Guest Excelling by David Middleton
Jul 1, 2019, 12:03am
New Solar + Battery Price Crushes Fossil Fuels, Buries NuclearJeff McMahon Contributor
Green Tech
From Chicago, I write about climate change, green technology, energy.Los Angeles Power and Water officials have struck a deal on the largest and cheapest solar + battery-storage project in the world, at prices that leave fossil fuels in the dust and may relegate nuclear power to the dustbin.
Later this month the LA Board of Water and Power Commissioners is expected to approve a 25-year contract that will serve 7 percent of the city’s electricity demand at 1.997¢/kwh for solar energy and 1.3¢ for power from batteries.
“This is the lowest solar-photovoltaic price in the United States,” said James Barner, the agency’s manager for strategic initiatives, “and it is the largest and lowest-cost solar and high-capacity battery-storage project in the U.S. and we believe in the world today. So this is, I believe, truly revolutionary in the industry.”
It’s half the estimated cost of power from a new natural gas plant.
Mark Z. Jacobson, the Stanford professor…
[…]
Forbes
That’s where I stopped reading the Forbes article.
Coal and gas on notice, as US big solar and battery deal stuns market
Sophie Vorrath 3 July 2019
A Californian solar and battery storage power purchase agreement is plumbing new lows for the cost of electricity from solar – a US-dollar price of 1.99c/kWh for 400MW of PV and 1.3c/kWh for stored solar power from a co-located 400MW/800MWh battery storage system.The record setting deal, struck by a team at the Los Angeles Department of Water and Power (LADWP) with renewables developer 8minute, seeks to lock-in a two-stage, 25-year contract to serve 7 per cent of L.A.’s electricity demand from the massive solar and battery project.
The project, called the Eland Solar and Storage Center, would be built in two 200MW stages in Kern County north of Los Angeles, with an option to add a further 50MW/200 MWh of energy storage for 0.665 cents per kWh more.
[…]
“This is the lowest solar-photovoltaic price in the United States, and it is the largest and lowest-cost solar and high-capacity battery-storage project in the U.S., and we believe in the world today,” said the LADWP’s manager for strategic initiatives, said James Barner. “So this is, I believe, truly revolutionary in the industry.”
Barner has also noted that the project has been able to make “full use” of a “substantial” federal solar investment tax credit, which amounted to around 30 per cent “basically knocked off the capital cost of the project.”
[…]
Renew Economy
This project would not be feasible without the investment tax credit (ITC). Knocking 30% of the CapEx at the expense of the taxpayer is kind of a big factor here. Tax credits are not the same as tax deductions. Fortunately, the ITC is scheduled to be scaled back over the next few years.
There’s also some confusion about the power purchase agreement.
Los Angeles seeks record setting solar power price under 2¢/kWh
The city’s municipal utility is readying a 25-year power purchase agreement for 400 MWac of solar power at 1.997¢/kWh along with 200 MW / 800 MWh of energy storage at 1.3¢/kWh.
JUNE 28, 2019 JOHN WEAVER[…]
The team told the commissioners that on July 23, they plan to seek approval of a two phase 25-year power purchase agreement (PPA) priced at 1.997¢/kWh for 400 MWac / 530 MWdc of solar electricity delivered at time of generation plus a adder 1.3¢/kWh for the excess electricity later delivered from a co-located 400 MW / 800 MWh energy storage system.
PV Magazine
The green cheerleaders think that the the electricity generated directly by solar generation will be sold for 1.997¢/kwh and the electricity stored in the battery system will be sold as a separate product for 1.3¢/kwh. From the comments section of the PV Magazine article:
NickM
June 28, 2019 at 11:00 am
Wouldn’t the battery power be an additional 1.3 cents/kWh, so ~3.3 cents total? Otherwise the stored energy is selling for less than the directly generated solar — that sounds odd.
John Weaver
June 28, 2019 at 11:03 am
Separate product, so not added on top of it[…]
PV Magazine
The math of a “separate product, so not added on top of it” just doesn’t work.
I have not been able to find any actual numbers for the cost to build this power plant. It seems that they are rarely made public these days. All that’s ever announced are ridiculously low prices in power purchase agreements.
