Ravi Manghani is the head of solar research at Wood Mackenzie, where he focuses on solar-plus-storage, solar integration on the grid, and related power markets issues.
Read our interview to explore emerging solar-plus-storage technologies, regional programs accelerating solar-plus-storage adoption, and more.
Wood Mackenzie (WoodMac) is an international energy and commodities market analytics and consulting firm. Its focus was initially on the oil and energy markets, but the company expanded its power practice to clean technologies with its acquisition of Greentech Media (GTM) in 2015 and MAKE Consulting in 2016. More recently, WoodMac also acquired Genscape.
I joined WoodMac with the GTM Research acquisition and have served as part of the company’s energy transition practice for six years. During my time, I’ve built the storage practice and recently have moved into leading the solar research team. Now, I’m back to my roots leading research on the solar market to focus on emerging trends (including evolving solar business models, solar+storage, and global markets) so audiences can understand how solar fits into the broader grid as an energy resource today and in the future.
Good question! I’ll address this for all three market segments.
Increasingly, residential customers are opting for solar on their rooftops as a way to use clean energy every day. With recent changes to market policies in Hawaii, Massachusetts, New York, and California, there is now more conversation around Time of Use (ToU) charges and solar export tariffs. This is causing more homeowners to think about installing storage for reliable backup power. Discussions on the future of net metering will inspire utility commissions to think proactively about how the grid of the future will be distributed across the country. The role of distributed energy resources with the overall growth of decentralized and digitized technologies will be one to watch.
Commercial & Industrial (C&I)
We are noticing that more companies are joining the RE100 initiative as Fortune 100 to 500 companies identify renewables as the cheapest option for their energy needs. Some companies have announced their commitments and tech giants like Google and Amazon are now the largest procurers of solar.
As more companies are procuring renewables for their own loads—and the costs of solar are becoming competitive with utility and even wholesale market rates—many C&I companies are able to generate energy independently and cause load defection. This was the case with MGM Resorts in Las Vegas and NV Energy. Off-site solar procurement is one of the fastest growing segments today. With more large customers setting their own mandates and procurements, it’s leading us to think more about what will happen when more large and medium C&I customers go solar.
In solar wholesale markets, we’re seeing increasing instances of zero or even negative prices. Beyond today’s numbers, we expect this will be more frequent, and in general there will be higher price volatility. This has caused independent system operators (ISOs) to think about how to design these markets in a way that will provide a reliable grid particularly as we move towards higher decarbonized scenarios.
Looking at solar technologies, we have witnessed a lot of cost improvements on the module side for the past decade or so. These cost improvements have come from gradual but consistent improvements in mostly silicon-based modules. The most exciting part is that we’re nowhere close to seeing a slowdown in efficiency improvements, whether it’s in the form of bifacial modules or more improvements in mono-PERC. Higher efficiency modules have helped reduce balance-of-system costs and will continue to support improvements in overall PV costs.
With energy storage, what excites me most is the future of long-duration storage. There are plenty of emerging technologies that target the 12- to 48-hour requirement for long-duration. Flow batteries are promising as a technology but there’s also opportunity for hydrogen, compressed air, thermal, and emerging electromechanical solutions. To prosper, we will need a wide variety of storage technologies to provide the best solution under individual circumstances.
The most significant innovation we are seeing in the project development landscape is in finance. As more and more projects perform as expected over extended periods of time, traditionally conservative capital sources—which have largely been on the sidelines until recently—have started to recognize that solar can represent a long-term, predictable revenue stream. Access to this patient capital is a key differentiator for developers in the market today. That’s true for developers across the value chain: utility-scale, C&I, and residential.
There are markets that are opening for different reasons. For instance, the California market has faced a lot with the PG&E bankruptcy and wildfires and public safety power shutoffs (PSPS); the topic of decentralized energy solutions has also come up quite a bit. Whether for aggregators or residential customers, solar + storage solutions are being considered more seriously now than ever. That’s why California, the largest renewable energy market in the US, will continue to be an interesting market to watch as it scales to levels we’ve never seen.
If you look to the East Coast, markets like New York, Massachusetts, and Maine have large megawatt goals due to their fairly aggressive renewable targets. Those ambitious climate policies will drive solar + storage growth in the coming decades. Outside of markets with portfolio standards or climate policies, we’re starting to look at states like Texas and Florida as economics expand their markets.
Texas especially has seen a huge spike in its solar project pipeline. This past summer, they’ve been working with a $9,000 MWh price point for a few hours because the power peaks during the summer hours are extreme, and utility-scale solar can support peak capacity due to highly coincident generation profile.
Don’t lose sight of the market. Entrepreneurship 101 will tell you to solve a problem for a market but the trap startups typically fall into is when they keep their focus solely on their solutions and technologies without looking at how the market is evolving. Solar has been growing gangbusters, but we’ve barely scratched the surface. There are a ton of market needs, from software, module, and non-module technologies to business models and services. As the operating solar project portfolio grows to hundreds of gigawatts in the next decade, there will be opportunities to support and service these assets to optimize production and revenue streams. All these applications will be ripe for entrepreneurial solutions.
A lot of the players have placed their bets and made their moves with the 2020 step down in mind. Many project developers will need to find other areas to improve the cost structure or their value proposition and make up for the step down. The answer may lie in looking for efficiencies on the cost side. Some are playing out already, like lower cost capital in the market from the infrastructure funds. Continued improvements in market efficiency, software, and hardware will help make up for the cost difference.
2020 will be interesting because it may be the first year of the step down; but on the other hand, we also have five states that have committed to aggressive 100% portfolios standards. That number will likely go up. As prices for renewables procurement continue to be low in 2020, the industry may have to pay attention to grid integration and how storage can be integrated and priced based on location. We should also see more innovation on insurance, creating approaches to managing all kinds of risks related to offtakers, merchant, etc. while competing on price.