New trend in generation is “run to the sun”

Natural gas remains the leading fuel for new-build electric generation, with more than 18,000 megawatts MW under construction in the United States, Mullins said at the briefings, which were organized by Industrial Info. Wind power continues to garner a significant share of the new power-generation market: Industrial Info estimates that about 6,000 MW of new wind capacity will kick off in the U.S. this year.

But a "run to the sun" in new-build electric power — for both photovoltaics PV and concentrating solar power CSP — has emerged as a bona fide market trend in some parts of the U.S., Mullins said. Industrial Info is tracking more than 60 utility-scale CSP projects totaling more than 11,000 MW, concentrated mainly in California, Nevada and Arizona, although Mullins expects delays and cancellations to thin the ranks of CSP projects that are actually built.

"We expect growth for CSP to be uneven," Mullins said, noting that the three critical variables for solar construction are financing, power purchase agreements, and the technology itself. In addition, many utility-scale solar projects are in remote locations, so transmission lines will be needed to bring power from those future projects to the grid. And some types of utility-scale solar power require large amounts of land, further complicating project kick-off dates.

Regarding PV, Mullins said that high incentive levels in some European markets led to strong demand-growth in recent years. But that growth has stalled as countries like Spain and Germany have curtailed their financial support for PV. "Europe's pullback is America's gain," he said, noting that sharp declines in PV module prices and generous incentives in some U.S. states have created a "mad dash to solar power."

"This is the year for U.S. utilities to install PV," Mullins said. "Development of PV generation is definitely on the rise, and we expect that market to continue growing." Industrial Info is tracking 30 utility-scale PV projects totaling more than 1,600 MW, with a total investment value TIV of about $8 billion, which are scheduled to kick off this year. An additional 2,000 MW of utility-scale PV-generating capacity is under development in the U.S., with scheduled kickoff dates between 2011 and 2013.

Although he conceded that a market sustained by incentives is inherently unstable, Mullins noted that renewable energy projects must start construction by the end of this year to qualify for the healthy incentives contained in the American Recovery & Reinvestment Act ARRA, the Obama administration's financial stimulus program.

Mullins said that utilities have historically played a minor role in solar development, "but over the last year there has been a major shift in utilities' perspective on solar." Helped along by regulatory mandates and financial incentives, utilities have concluded that solar power should be part of their future energy supply portfolio.

The IIR vice president predicted that large-scale PV generation projects — "central-station sun farms" in the words of one attendee — likely will give way to smaller-scale projects of less than 20 MW, which can be co-located with existing substations, eliminating the need to build new transmission lines. Co-locating PV projects alongside windfarms can offset the intermittency of wind power, and Mullins is seeing some of that as well.

Mullins said that renewable energy will continue to remain a relatively small part of the overall U.S. electricity-generating portfolio. Coal-fired generation will continue to command the largest single slice of that market, with more than 328,000 MW of existing generating capacity. But construction of new coal-fired generating capacity continues to be "in limbo" because of uncertainties about environmental regulation, Mullins said.

Existing coal-fired generators are undergoing significant maintenance and expansion work: Industrial Info is tracking more than $3 billion in major boiler work or turbine-rotor replacements or teardowns.