Solar Electricity Options for Utilities

Jan. 1, 2009
Utilities are rapidly moving to embrace large-scale electric solar initiatives to meet regulatory and consumer needs with utility ownership becoming the latest trend.

As the Number of Photovoltaic Projects Continues to Climb, U.S. electric utilities are becoming increasingly engaged with grid-connected solar electric. Utilities have traditionally operated as solar facilitators, integrating customer-developed projects, but over the last year, companies have embraced value-added entrepreneurial projects. Utilities are now providing solar-specific solutions to regulatory, customer and/or internal business needs.

Several thousand megawatts of centralized and distributed photovoltaic (PV) and concentrating solar thermal electric projects have been announced. Based on these announcements and discussions with utility executives, the Solar Electric Power Association anticipates that utilities will quickly become the largest and one of the most important customers for the solar industry.


Solar technology provides a wide variety of options for electric utilities, both for distributed generation and central station power plants.


Photovoltaics are the most commonly deployed type of solar electric technology, consisting of either crystalline-silicon or thin-film panels. Crystalline-silicon panels represent the majority of the market. Over time, the efficiency of this technology is showing incremental improvements, with the current range between 15% and 22%. Over the past few years, thin-film solar panels have quickly increased their share of the market to more than 10%. While their efficiencies are significantly lower — between 7% and 10% — the cost to manufacture thin-film panels is far less, making the cost per kilowatt hour on par with crystalline silicon panels.

Photovoltaics historically have been used for rooftop and relatively small ground-mounted systems. But in the past year, utilities across the United States have announced plans for large PV plants totaling more than 1.6 GW. The largest of these announcements came from Pacific Gas and Electric, which will purchase the electricity from two separate 550-MW and 250-MW PV power plants to be built in the next three to four years.

Concentrating Solar Thermal Electric

Concentrating solar thermal electric technologies have gained significant momentum in the past five years, with plants totaling about 4 GW currently in the works. This type of solar technology includes parabolic trough systems, power towers, compact linear Fresnel and dish systems, which concentrate the thermal energy of the sun to drive a conventional steam turbine. Advancements with molten salt storage are providing utilities with the opportunity to firm this traditionally intermittent resource, potentially mirroring the performance of an intermediate natural gas plant.


As utilities begin to recognize the need to incorporate significantly more solar electricity into their resource mix, a number of existing and new business models are emerging.

Power Purchase Agreements

Utility purchases of solar electricity through traditional long-term power purchase agreements is the most common procurement method for large-scale plants. Arizona Public Service announced the 280-MW Solana parabolic trough plant in 2008, which will include six hours of thermal storage. The Sacramento Municipal Utility District provides another example, but on a smaller scale. SMUD is developing a pilot 1-MW community solar system, using an RFP process to sign a 20-year power purchase agreement with a third-party solar developer. The utility will then resell the power to customers around its service territory. The customers will buy blocks of power at a long-term fixed monthly price that offsets their retail consumption, that is, remote net metering. Customers, who may not have been interested in owning their own PV system, gain a long-term fixed price that offsets a portion of their consumption, the contract for which is portable within SMUD's footprint. SMUD estimates that this program is cheaper per kilowatt than a traditional rebate program.

Utility Ownership

Utility ownership of solar electric plants is the newest trend in the industry. SEPA expects this trend to increase dramatically in the near future, since the federal investment tax credit can be used by utilities starting in 2009. One prominent example of utility ownership is the emergence of the distributed power plant. Last year, Southern California Edison, and later Duke Energy and San Diego Gas & Electric, announced 250 MW, 10 MW and 52 MW respectively of distributed, utility-owned PV facilities located on leased customer rooftops and open space. Each project feeds the solar electricity into the distribution grid and will earn a rate of return on the capital investment. The systems will have higher peak capacity values than any one individual installation of a similar size due to more diverse geographic placement.

Julia Hamm ([email protected]) is the executive director of the Solar Electric Power Association. Her career has focused on developing tools to communicate the value of renewable energy and energy efficiency to electric utilities, municipal governments and product manufacturers.

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