With continued deployment of solar across the United States, assessing the interactions of solar with the power system is an increasingly important complement to studies tracking the cost and performance of solar plants. This project focuses on the historical contribution to reliability, trends in market value, and impacts on the bulk power system of solar deployed in the U.S. through the end of 2020.
The scope of this analysis includes the seven organized U.S. wholesale power markets and is based on historical hourly solar generation profiles for each individual plant larger than 1 MW or county-level aggregate profiles for smaller solar. In addition, we present a limited set of results for ten utilities that are outside of the independent system operator (ISO)/regional transmission organization (RTO) markets.
- Solar Generation: Solar deployment in the California Independent System Operator (CAISO), where solar generation was equivalent to 21.2% of annual load in 2020, far exceeds the level in other ISOs. The New England Independent System Operator (ISO-NE) has the second-highest penetration, with solar generation equivalent to 5.2% of annual load in 2020. All other ISOs have annual solar generation shares at or below 3%.
- Reliability Contribution: Solar’s contribution to the overall resource adequacy of the power system is measured by its “capacity credit”. While calculation methods vary across ISO/RTOs, summer capacity credits for solar in 2020 range from 39 to 80% of a system’s nameplate capacity. Capacity credits have remained largely stable over the past years except in CAISO where solar’s capacity credit steeply declined in 2018.
- Market Value: The market value of solar, defined here as the sum of the energy and capacity values, primarily varies across regions and years because of variations in average energy prices and capacity market prices. The energy value, based on the hourly solar generation and real-time power prices at pricing nodes near each solar plant, is the largest component of the market value across ISOs. In 2020, the average energy value spanned from $21/MWh in CAISO to $24/MWh in SPP. The capacity value of solar is based on the capacity credit of solar and the capacity price. The capacity value in 2020 was highest in the Southwest Power Pool (SPP; $26/MWh), though capacity prices there are based on estimates of bilateral capacity transactions rather than transparent organized capacity market prices, and lowest in the Midcontinent Independent System Operator (MISO; $2/MWh).
- Market Value Decline: The market value of solar in CAISO declined between 2012 and 2019, both overall and relative to annual average energy and capacity prices. In 2012, solar’s market value in CAISO was 40% higher than the value of a flat block of power (representing the market value of a generator that operates at full nameplate capacity in all hours of the year). By 2020, however, solar’s value was 30% lower than a flat block of power’s value because of a solar-induced shift in the timing of high and low energy prices and a reduction in solar’s capacity credit. In contrast, the market values of solar in regions where solar penetrations were low did not decline relative to average prices.
- Overall Competitiveness: As solar’s market value declined in CAISO, its cost—as measured by levelized power purchase agreement (PPA) prices—declined at a similar pace, thus maintaining solar’s overall competitiveness. Solar was more competitive in SPP and the western non-ISO utilities where the market value in 2020 exceeded the levelized PPA price of contracts signed in 2020. Solar’s wholesale market value in 2020 matched PPA prices in CAISO, ERCOT, PJM, and the southeastern non-ISO utilities. On the other hand, PPA prices in MISO and ISO-NE exceeded solar’s wholesale capacity and energy value. Revenue streams or benefits beyond wholesale market energy and capacity value may help explain continued solar growth across the country.
- System Impact: In CAISO, the net load has shifted to resemble the “duck curve,” with particularly low net load during spring days and high ramps as the sun sets in the evening. Similar patterns emerge in real-time prices, with lower prices during the day and higher prices in the early evening. Ancillary service requirements, particularly regulation reserves, have increased during the day, as have regulation prices. Negative real-time prices during low net load days in the spring suggest growing challenges with providing flexibility. However, broader shifts in the system—including growing participation of western utilities in the Western Energy Imbalance Market and variations in hydropower levels—appear to have mitigated some challenges in 2020 relative to 2017, even with greater solar deployment in 2020. Impacts to the net load shape from solar are similarly evident in a number of non-ISO utilities in the Western U.S., for example Arizona and Nevada. With much less solar deployment in the other ISOs, solar impacts on the bulk power system are much less obvious.
This report focuses on the empirical trends in system impacts, reliability and market value of stand-alone solar in the United States. For the first time, we also assess the reliability contributions and market value of several PV-battery hybrid projects based on empirical dispatch records from 2020. For more information, see Influence of Business Models on PV-Battery Dispatch Decisions and Market Value.