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The Case For More California Energy Storage

image credit: CAISO
Ron Miller's picture
Principal Reliant Energy Solutions LLC

Ron Miller is an energy industry expert creating value by analyzing assets, markets, and power usage to identify, monetize, and implement profitable energy and emission reduction projects. He is...

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  • Mar 24, 2020
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We have seen dramatic changes in the California “Duck Curve” over recent years. So what is the “Duck Curve”? Essentially, it shows the amount of non-solar, non-wind energy generation that is required by gas and nuclear power stations each hour of the day to satisfy demand. Unfortunately, with growing solar production, base load power plants designed to run continuously and efficiently for long production runs are being asked by the market to ramp-up and ramp-down during each day.

Graph 1 shows the predictions in 2013 for the impact of solar during the day for the California Independent System Operator (CAISO) followed by the updated version for 2019 in Graph 2.

In 2013, the projection was that the over-generation risk from more and more solar would be above 12,000 megawatts (MW).

Graph 1: CAISO Actual and Projected Net Load At March 31 for 2012-2020 As Of 2013

 

Source: https://www.scottmadden.com/wp-content/uploads/2019/10/ScottMadden_Energy_Industry_Update_V19_I2_2019.pdf#page=10

However, in 2019 the actual projection of the over-generation risk from more and more solar is really about 7,000 MWs, a full 5,000 MW lower than just 6 years earlier. This phenomenon is due primarily to utility-scale solar projects coming online for California utilities, and is about 40% lower than the minimum net load originally forecasted for March 2020.

Graph 2: CAISO Lowest March Daytime Net Load 2011-2019

 

Source: https://www.scottmadden.com/wp-content/uploads/2019/10/ScottMadden_Energy_Industry_Update_V19_I2_2019.pdf#page=10

So what does this eroding of the “base load” required MW energy supply mean to ratepayers and taxpayers of California?

  1. Current reliable and safe base load (i.e. dispatchable) generation stations may experience difficulty remaining financially-viable as their energy is only dispatched for a portion of the day (i.e. not run continuously and economically as originally designed)
  2. Increasing solar energy production during the 10 AM – 5 PM hours is flooding the market, incurring more renewable curtailments
  3. Excess energy supply to the market manifests itself in low or even negative energy prices during certain hours of the day. Low prices discourage energy from base load plants that find it very difficult to compete (i.e. not profitable)
  4. Solar and energy projects experiencing curtailments are not producing the renewable energy credits as expected, nor are they generating projected earnings from energy sales to validate the anticipated project economics
  5. Wind energy projects experiencing curtailments are not generating the production tax credit of $0.023 per kilowatt-hour (kwh) so important in renewable energy project economics
  6. Solar curtailments cost federal taxpayers in under-productive investment tax credits (ITC) extended by the federal government (and all of us as taxpayers)
  7. Increased operational cost and risk to ramp-up/ramp-down (or cycling) is incurred in conventional generation not designed for this service. Cycling of generation could potentially reduce the service interval or time period between maintenance shutdowns for these plants, exacerbating the energy supply problem in the non-peak periods
  8. Increased solar installations accelerate the steepness of base load plant ramp-up, causing more stress on existing generators

Graph 3 details the growing CAISO monthly curtailments from April 2015 through June 2019.

 

Graph 3: CAISO Growing Renewable Energy Curtailments April 2015 Through June 2019

 

So what is the cost of these solar and wind energy curtailments? Assuming a 25% capacity factor for solar installations, a 30% ITC, a cost of capital of 8%, and a 20-year project life, each kwh of solar carries with it a levelized cost for the ITC for federal taxpayers of $0.0246 per kwh.

For the projected 2019 renewable energy curtailment of 891,065 megawatt-hours (MWh), curtailments in California alone amounted to a cost to federal taxpayers of $21.92 million in 2019. As more utility-scale solar projects are added to the state energy mix, curtailments will occur more frequently, thus increasing the cost to taxpayers. A logical question is: Why should California build more solar power plants at a rapid pace in order to meet the state’s environment goals, if so much power is now being curtailed and will be curtailed in the future?

From the ScottMadden research cited earlier, “…the most extreme daytime net load low (i.e., the lowest point in the year) dropped 61% from 18,531 MW in 2011 to 7,206 MW in 2018 indicating a persistent low net load throughout the year. But it was not just the lowest points. More than 80% of the days in 2018 had a minimum net load below the lowest point recorded in 2011. Key observations concerning the late-day three hour ramp-up include: - Growing ramp-up needs: The most extreme late-day three-hour ramp-up (i.e., the highest point in the year) increased 129% from 6,245 MW in 2011 to 14,304 MW in 2018. - One-third of peak: The maximum 2018 ramp up was roughly one-third of system-peak served that year.”

What are some of the solutions?

  1. Build more energy storage facilities which can absorb excess solar and wind energy during the peak production periods of the day, while providing energy during the off-peak periods after 5 PM each day
  2. Offer tax incentives to capture/store energy vs. curtailments and non-production of renewable energy while reducing incidences of negative peak energy prices
  3. Incent consumer behavior to better align energy demand with renewable energy supply production to utilize relatively-cheap energy and to minimize curtailments
  4. Implement Time of Use (TOU) electricity rates

Copyright © March 2020 Ronald L. Miller All Rights Reserved                                                  

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Matt Chester's picture
Matt Chester on Mar 24, 2020

For the projected 2019 renewable energy curtailment of 891,065 megawatt-hours (MWh), curtailments in California alone amounted to a cost to federal taxpayers of $21.92 million in 2019. As more utility-scale solar projects are added to the state energy mix, curtailments will occur more frequently, thus increasing the cost to taxpayers. A logical question is: Why should California build more solar power plants at a rapid pace in order to meet the state’s environment goals, if so much power is now being curtailed and will be curtailed in the future?

Energy storage is definitely the traditional answer to this problem. I'm curious, though, about your thoughts on some of the suggestions for alternative uses of over generation-- hydrogen production or desalination are the ones that come to mind, but I'm sure there are others. I know there may be economic challenges building out such infrastructure for something that only comes into play part-time, but is there a future for those efforts as well, or will traditional energy storage reign supreme?

Ron Miller's picture
Ron Miller on Mar 24, 2020

Great question. The problem I can see for hydrogen or desalination vs. energy storage is the capacity factor of the former. How many hours of the day or year would you operate the hydrogen or desal plant on “distressed” solar or wind energy? If less than 50% of the time, can the project generate enough revenue in those 8 hours daily to produce a financeable rate of return project?

Patrick McGarry's picture
Patrick McGarry on Mar 24, 2020

Ron-  Great article. Thanks for sharing.

Do you see any market design changes required to accomodate storage? And will hybrid power plants be a part of the future?

Patrick McGarry

Ron Miller's picture
Ron Miller on Mar 24, 2020

I think Time of Use (TOU) utility rates are coming and not just in California, but trials in Colorado as well. We need some mechanism to encourage demand when the supply is at its greatest, thereby reducing the need for storage. For solar/wind to truly replace coal/gas/nuclear, we either change demand (TOU) or augment renewable supply during the non-daylight/non-windy periods of the day with storage. We need bulk storage at hybrid plants to approximate what we now have with baseload plants on the grid. 

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