Rooftop

Texas’ energy demand is growing – more rooftop solar could help

Texas’ energy demand is growing – more rooftop solar could help
(Photo by Joe DelNero /NREL)

Texas’ energy demand is anticipated to keep growing, and if generation and transmission buildout doesn’t keep up, the state could face a capacity shortfall that threatens system reliability. A new study released by the Texans for Local Energy Freedom Coalition, The Value of Residential Solar in Texas, argues the state is not fully taking advantage of its rooftop solar potential, and changing course could mitigate some of the capacity shortfall.

The report, commissioned by the Texas Solar Energy Society (TXSES), argues that the overall value of distributed solar in ERCOT will be about 27¢/kWh, with 15¢/kWh realized in the generation, transmission, and distribution system and 12¢/kWh realized through air pollutant and emission reduction benefits.

“As Texas grows and the demand for electricity increases, our analysis demonstrates the value that customer-sited solar brings to Texas.” said Anirudh Kshemendranath, a Senior Consultant with Dunsky Energy + Climate Advisors, the firm commissioned by TXSES for the study. “Customer-sited solar has the potential to alleviate grid constraints and reduce costs for all ratepayers and if valued correctly, can be an important tool to support energy reliability and affordability for all Texans.” 

The Electric Reliability Council of Texas (ERCOT) expects the summer net peak demand to grow from 82 GW today to about 90 GW by 2030. Furthermore, the anticipated influx of large power consumers such as data centers, crypto mining, hydrogen production, as well as the electrification of buildings, transportation and industry, could drive the system’s peak demand to 163 GW by the end of this decade.

Distributed energy resources (DERs) like rooftop solar could help meet that growing demand, but total installed rooftop solar capacity in ERCOT territory is less than 3% of its technical potential, according to a new report from Dunsky. Inconsistent compensation policies among non-competitive utilities are seen as a barrier to rooftop solar reaching its full potential, the report said. Additionally, the report argues there is an opportunity for utilities to revise and align compensation mechanisms that consider the full benefit that solar PV can contribute to the grid and system reliability.

Among rooftop solar’s grid benefits, the largest component is avoided energy costs (9¢/kWh), the report said, followed by wholesale price suppression benefits (1¢/kWh). The report also argued that Texas’ current export credits may not accurately reflect the value of solar.

In their solar buyback plans, non-competitive utilities in Texas offer a range of export credits (from 3 ¢/kWh up to 19 ¢/kWh). This disparity in compensation exists because the utilities have different ways of evaluating the grid benefits from solar, the report said. Typically, utilities do not consider solar’s additional benefits to the wholesale market, such as avoided risk premium costs, ancillary costs, and price suppression benefits, as well as its benefits to the T&D system in the form of avoided transmission and distribution capacity costs.

Solar also provides intangible benefits that can be difficult to quantify, such as stimulating local economies through jobs and predictable revenue streams, providing energy equity through bill savings, or acting as a buffer against price volatility.

“If state leaders are serious about keeping the grid stable and affordable, it’s time for them to step in and adopt statewide policies to ensure fair compensation for homeowners and businesses that supply energy from solar installations to the distribution grid,” said Alison Silverstein, a former advisor for the Public Utilities Commission of Texas. “This state had a deadly power outage during Winter Storm Uri and several close calls that we will continue to have for the foreseeable future. Rooftop solar is a key part of avoiding an energy crisis. We just need some regulatory certainty coming from Austin.”

Another report released in February argues that Texas electric utility policies for residential solar have made investments in the technology less financially viable.

The report, Eclipsing Progress: The State of Solar Rates and Fees at Monopoly Electric Utilities in Texas, examined 141 noncompetitive Texas electric utilities and their policies for customer-sited solar – solar systems installed where the electric utility customer lives – and compared the bill savings to the cost of purchasing and installing a home solar system.

In most cases, the report found, ratepayers who take out loans to purchase and install a home solar system would take longer than 15 years to make their money back. Furthermore, even those who pay in cash on day one and bypass financing could wait up to 10 years to recover their costs.

In addition to the costs of the panels themselves, ratepayers with customer-sited solar are subject to fees and other policies, varying by utility, the report concluded. While these ratepayers can also be compensated for supplying excess solar energy to the grid, the mixture of fees and low compensation has made the investment unfeasible for “most” ratepayers.

Most of the utilities analyzed for the report don’t offer net metering, or compensation for excess solar sent to the grid at the same rate the customer purchases it. The average compensation rate utilities pay customers for excess solar-generated energy is only 43% of what the same utility charges for the energy it sells to all its customers, including those with customer-sited solar.

The report also found that the average monthly payments on 10 and 15-year loans to purchase a solar system are higher than the average monthly energy savings at most of the analyzed utilities.