Navigant Research Blog

For the First Time, Solar Surpasses Wind

— June 20, 2017

2016 was a record year for solar with 76.6 GW installed—50% year-over-year growth from the 51.2 GW installed the year before. This brings solar to over 300 GW installed globally, just after exceeding the 200 GW mark in 2015, according to SolarPower Europe. This is great news for the broader renewables industries and for anyone concerned about climate change. However, it may raise some concerns within the wind energy industry, which for many years has vastly exceeded the installation rates of solar.

Since wind installed 54.3 GW (cumulative wind capacity stands at 484 GW), 2016 marks a turning point: the first time solar has exceeded wind energy’s annual installation rates. Solar only recently has been considered a serious competitor to wind, as solar PV module prices have fallen and installation rates have skyrocketed. This has led some notable developers (such as US-based Pattern Energy and Tri Global) to diversify from wind into solar, and turbine manufacturers Gamesa (now Siemens Gamesa Renewable Energy [SGRE]) and Suzlon to diversify into solar. SGRE landed a deal to build 130 GW of solar projects in India using inverters manufactured by Gamesa from factory capacity previously intended only for wind turbine power converters. Pattern is involved in a number of solar projects, including its first solar foray with 120 MW in Chile.

Wind continues to attack costs. It has decreased its cost of energy by 66% over the past 7 years (while solar decreased 85%), and its higher capacity factor of around 40% versus solar means wind will continue to maintain an edge in total megawatt-hours produced with the same nameplate capacity as solar. However, there are some key detractions to wind power that can’t easily be overcome. Two major impediments stand out: resource constraints and aesthetic impact.

Resource Constraints

Wind power is increasingly cost competitive in areas where there are good wind resources. In the United States, for example, the clear majority of wind capacity is installed in the vast central interior corridor spanning through Texas, Kansas, Oklahoma, Colorado, Iowa, Nebraska, Iowa, Minnesota, and the Dakotas. The consistent, low turbulence wind makes new wind plants cheaper than fossil fuel generation in those parts of the country.

While some of those states boast significant populations, the majority of the US population is located along the coasts where much less wind power is being developed because the resources are not as good (except for offshore—an entirely different topic). Solar doesn’t have the same challenge, as areas with strong solar resources are more likely to be colocated with population centers.

The Aesthetic Challenge

Wind turbines have increased their efficiency by evolving taller towers and longer blades. While this results in fewer turbines needed at a given project, it still results in a major visual change to the horizon. There are many people around the world that do not welcome such obstructions. Solar is arguably less visually obtrusive, as it takes up space on roofs in the residential setting or large fields in commercial settings.

Wind development has largely plateaued and global installations above 50 GW are expected annually for the next 10 years. Whether solar will begin to consistently eclipse those figures as it maximizes its core strengths is the big question.

Best of Both Worlds?

Regardless, one factor that will help the two technologies remain (to some degree) complementary instead of direct competitors is the different and complementary resource profiles. In most parts of the world, sunny months tend to be less windy and windy months tend to be less sunny. Analysis by the Fraunhofer Institute of Germany’s grid shows greater value and system stability with both wind and solar operating versus only one of the two technologies operating.

 

Utility Programs May Be Doing More than We Give Them Credit For

— February 24, 2016

light bulbsMany utilities run programs that incentivize their customers to buy increasingly efficient devices, with the ultimate goal of making these efficient devices the new normal. These programs are often accompanied by marketing campaigns to educate the public about the new technology and encourage people to adopt it. The long-term strategy is that this combination of incentives and messaging makes customers more comfortable with new technology, eventually leading them to purchase it regardless of whether or not it is still being incentivized by the utility. Making this change to the norm is called market transformation.

The accounting that goes into determining how much savings utilities can claim for this market transformation process is tricky. Let’s use lightbulbs as an example. Utilities are supposed to be able to claim credit for purchases of efficient lightbulbs that their programs are responsible for influencing. While it’s easy to count how many lightbulbs the program incentivizes each year, calculating how many efficient lightbulb purchases the program influenced is not that simple.

Determining Influence

First off, there are people who bought incentivized lightbulbs but who would have still bought the more efficient lightbulbs even if the program didn’t exist. These customers are known as free riders and shouldn’t be counted; the number of free riders in a program is often estimated and subtracted from program sales.

There are also people who may have received one efficient lightbulb in a kit and decided to purchase a few more without getting the incentivized price. These extra purchases are called program participant spillover. Beyond that, there are people who learn about the benefits of the new technology—from program advertising, retailers stocking more of the efficient technology on their shelves, and price reductions from increased sales volumes—and purchase it without the incentivized price; this is called non-participant spillover. “Market effects” is the term used to describe these spillover purchases and others that aren’t counted because they are very difficult to estimate; however, the utility should get credit for influencing these purchases.

Navigant’s Market Transformation Model endeavors to measure the full impact of utility programs by forecasting what would have happened in the market without the program and comparing this to actual market activity. The Market Model has been used to estimate the market effects of lighting programs in both the residential and commercial sectors. In Michigan, the model was able to show that utility programs were making a larger impact on the market than just the number of lightbulbs being incentivized. By correctly attributing market effects beyond the sales incentivized by programs, we can give utilities the credit they deserve and better support them in spurring the shift to more efficient lightbulbs and other devices.

 

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