If we assume that they got the installed cost down to $1/W and they manage a 33% capacity factor, like the nearby Springbok 1 facility, the 200 MW Eland Phase 1 solar PV system would cost $200 million. Using NREL’s latest estimate of battery storage costs, a 100 MW, 4-hr system would run about $132 million ($93 million w/ITC),. They would lose money on the sales of battery-stored electricity at 1.3¢/kwh.
Combined, the project has a 144% simple ROI over 25 years, with a 17-yr payout; but this doesn’t include operation and maintenance costs or battery cell replacements. No sane business would risk capital like this; they could generate a 190% ROI from 30-yr Treasuries with virtually no risk. Adding the battery storage at a huge loss doesn’t make any sense. If this was the actual pricing structure, the net price would go down with more battery storage… This simply defies credulity.
The project includes the option to add 50 MW / 200 MWh of energy storage for an additional adder of 0.665¢/kWh.
PV Magazine
If the battery costs are cumulative to the base price, the project would become more profitable with the battery storage system than without. Increasing the battery storage would increase the net price per kW/h and improve the project economics, rather than worsen them.
Solar Phase 1 + 100MW BESS/4-hr –> 3.297¢/kWh.
Solar Phase 1 + 150MW BESS/6-hr –> 3.962¢/kWh.
Summary table with ITC
While these prices are “competitive” with natural gas advanced combined cycle power plants, they entirely dependent on subsidies. Even then, the returns are marginal. A 7% discount rate would kill even the Solar + 150MW BESS/6hr project. There’s got to be another angle.
The other angle
How do project developers use the tax credits?
Many project developers do not have enough taxable income to take full advantage of the tax credits. Instead of using it to lower their own taxes, they use it to secure investment dollars from tax equity investors (typically large financial institutions, and occasionally high-net worth individuals). Tax equity investors will provide the developer with funding in exchange for a share of assets in the project. This enables the investors to receive tax credits for every dollar invested (reducing future tax liability) AND receive a return on their investment from the developer.Typically, all the income for the first five years of a project’s life goes to paying back tax equity investors until they meet their return, at which point the developer will buy out the investor’s stake in the project. Tax equity investment is significant: According to Greentech Media, it makes up 40 to 50 percent of financing for solar projects and 50 to 60 percent for wind projects. The balance of the project’s capital stack comes from equity and debt financiers.
Level 10 Energy
Even if the solar power developer is unprofitable and has little or no Federal tax liability, the ITC can be effectively sold to investors who can take full advantage of the tax credit.
Take away the tax credit and this is a money-loser
Barner has also noted that the project has been able to make “full use” of a “substantial” federal solar investment tax credit, which amounted to around 30 per cent “basically knocked off the capital cost of the project.”
Renew Economy
Summary table without ITC
A discounted cash flow analysis would kill this project in a heartbeat, if not for the investment tax credit (ITC). Without the ITC, they couldn’t bid such low-ball PPA’s and they would have a much more difficult time securing financing.
What effect will the expiration of renewable energy tax credits have on prices?
Without tax credits, developers will need to turn to more expensive sources of financing to get their project built, which could result in an increase in prices. In addition, they will not be able to lower prices as a result of production tax credits.In many cases, tax credits were the driving force behind renewable energy becoming less expensive than coal. It remains to be seen whether the expiration of the ITC and PTC will have a dramatic effect on the price of renewable energy. While it is likely that prices will rise, there are several factors that could mitigate how much they rise:
Lower Costs: Advancements in technology have reduced the cost of building wind turbines, photovoltaic cells and other major components of renewable energy projects. In addition, if the tariffs on solar products and steel are removed, equipment costs could decrease.
Increased Demand: Corporate demand for renewable energy and renewable production standards for city and state governments are increasing the number of buyers in the market and overall demand for clean energy. In addition, policy changes like a carbon tax or passing of the Green New Deal could increase demand.
Level 10 Energy
Reality
Most of the country is not as well-suited for solar PV as the Mojave Desert. Whereas, apart from States with pipeline phobia and Hawaii, natural gas works just about everywhere… Even at night and on cloudy days.
