By Patrice ‘Pete’ Parsons, TXSES Executive Director
Until Hurricane Beryl, the biggest news in Texas energy this summer had stemmed from ERCOT Chief Executive Officer Pablo Vegas’s mid-June announcement to state legislators that demand for power in the ERCOT regions of Texas could nearly double by 2030—a number much higher than previously estimated. The news stunned the Senate Business and Commerce Committee he was presenting to and led to much speculation about why this was the first they had heard about it.
Mr. Vegas had already shared these numbers at ERCOT’s May Summit, however, which I had attended, and where he also dropped the bombshell that Texas is facing a $13.9bn price tag to add enough transmission capability to keep up with our overall power needs over the next ten years.
Summer net peak demand is expected to grow from its current 82 GW to about 163 GW by 2030 due to an increase in large power users coming online, such as data centers, crypto mining, electrification, and hydrogen production. This is approximately 40GW more than last year’s estimate. The bump is the result of a new law passed in the last legislative session requiring ERCOT to include companies’ grid connection requests before they are finalized, whereas before they were not allowed to be included.
Before Mr. Vegas’ announcement, I had joined with colleagues at Solar United Neighbors and Public Citizen to form the Texans for Local Energy Freedom Coalition and explore possible solutions for utilities to reimburse rooftop solar owners and offset the cost of solar being fed back into the grid. The coalition determined the need first for a study that would define the true costs and value of solar per kilowatt hour in ERCOT regions in order to prove we had the correct market signals for those that either already have solar or those considering adding rooftop solar.
We are proud to share that the Value of Residential Solar in Texas report was released this past week, on Tuesday, July 16th. TXSES was able to secure a grant from the Cynthia and George Mitchell Foundation and commission Dunsky Energy to prepare the study. The release was accompanied by an online press conference (click to see recorded video) and press release. You can read the full report on our website: Value of Residential Solar in Texas.
Value of Rooftop Solar Findings
The report points out that if “generation and transmission buildout does not keep up with the pace and magnitude needed to support the anticipated increase in electric demand, ERCOT could face a significant capacity shortfall and a threat to its system reliability.” Adding that, “Distributed Energy Resources (DERs), such as rooftop solar, will play a crucial role in meeting emerging system needs and can alleviate constraints on the generation and transmission system.”
Among the report’s important conclusions, it found that energy supplied by rooftop solar in Texas is much more valuable than the average kilowatt-hour sent to the ERCOT grid by other means. It notes that ERCOT’s total installed rooftop solar capacity is currently at less than 3% of its potential capacity, and that “this is primarily due to inconsistent solar compensation policies among non-competitive utilities,” which send the wrong market price signal to homeowners. “Utilities must provide fair compensation for the full electric system benefits these systems offer the grid to ensure that rooftop solar PV continues to contribute to system reliability.”
The report’s key findings:
- Solar offers substantial benefits to Texas’s grid: With the anticipated increase in electric demand, Texas needs all available generation and demand response tools. Even with the forecasted rise of rooftop solar, a significant amount of additional energy will need to be generated. Rooftop solar will alleviate some of the burden on the utilities and the state by reducing the additional infrastructure needed. The analysis found that in 2025, the overall value of solar in ERCOT will be about 27¢/kWh. About 55% of the total value (15¢/kWh) is realized in the generation, transmission, and distribution system, while the remaining 45% (12¢/kWh) is realized through air pollutant and emission reduction benefits.
- Among the grid benefits, the largest component is avoided energy costs (9¢/kWh), followed by (ii) wholesale price suppression benefits (1¢/kWh). These savings are substantial because solar panels generate energy at times when wholesale energy prices tend to be high.
- In 2025, the benefits from reducing greenhouse gas pollution (10¢/kWh) make up 90% of the overall public benefits, followed by benefits from reducing air pollutants that are harmful to human health (2¢/kWh). However, this value is expected to decrease significantly over time as the overall energy supply in ERCOT becomes cleaner.
- The current export credits may not accurately reflect the value of solar: Retail Electricity Providers offer a wide range of export credits for customers with solar, ranging from 3¢/kWh up to 19¢/kWh. This disparity exists because utilities have different ways of evaluating the grid benefits of solar. 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. As a result, these export credits may not accurately reflect the full value that solar provides to the system.
- Solar PV provides several intangible benefits: In addition to the values listed above, distributed solar provides significant benefits to the Lone Star State.
- Job and Local Economic Impacts: Distributed solar can stimulate local economies by providing employment opportunities. Construction of one MW of residential solar could result in 12 to 20 full-time equivalent direct jobs that year. In addition, solar can bring stable and predictable revenue streams to communities through employee wages and the local supply chain involved in installing and maintaining solar PV systems.
- Poverty Alleviation and Energy Equity: Solar energy addresses environmental justice concerns and can promote poverty alleviation and energy equity through electricity bill savings and buffer against price volatility.