Exxon’s Power Play Points to Texas’ Future
The oil giant’s big bet on Permian renewables shows how the economics of the electricity market are changing.
As stories about the energy transition go, Big Oil going big on solar power in the heart of America’s biggest oil patch is as transitiony as it gets. Besides the symbolism of Exxon Mobil Corp. signing up for 250 megawatts of solar power (plus the same amount of wind power) in the Permian basin, though, it is also part of a big change gathering momentum in the country’s biggest electricity market: Texas.
Despite lots of sunshine and power demand, the state hasn’t embraced solar power in a Texas-sized way. Last year, it ranked sixth in the U.S. in terms of solar generation, just behind Utah. But that appears to be changing. As of the end of November, the state’s solar pipeline was at almost 37 gigawatts, up from less than 25 GW at the beginning of the year, according to the latest monthly report from the Electric Reliability Council of Texas (ERCOT).
Most of this proposed solar capacity will never see the light of day. Still, 4.1 GW of that planned capacity already has an interconnection agreement in hand and should be running by the end of 2020, almost quadrupling the state’s solar capacity:
Renewable energy at scale does weird things to wholesale power markets designed for traditional plants. Because it has no fuel cost, its marginal cost to run is effectively zero (and sometimes negative if subsidies are in play). So when the sun is shining or the wind is blowing, these plants switch on and tend to both suppress the wholesale power price and leave less demand to be met by traditional plants.