California and other states are moving quickly to 100% renewable energy, but what are the implications on the retail residential electricity rate as penetrations levels increase?
Increased Renewable Energy Penetration:
Graph 1 depicts the California annual renewable energy penetration percentage history for 2013-2019 as it has steadily increased per legislative mandate.
Graph 1 – California Annual Renewable Energy Penetration Percentages 2013-2019
Source: https://www.energy.ca.gov/sites/default/files/2019-12/renewable_ada.pdf
In 2019, large hydroelectric and nuclear generation were a significant source of California electricity. When sources of carbon-free energy such as large hydroelectric generation and nuclear are included with RPS-eligible renewables, 63 percent of the state’s electricity retail sales came from non-fossil fuel sources in 2019.
On September 10, 2018, former Governor Edmund G. Brown Jr. signed Senate Bill (SB) 100 (De León, Chapter 312, Statutes of 2018) increasing California’s RPS target to 60 percent by 2030 and adding a planning target of 100 percent renewable and zero-carbon electricity by 2045.
Graph 2 indicates the rise in additive California (Renewable Portfolio Standard (RPS) over 2002-2030.
Graph 2 – California RPS 2002-2030
Source: https://www.energy.ca.gov/sites/default/files/2019-12/renewable_ada.pdf
Graph 3 shows renewable generation from power facilities serving California load from 1983 through 2019 by resource type, including grid-connected, behind the meter (BTM) solar resources. The estimated 2019 total renewable generation, including out-of-state generation delivered to California and BTM solar generation, was 105,559 gigawatt-hours (GWh), including an estimated 16,306 GWh of BTM solar. In the past five years, solar generation has increased over 350 percent, and BTM solar resources have increased by nearly 120 percent. These generation estimates do not include generation from BTM wind resources.
Graph 3 – Total Renewable Generation Serving California Load By Resource Type
Source: https://www.energy.ca.gov/sites/default/files/2019-12/renewable_ada.pdf
In 2006, the landmark Million Solar Roofs Initiative was codified under Senate Bill 1, which set forth a goal of installing solar photovoltaic systems on 1 million roofs throughout California. In the first half of 2019, California surpassed the million solar roofs goal. Since 2006, there has been steady progress, doubling the number of installations every two to three years. CEC staff estimates the current number of solar systems installed across California at more than 1 million through June 2019. Rapid solar photovoltaic system installation cost reductions have contributed to reaching the million solar roofs goal. Graph 4 shows the continuous growth in California distributed solar installations and the concurrent decline in the installed cost of residential solar systems since 2000.
Graph 4 – Status of California’s Million Solar Roofs Through June 2019
Source: https://www.energy.ca.gov/sites/default/files/2019-12/renewable_ada.pdf
Renewable power generation growth in the US is soaring and is expected to overtake natural gas-fired power generation by 2045, according to the US Energy Administration, leading to major concerns about the reliability of these intermittent resources and the significant impacts they will have on US power supply and prices.
California has provided a stunning example of these challenges. The state has by far the largest amount of solar power generation among US states, with nearly 13 GW. Renewable output across the California Independent System Operator nearly doubled in the last decade to account for roughly 40% of its total fuel mix in 2019, according to ISO data. This rapid growth has also brought with it adverse impacts, including generation curtailments that surpassed 17,000 MWh on 1 April 2019.
These examples reveal just some of the challenges ahead for the multiple US states pursuing 80-100% targets on carbon-free power generation over the next few decades.
For more information on California’s renewable energy curtailments, see my article, “Why Is California Continuing To Curtail Solar & Wind Energy Production?”, https://www.linkedin.com/pulse/why-california-continuing-curtail-solar-wind-energy-ron/
Increased California Residential Electricity Rates:
We see in Graph 5 that the California residential electricity rate history from 1990 to 2022 has shown a steady rise.
Graph 5 – California Residential Electricity Rate History, 1990-2022
Source: https://www.eia.gov/electricity/data/state/
Looking at the relationship between California renewable energy penetration rate and the retail residential electricity rate from 2013 to 2019, as the annual renewable energy penetration growth has grown at an 8.55% rate, the annual retail residential electricity cost has grown at an 2.80% rate.
Unfortunately, for California electric rate payers, the electricity rate annual inflation from 2020 over 2021-2022 has been 11.86%.
Electricity prices in California rose more than 5 times more than in the rest of the U.S. over 2011-2017 as increased renewable energy penetration caused price inflation as shown in Graph 6. The average electricity price increase for California during this period was 3.60%, while the average price increase for the remaining 49 states was 0.67%.
Graph 6 – Electricity prices in California 2011-2017
Between 2008 and 2021, the all-sector price of electricity in California increased five times faster than rates in the rest of the continental United States, as shown in Graph 7. In 2021, the all-sector price of electricity in California jumped by 9.8 percent to 19.8 cents per kilowatt-hour. Residential prices increased even more, jumping by 11.7 percent to an average of 22.8 cents per kilowatt-hour. California residential users are now paying about 66 percent more for electricity than homeowners in the rest of the US.
Graph 7 – California vs. Rest of Continental U.S. Electricity Prices 2008-2021
The intermittency and reliability of renewable generation adds uncertainty around operations requiring additional reserves, as well as uncertainty in resource adequacy, such as demand response, said Morris Greenberg, senior manager of North American power analytics at S&P Global Platts.
As the renewables fleet grows rapidly, grid operators will increasingly have to manage oversupply, likely through generation curtailments, and will have to address the negative impacts that low power prices will have on future generation development.
There is so much solar power in California today that it can generate more electricity than is needed during the middle of the day. In order to balance supply and demand on the grid, the ISO must automatically reduce the production of energy from renewable resources, or “curtail” generation. In rare instances, when economic bids from generators are insufficient, the ISO also must manually curtail production to maintain the supply and demand balance.
Nevertheless, this problem is only going to become more challenging in the future as even more solar is added to the grid. There are increasing efforts to pair storage with solar generation to address the problems directly. As CAISO adds energy storage capacity to receive excess solar energy and also peaking natural gas generation facilities to solve the early evening shoulder hours energy shortfall, additional costs for California ratepayers are inevitable with higher renewable energy penetration.
For more information on California’s renewable energy curtailments, see my article, “The Case For More California Energy Storage”.
Summary:
In summary regarding California’s renewable energy penetration’s relation to increasing electricity rates:
- Higher solar penetration by both utility scale and BTM residential solar will stress the California “Duck Curve”
- With more solar, more curtailments will take place until adequate energy storage capacity is available
- Due to additional redundant/backup natural gas peaking units, and increased transmission/ distribution line capacity, utility rates will increase with higher renewable energy penetration
- Without transmission infrastructure capital expenditures which translate to increased utility customer bills, the California grid risks blackouts and/or lower reliability for the future
- Added transmission infrastructure for peak solar energy generation periods will not be fully utilized during the remaining lower/non solar hours of the day
- As residential utility bills escalate with higher renewable energy penetration, ratepayers/voters may question if this climate solution is affordable to their family budgets
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