California’s Solar Industry Is Getting Sunburned

Solar power in California just had a good decade. Thanks to strong policy and, yes, good sun, solar expanded to become a significant proportion of the state’s electricity mix and help substantially decarbonize its power generation fleet. It has been so successful, in fact, that its previous success imposes challenges on its future. Solar has become the snake that eats its own tail, reducing its own revenue and creating new imperatives for solar generators. Here are two ways of looking at that success. The first is as a percentage of total power generation. In 2011, solar was just 1.6% of the state’s electricity mix; in 2020, it was 26.4%, growing 15-fold in 10 years. That percentage also makes solar the second-largest source of power in the state, after natural gas and ahead of nuclear and wind.

The second way to look at solar’s success is to see what that fleet of solar power plants looks like from the perspective of the grid. Every year, that expanding fleet generates more power. In 2012, peak daily solar generation in August was less than a gigawatt; last August, in was 11.5 gigawatts.

Taller Peaks

California solar generation per hour, month of August

Source: CAISO, BloombergNEF

Solar is a huge part of California’s zero-carbon electricity ambitions. The state’s annual electricity demand is about the same as it was 15 years ago, which means that all this new solar power is displacing something else in the grid. This is a good thing from an emissions perspective in that solar is displacing hydrocarbon fuels. In so doing, though, it upends the dynamics of the California power market.