While wind and solar might be competitive in some areas…
No matter how low the LCOE drops, wind and solar will always be dependent on the wind blowing and Sun shining. Note: The EIA LCOE numbers do not include storage or backup and assume an increase in natural gas prices between 2023 and 2040…
And, if the reduction of carbon emissions was really that important…
While the cost of wind and solar has declined since this graph was published in 2014 one thing hasn’t changed: Nuclear and natural gas can directly replace coal on a 1 MW per 1 MW basis; while wind and solar will never be able to do so. This assumes that it’s actually necessary to replace coal.
But, but, but… What about fossil fuel subsidies?
What about them?
As the Gipper would say…
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At 0.02 per kwh, 25 years,365 days/year, 8 hours per day the company would receive $1.46 per watt of solar panel.
At 10 years, $0.58.
More than a little fishy.
I upgraded my system last summer with Trojan’s new Smart Carbon batteries. I’ve only had my backup generator run for about 10 hours since May.
https://www.trojanbattery.com/pdf/SmartCarbon_Brchr_TriFold_Prn_Handout.pdf
6V batteries…. Does that mean you need 40 batteries to run 240V equipment?
24 VDC then the inverter converts it to 115 VAC 60 HZ. I have 16 batteries in a 4X4 array.
Actually, the math DOES add up. Your headline and post itself are very misleading.
Investment tax credits are equally applied to any business capital investment, not just solar. So it applies to new coal plants, new gas plants, new nuke plants, etc. This is the government that purposely favors business investments in new plants and equipment, as a means of stimulating the overall economy.
Secondly, the battery storage component of the price is an add-on, nobody is pretending that it is not. But it is not an add on to all power generated, since the capacity of the battery storage is far less than that of the PV output. Therefore the storage adder only applies to the battery-delivered power, so that the total is not 1.997 plus 1.2, but 1.997 plus 1.2 on that portion of the power that is battery delivered.
The total capacity of the battery system is 800 MH-H. The total capacity of a 400 MW PV that operates, on average 12 hours per day is approx. 400 x 12 or 4,800 MW-Hr. So the battery storage fee only applies to approx. 1/6 of the total power generated, meaning the total average price with storage is about 2.2 cents/KW-hr, which is still far below the cost of any hydrocarbon or nuclear fueled power plant.
Duane, as one of their justifications for closing Diablo Canyon, PG&E has said that achieving 70% renewable electricity for California by 2030 is easily done — just what California’s politicians and green energy activists want to hear.
What would the cost figures be if 70% — not 7% — of LA’s electricity demand was being supplied from solar, wind, and batteries while future total demand remained at current levels and the target date for full implementation was January 1st, 2030?
If you, Duane, were to be placed in charge of performing the cost analysis work, what estimating tools and techniques would you be using? To what level of detail would your cost estimate be done, and at what level of confidence?
What specific kinds of planning assumptions concerning the pace of technology advancement, future socio-economic conditions, future power demand patterns, and the impacts of regulatory review processes would you be making?
I believe your math is correct but conclusion is wrong. The battery that is not included in the calculation is the fossil fuel power plant running (inefficiently) in the back ground to support the solar power plant when clouds appear and night falls. This is a cost that must be added to the cost of unreliable renewable power to properly make any comparison.
The framework of Duane’s analysis — and the LA Commission’s analysis — cherry picks the cost data and the engineering feasibility data in ways that drastically underestimate the true costs of reaching California’s long term renewable energy targets.
Forget for a moment the issue of whether AGW is real or it isn’t. California is embarked on a course of action where many billions of dollars will be spent in a useless attempt at achieving a low carbon or no carbon energy mix but without nuclear. Just like what has happened in Germany.
No cherry picking … the data are the data.
In point of fact, PV plants do not have very much of an “intermittency problem”, because virtually every electrical power generation and distribution system experienced peak power consumption in the daytime, not the night time when the PVs aren’t working. Which is why the power companies offer various inducements to customers to reduce their power consumption during peak daylight hours and swich to night time peak power demand.
PV plants have a very serious “intermittency problem”, which worsens as more solar power is added to the grid.
