Solar capacity surged 30% in 2014 to more than 20 gigawatts and will more than double by the end of 2016, according to the Washington-based Solar Energy Industries Association. That’s enough to power 7.6 million U.S. homes, up from 360,000 in 2009. The biggest gains will be in California, Arizona, Texas, Georgia, New York and New Jersey.

Rate Review

Even with the rapid growth, solar still accounts for less than 1% of total U.S. power production, behind coal, natural gas, oil, nuclear and hydroelectric, according to the government’s Energy Information Administration. Because output suffers on cloudy or hazy days, grid operators have to keep conventional plants on standby.

New York State’s Public Service Commission is overhauling its rate system to keep transmission owners profitable as more consumers produce their own power. Solar production has more than tripled in New York City and Westchester County, a northern suburb, in about two years, according to Consolidated Edison Inc., which owns the city’s utility.

Ripples in the power market can already be seen from installations including Topaz, the world’s largest solar farm, the newest member of the Route 58 energy highway that extends dozens of miles inland to the Bakersfield oil and natural gas fields.

Antelope Lanes

The 550-megawatt array, with grass lanes to let the pronghorn antelope roam, houses 8.4 million glass covered thin-film photovoltaic panels on California’s Carissa Plains. Billionaire Buffett’s first push into solar, through his Berkshire Hathaway Inc., energy unit, will be followed by the even larger 579-megawatt Solar Star Projects about an hour’s drive away.

Topaz gets the most sunlight from about 11 a.m. to 3 p.m. almost every day, reducing the need for supply from gas-fired plants, or from hydroelectric dams hobbled by California’s four-year drought. Even though some solar farms operate only about a quarter of the year, they can turn wholesale prices negative during the sunniest hours of the day, squeezing profits for conventional generators.

Negative Prices

On April 23, spot wholesale prices at Southern California’s SP15 hub, which includes Los Angeles and San Diego, averaged minus $60.94 a megawatt-hour for the 10 hours from 8 a.m., with solar accounting for as much as 23% of power generation in the hour ended at noon. The negative price meant that the seller, wanting to keep its generator running, paid the buyer to take the power.

“I was here before we broke ground and seeing it then and now amazes me at how quickly we were able to build the project and coexist with the environment and generate 550 megawatts of green power,” Gary Hood, project manager for Topaz, about 250 miles southeast of San Francisco, said as he showed a visitor around.

Berkshire is already producing power at Solar Star, which will be fully operational in the third quarter. Apple said in February it is investing $850 million in a plant that First Solar Inc. is building nearby.

“We will see renewables increasingly make up part of the resources stack just because it makes economic sense,” Jonathan Mir, head of North American power and energy at Lazard Freres & Co. LLC in New York, said by phone May 13.

“Appreciating that there are important qualitative differences between non-renewables and renewables, I don’t think people can simply say with a straight face anymore that renewables are more expensive,” he said.

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