GTM Research further forecast rapid solar power growth of 521 percent this year in Mexico, with the market for solar potentially rising to 4 gigawatts to 6 gigawatts each year by 2030. Among the factors driving this growth are Mexico’s recent energy reform and high goals for renewables – 35 percent by 2024 and 45 percent by 2036, relatively inexpensive labor costs and a great deal of sunshine.
Northern Mexico, for instance – located only a few hours from MSE’s 200-megawatt solar module factory – has some of the best radiance in the world, helping make it an ideal region for solar development.
Mexico represents a major business opportunity for Texas-based solar companies like MSE. Consider that four of the seven solar providers that won the country’s first clean energy auction there have headquarters in the U.S. These companies, and others with ties to our southern neighbors, are primed to take advantage of solar’s growth in Latin America.
A prime example of how this can work came earlier this month, when MSE, along with other area renewable energy companies and San Antonio’s municipal utility CPS Energy, welcomed businesses and dignitaries from Mexico interested in learning from San Antonio’s model of integrating cleaner energy. The event included a tour of MSE’s manufacturing facility.
No doubt, the future for solar power in Texas, and its expansion into Mexico and other Latin American countries, looks highly promising. However, there are some important points to consider before we see this bright future become a reality.
First, we need to provide adequate connections from where solar power is produced to where it’s consumed. Currently, Texas’ power transmission lines are reaching capacity, and that could become a hurdle to solar’s growth here. Developing ways to connect power generation sites in West Texas to consumers in major metropolitan areas will be key to continued utility solar growth, while removing barriers to net metering and developing creative payback structures for solar will be important to the expansion of residential solar.
For its part, Mexico will need to address impediments to reach its solar growth potential. Those factors include: depreciation of the peso in relation to the U.S. dollar; a 15 percent import tax on PV panels; and variable industrial and residential electricity, including subsidies creating unnaturally low rates in the country.
In addition, taking a closer look at the clean energy auction in Mexico, the winning projects went for very low Power Purchase Agreement prices. That, in turn, will push down solar module prices. In short, the competition is cutthroat and possibly not reflective of the real costs of business.
It has yet to be seen whether the extremely low prices for solar power in Mexico will make sense economically for companies like MSE. Like many other manufacturers and developers, my company is waiting to see how the Mexican solar power market develops in its very early stages. As projects begin to be built and new policies are implemented, our proximity to Mexico will allow us to keep a close eye on that market as it develops and to participate in a manner and at a time that we see fitting.
Our hope is that these potential hiccups can be addressed with supportive policies and regulations on both sides, a growing market across the border and what Bloomberg New Energy Finance described as “a fundamental transformation of the world electricity system over coming decades towards renewable sources such as wind and solar.” If they are, we believe that the potential for Texas’ solar industry to help our state, Mexico and the broader Latin American region meet most of their clean energy needs, is enormous.
Alex Kim is the CEO of Mission Solar Energy.
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