It’s called “The Duck Curve”. Peak demand occurs early in the evening. Peak solar output occurs at mid-day…
https://en.wikipedia.org/wiki/Duck_curve
The more solar power added to the grid, the worse the problem gets…
https://www.nrel.gov/news/program/2018/10-years-duck-curve.html
Duane: “No cherry picking … the data are the data.”
The low costs the LA Commission is advertising for the 7% contract are intended to convince the public that solar PV backed by sufficient battery storage can strongly undercut both nuclear and natural gas as a relatively cheap future source of electricity for southern California’s long term needs.
You also apparently believe that solar PV backed by sufficient battery storage can strongly undercut competing sources of electricity.
And so I ask you once again, what would the cost figures be if 70% — not 7% — of LA’s electricity demand was being supplied from solar, wind, and batteries while future total demand remained at current levels and the target date for full implementation was January 1st, 2030?
If you don’t have the estimated cost figures for 70% by 2030 at your fingertips, then how specifically would you go about determining what the actual costs might be?
Any fossil fuel power plant operates “efficiently” regardless of the total power output. Efficiency of steam driven generataors is driven by characteristics the rankine cycle, which is a function of operating temperature range, not the electrical or mechanical power output.
And by the way, all steam plants are relatively inefficient .. with typical efficiencies, as defined by mechanical power output (such as shaft horsepower of a turbine generator) ivided by the thermal power input. Most steam plants operate in the 35-45% range, with nuke plants being on the low end and gas or coal fired superheated boilers being at the upper end of that range.
Electrical generating plants are nothing like internal combustion engines which only operate efficiently within a narrow RPM range, and so require multi-speed transmissions to operate efficiently .. and even RPM is not a linear relationship with output power either.
Duane, where do you dredge up your logic? Manpower is not reduced, turbines are not shut down, the capital costs and wear are not reduced during periods of reduced power output. Mechanical inefficiencies do not change, but when the power is reduced are now a greater part of the total inefficiencies. These costs continue and must be absorbed by the rate payer.
You need to revisit the near disaster that South Australia experienced on February 24th of this year. For five hours the power grid was stressed to its max. As the evening wore on, no power was generated by solar and a minimum by wind but the demand did not decrease at the sun set and the wind died down. SA power had all its steam generation at max, CCGT units at max, OCGTunits at max, Diesel generators at max with little or none coming over the interconnector or from its massive battery. SA power was shutting down users. The estimated cost to the rate payer at that time was $13,500/mwhr.
He just makes it up as he goes.
After all, data is data.
So the cost will be less because the lights will go out?
“…Secondly, the battery storage component of the price is an add-on, nobody is pretending that it is not…”
Ummm…did you read it? Skip to the last line below if you need to.
NickM
June 28, 2019 at 11:00 am
Wouldn’t the battery power be an additional 1.3 cents/kWh, so ~3.3 cents total? Otherwise the stored energy is selling for less than the directly generated solar — that sounds odd.
John Weaver
June 28, 2019 at 11:03 am
Separate product, so not added on top of it
12 hours a day! Go to PVWATTS at NCSTATE, the National Renewable Energy Laboratory. https://pvwatts.nrel.gov/pvwatts.php
In Dec. LA averages 4.07 hours a day TSI at name plate rated under STC.
In Aug. LA averages 7.55 hours a day TCI at name plate rated under STC.
664.502 MWH annual production. You just calculated 1,752,000 MWH’s annually.
That is before round turn losses, panel degradation and battery degradation. O&M downtime…
I’ll like to have an insight of their preventive maintenance schedule and Time Before Overhaul. That’s a massive battery and 25 years is a very long time for chemistries.
If they deep cycle it every night, then the mass is said in about a year, give or take some quarters.
Zzzzzzzzz. Wake me up when there’s ONE single neighborhood in the 1st world disconnected from public utilities and living/operating normally from just sun panels and batteries.
I think your $200 Million is way low. I believe that is just the material cost for the cells. Throw in all the copper needed to tie these cells together, inverters, switch gear, controls, site prep, and structural steel to get the true material cost. Add in labor, engineering, equipment, construction management, taxes, shipping, profit, and overhead. I think the real price is $700 Million. On top of that you have to run transmission lines to get this power onto the grid.
The EIA’s levelized cost numbers assume all generating plants have the same expected lifetime. Thus, they understate the levelized costs of wind and solar.
