Solar Land Grab

With Swiss clock precision, the U.S. Energy Information Agency (EIA) issues at the end of each month a measure of energy supply and demand.  The June 2017 issue carried a worrying message, at least for nuclear power.  The nukes are no longer the dominant power source after fossil fuels.  Summed together the renewable sources -  biomass, geothermal, hydropower and solar  -  are now providing 20.05% or virtually as much power as nuclear generation plants at 20.07% of the U.S. electricity generation. 

The steady advance of renewable power sources, especially solar power, is a bitter pill for players in the nuclear power.   Industry representatives promote nuclear as more reliable than solar power generators that only produce power during daytime hours and are dependent upon weather conditions.  Yet in 2016, according to the Solar Energy Industries Association (SEIA), 14,626 megawatts of solar power were installed, setting another record and making solar the primary source of new electric power capacity in the year.  Indeed, solar power represented 39% of added power in 2016, compared to 29% from new natural gas and 26% from added wind.  Nuclear is lumped into all other source that together represented 6% of new power sources added in 2016.

The total solar power installed in 2016 was comparable to power from three average nuclear power plants.  Expressed another way, in one year solar power additions were equivalent to what the nuclear power industry requires six to seven years to build. 

Nuclear power engineers are fond of picking on solar as an inadequate power source, making snarky remarks about the limits of rooftops in the country.  A serious answer to the question is critical for investors considering meaningful stakes in solar going forward.  In 2016, utility-scale solar power installations exceeded residential installations for the first time in five years with 2,583 megawatts installed during the year.  Demand for solar power modules for utility applications could be a significant growth driver for solar.   However, utilities do not need rooftops.  They need land and lots of it.

Could solar really be a viable source for the majority of the U.S. electricity needs?

The National Renewable Energy Laboratory (NREL) has perhaps the most authoritative estimate of land required for utility-scale solar power plants.  Their survey completed in 2013, found that solar power plants at the time averaged on a capacity-weighted basis 8.9 acres per megawatt.  However, solar power technology is rapidly improving.  More recent work suggests about 4.0 acres are needed for one megawatt power generation capacity. 

The Four Acres-to-One Megawatt rule of thumb might be too simplistic.  Solar modules based on thin film technology probably require as much as 30% more space than a plant relying on crystalline modules.  Thus a crystalline module plant probably needs between 4.0 acres and 5.0 acres to set up one megawatt of power generation capacity and a thin film plant about 6.5 to 7.5 acres.  The use of tracking equipment requires extra space, but the increased power production that results from tracking the sun’s movement actually decreases the land use requirement per megawatt.

From all fuel types and technologies, the U.S. produces about 11.0 billion kilowatts of electricity per day.  Expressed in terms of megawatts this would be 11.0 million megawatts.  To switch all that power to solar sources would require about 88 million acres of land, using the high end of the NREL estimates and then rounding up for conservatism.  This is about 3.8% of the 2.3 billion acres in the U.S. 

While that might seem like a very small portion of the country, it is important to remember that large areas of our country are just flat out not suitable for utility-scale solar power generation.  For example, Alaska will never be known as a sunny clime.  Excluding the 375 million acres in Alaska that is probably not suitable for solar installations, the acreage requirement for solar represents about 4.4% of the rest of the country’s total land space.  You can continue throughout all states, eliminating low-sunlight places, inaccessible locations or land already spoken for other uses.

There is certain plots of land the federal government would like to put up for a solar land grab. The U.S. Environmental Protection Agency tracks contaminated land and mining sites across the country comprising about 13 million acres.  This is of course not enough acres to support the conversion of the country to full solar power generation.  There are also issues of transmission distance and storage.  The EPA estimates that its tracked acreage of fouled land suitable for solar could support about 919,600 megawatts of power production.  Thus contaminated lands that no one else wants could support solar power generation of about 8.3% of the country’s total electricity requirement. 

Exelon Solar City, Chicago

Brownfields are probably not where the solar industry looks first for land.  Yet there are notable projects.  Exelon (EXC:  NYSE) operates the largest urban solar plant in the U.S. on an abandoned industrial site in Chicago.  Kokomo Solar Park delivers 7 megawatts of solar power from a manufacturing site in Indiana where the soil was once laced with lead, solvents and PCBs.  National Grid Plc (NGG:  NYSE) is cooperating with Olean Gateway LLC to deliver 4 megawatts of solar power from a brownfield site that was once home to an oil refinery and fertilizer plant.

The solar power industry appears on the brink of a new period of significant growth from utility-scale projects.  Some might have been worried that the necessary land requirement might not be feasible or fair.  However, with efficiency advances and some creative thinking the solar land grab might be more acceptable than previously thought.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.