Keynote by Jeff Wolfe, Solar Business Festival 2016, Austin, TX
Good morning. Thank you for inviting me, it is a real pleasure to be here with you. I’ve only got 10 minutes to predict the future, so that means I don’t have enough time to get very much wrong.
I had my entire speech written, then we had an election. Actually, not true. I didn’t have my remarks written before the election, but it would not have mattered. Because solar energy is not only here to stay regardless of politics, solar energy is now shaping politics because every politician I know likes jobs. Nationally solar created 1 out of every 33 new jobs last year. The 7500 people working in solar in Texas today is a larger number than the number of people who operate the coal fired power plants in Texas. That means that almost everyone knows someone who works in the solar industry, and almost every Congressman has someone in their district who works in solar. Its personal now, and its votes. And all that means the future of solar is bright.
Right now, Texas coal-fired power plants burn a lot of Wyoming coal. I say we should bring those mining jobs back to Texas and turn them into sun miners instead of coal miners, and shut those coal plants down. And by the way, ERCOT agrees that the coal plants will be shut down by 2030 or earlier, and replaced with solar plants. The only thing ERCOT got wrong is the speed of price reduction in solar, which will make coal uneconomical sooner. No government agency has ever accurately predicted how fast the price of solar will decline, we always beat the projections.
I got into the solar industry in 1998, and sold systems for $18/watt, cash up front. (That’s when I learned how to be a good salesperson!) Now we’re at 20% of that for an expensive residential system, and 6% of that for utility projects, and solar is the cheapest new power Texas can construct, even if natural gas is basically free.
So, the sky is literally the limit, right? Maybe, but there are some dark clouds.
First, the biggest enemy of solar is … solar. We succeed faster than anyone can imagine, and that causes failure. When we install more solar faster than dreamed in Texas, guess what,
- We will have the duck curve flying in. Except it will be the Texas State bird, the Northern Mockingbird which will mock our success.
- We will have increasing interconnection queues for utility projects, and as residential takes off, we will get increasingly long lines for utility approvals. You can say ‘not in Texas’, but it has happened in every other state. And yes, traditional power sources will be behind the push to “insure grid safety”, their code for obstructionism.
- We will run into transmission and distribution capacity constraints. Start supporting new T&D now.
The second biggest enemy of solar is the biggest industry in the world, the fossil fuel industry. Yes, they sometimes play nice, and they can be great partners at times, for a while, but make no mistake, the industry as a whole does not want solar to succeed as anything more than a small percentage of our power supply. This has nothing to do with climate change or denial, solar is simply a competing energy source, and the fossil industry does not want to give up market share. Whereas we see a future where 100% of energy is provided by wind, water, and sun, they see a future with carbon capture and storage. I don’t dislike carbon capture and storage. But that will be the far more expensive solution, and we have never developed or deployed CCS at scale. But regardless, the fossil industry will use their muscles to create problems, obstructions, cost impacts, and restrictions, as they have in every other solar state.
You will see:
- Astroturf opponents (folks who look like grassroots but are funded by outside interests) will delay projects and increase costs.
- More regulation will be created, even in Texas, as our opponents seek to maintain their less competitive industries.
o (This is also why we need a strong residential solar industry, to help build real grassroots support for ALL solar.)
- NO net metering, but the good news, no big net metering battle. We’ll sell lots of solar without that
So what are the key megatrends for the solar industry in Texas over the next five years?
First, we will not be the solar industry. Minimally, we will simply be a part of the energy industry. When there are no special subsidies for solar, and SRECs have almost no value, as is the situation in much of Texas, we are simply competing in the electric industry. That goes for utility scale and residential scale. Yes, people will pay more for power, they already pay more on some plans than others, and a good salesperson sells value, not price. But we will be able to compete on both value and price moving forward. This will make us stronger, and as we hit ever decreasing price points the addressable market becomes almost unlimited.
Second, we’ll be in the “Solar Plus” business instead of the solar business. Utility solar alone will not provide sufficient value on the ERCOT system, we’ll need to add ancillary services (which will be valued by ERCOT at some point, there is a rule-making we need to be involved in.)
Solar alone will not capture enough benefit for residential customers outside of the 100,000 early adopters. To reach our first million residential customers we’ll need energy storage, smart homes, and conservation all rolled into an “eHome” which will include all the services and various energy sources provided, all wrapped into one monthly bill. Residential is all about service and price, in that order. More services allows for increased price.
As the duck curve, or perhaps Mockingbird curve appears, existing fossil-fueled power plant operational hours will be reduced, cutting profitability of those plants while also increasing fixed costs per MWH generated. The effect of this will be to make solar plus storage cost competitive first against natural gas peakers, then against coal, then against natural gas combined cycle plants.
Last, but by no means least, is climate change. Of course, you all know that climate change is not really the problem. The problem is, political statements aside, we know what causes climate change, but we fail to stop it, we keep on releasing increasing amounts of CO2. But the Paris Agreement will create action, and it will create action to reduce CO2 emission in the US despite our death-wish politicians because business is taking the lead. The number of multinational business leaders who have committed to strong carbon reduction goals is growing weekly. Look at the website WeMeanBusinessCoalition.org for one of the lists. And these companies are also pushing their requirements down into their supply chains. When you have a Ford dealership in central Texas install solar because they want to project a green image, you are witnessing a sea-change in business, marketing, and therefore customer desire.
When I got into solar in 1998, I had a revolutionary idea, and that was to sell solar like Ford sells trucks, with sex and sizzle, instead of the guilt trip ‘you should do this’ which everyone else was using. Now, in 2016, Ford is selling trucks like some people sell solar, with an environmental message and action.
So here are my predictions for 2021, five years from now:
- Solar will regularly be contracted at $25/MWH for 10 – 15 year PPAs. That’s two and a half cents per kWh. (Yes, I know the ITC will be expired by then)
- Energy from storage will be available at less than $50/MWH in 500 kWh blocks, and cheaper for larger systems
- The cost to serve an integrated residential customer with solar plus storage and other services will be similar to the cost to serve that customer with similar services from the traditional supply.
- Residential and commercial customers who do not want to or cannot install solar at their facilities will be able to lock in 5 to 15 year power agreements at fixed rates with 100% renewables at competitive pricing.
- Texas will be the largest solar market in the US, installing over 5GW per year, with close to 100,000 workers
Solar has already won the war by 2021. But there will be lots of battles between now and then. Texas is the Lone Star state, let’s use the sun, our lone star, to power it.