David, you never explained in your previous post why you used Table 1b (unweighted average values) rather than presenting Table 1a (capacity-weighted average values). Why did you use Table 1b, rather than Table 1a?
For those who are interested, the Table 1a values for capacity factors (in percent) and LCOE (in $/MWh) from same EIA analysis are:
Conventional CC: 87%, 42.8
Advanced CC: 87%, 40.2
Wind onshore: 44%, 42.8
Photovoltaic: 29%, 48.8
You also never explained why think it’s appropriate to base the LCOEs for combined cycle (CC) plants on a capacity factor of 87 percent. For example, what was the average capacity factors for CC plants installed from, say, 2015 to 2017? Was it 87 percent? Or was it considerably lower?
I use 1b because it includes coal.
For those who are interested, here is Table 1a…
I haven’t looked at the plant-specific EIA data for every solar PV facility, but the highest capacity factor I can remember was in Arizona, where it topped 40%. Springbok 1 is a new facility near the site of the proposed Eland facility. It has only achieved 33%.
Combined cycle natural gas power plants have had an 87% capacity factor as long as I can remember. This is from the 2014 EIA LCOE report…
Riiigghht. That’s the reason! It wasn’t because the LCOE for photovoltaics in Table 1a is $48.8/MWh or that the LCOE for onshore wind in Table 1a is $42.8/MWh.
Tell me David, since you obviously consider yourself an expert on technology and technology trends related to the electric power industry:
How many gigawatts of coal-fired utility power plants are you expecting to be installed from 2021-2030, and then from 2031-2040?
Perhaps in the EIA’s “Fantasy Land” (your words). But what about in the real world? Or don’t you know the difference? As I asked, but you never answered, what were average capacity factors for natural gas CC plants installed in the last few years? Were the average capacity factors above or below 87% in actual real-world operation? What sort of number would be produced for LCOE if you used a real-world average capacity factor for natural gas CC plants installed in the last few years?
P.S. By the way, you never took me up on my proposed wind turbine capacity factor bet. Why not?
There really is no issue here: in California, the Public Utilities Commission (PUC) routinely rubber-stamps any request for electricity rate increases based on any reason offered by the owners/operators of electricity generation and distribution facilities.
So, “Sorry that we claimed we would sell electricity for $0.013-0.020 per kWh, but after spending around $300 million to bring the system on-line, we found that this was erroneous and we now have sell the system’s electricity at $0.20-0.30 per kWh. Please.” To which the PUC replies, “OK, sounds reasonable to us!”
The Great Mojave Subsidy Farm.
Are they peeing on my foot while pretending that it is raining?
The biggest battery on Earth (in Australia, made by Tesla) can replace a two-unit nuclear plant for about four and a half minutes. The improvement in battery technology needed to make storage competitive is about like the gap between the Sopwith Camel and the F-22.
So, if this is the gross wholesale generation rate that LADWP pays, (cost) then what will happen to the retail rate in LA after transmission and distribution? Does it lower electricity rates for the consumers in LA, even if it is only supplying 7% of the electricity? It seems to me this press release is being used as a propaganda piece to install in the mind of activists, alarmists and even skeptics that the solution is indeed solar and look how cheap it is…much cheaper than any other alternative. Which we already know isn’t the case because they are comparing apples and oranges and not telling the entire cost story. This is just another Fake News headline by omission to secure climate policies for such a scheme that really isn’t true or as advertised.
“00MW of PV and …. stored solar power from a co-located 400MW/800MWh battery storage system..”
do people reading this understand what it means??
Look at the “Duck Curve.” For a few hours a day the PV will provide 400 MW per hour to the grid. The average for the time the sun is shinning (12 hours) will be about 200 MW. the average for the day will be about 100 MW. That 100 MWs is the number that should be used to determine what the total PV system is worth.
The 400MW/800MWh battery storage system means that the maximum guaranteed and warranted instantaneous output is 400MW over a one hour period. Exceeding this void the warranty and significantly exceeding it will cause serious damage. The “800MWh means that you can extract 800 MWh of electricity. Since you are limited by the 400 MWH rating that means TWO hours at 400 MW or 800 hours at one MWH.
The loss of a typical gas powered power plant would exceed the power capacity of the battery system and would only provide limited help in such an event.
How much CO2 emissions does this scheme offset per dollar saved? How much more must be spent to get to zero?
The scheme is dead on arrival for a multitude of reasons which is made worse by phoney government project estimating about CO2 savings, green scheme efficiency, and all costs.
The idiots are also pretending that there would be no economic consequences to force trillions of dollars to be spent on making our electricity and industrial heat sources ridiculously expensive.
The engineering reality is it is impossible to get to zero CO2 emissions or even a 50% reduction using wind and sun gathering.
The amount of batteries required increases exponential as the forced reduction increases.
The scheme does not include the energy cost to produce the green stuff and replace the green stuff when it wears out.
Battery storage for a few hours is OK for daily load shifting. The problem is days and weeks of electrical power storage which is ridiculous for large states. Think of running a steel plant on batteries or power New York city for a few days using batteries.
The denoument of all this is going to be like that of Enron only many times larger.
Hilarious it will certainly be.
These very progressive Californian turkeys are marching headlong to a very traditional Christmas.
“…The math of a ‘separate product, so not added on top of it’ just doesn’t work…”
The assumption seems to be that solar will power the batteries…what if it is something else?
… have struck a deal on the largest and cheapest solar + battery-storage project in the world …
They may have “large” or they may have “cheap” – but both at the same time? Why do I have doubts…..
I am not an electricity man so I could never have done this myself, but I recognize a turd when I smell it. Remember when I hinted that something is wrong here and I asked all of you to help me out? I was viciously attacked for it. Now we know why – their business model turns into dogcrap when all those tricks are being pulled.
Dave: I respectfully disagree with some of your information and the conclusions you have reached.
The first problem is that you are citing DOE UNWEIGHTED information from Table 1b of the January 2019 report rather than Table 1a (weighted). The DOE summarized information from all recently completed projects (presumably 2018 and possibly 2017). Suppose there were three such projects: a virtue-signally small solar farm with poor sunshine with a contract to supply a California tech company locally generated electricity for $100/MWh and two facilities 10X bigger with excellent sunshine producing electricity for $40/MWh, the DoE would report an unweighted average of $60/MWh and a weighted (by capacity) average of $42.8/MWh. When evaluating the credibility this LA contract, you should be citing the weighted average of $45.9/MWh for the fixed cost of solar or even the lowest known fixed cost $40.3/MWh, not $60/MWh.
If you look at the cost of electricity from solar in 2014, the weighted average was $126/MWh, 3-fold higher. Costs are changing rapidly and the information in the “2019” report is at least a year old. In their 2014 report, the DOE applied an after tax cost of capital of 6.5% to all energy project, similar to the 7% discount rate you cite above. In their 2019 report, they are using only 4.2%. Since this report was being drafted, the 10-year T-bill has fallen from 3% to 2% and there are negative real interest rates for government debt in many countries. The cost of capital for the LA could be significantly lower than the 4.2%. The price of solar panels has also dropped. So the company contracting to deliver electricity from a solar farm to LA is certainly well below $40/WMh. That company, 8minuteenergy, is the largest producer of electricity from solar panels in the country.
Several other companies offered to supply solar electricity to LA for basically the same price as 8minuteenergy, so the going rate with subsidizes is $20/MWh (2 cents/kWh). The 30% federal production tax credit (PTC) for renewable energy will apply for the lifetime of this project, so the price without this subsidy is $28.6/MWh. (I presume the accountants will find some scheme that allows them to make full use of this credit. There is an investment tax credit (ITC) that applies to all businesses, but I’m not sure how it figures in the DoE numbers and would apply to electricity from natural gas too. So, while it may be somewhat remarkable that many companies are able to bid under $30/MWh (without PTC subsidy) when the lowest price in the January 2019 DoE report was $40.3, falling prices for solar panels, falling interest rates and the PTC certainly have gotten the cost electricity from this solar farm near the $20/MWh reported price.
Therefore I think it is absurd to suggest that the report prices are financially ludicrous. (You need to recognize that the cost of capital is a lot lower today than it used to be.)
David: Continuing my comments even though Part 1 hasn’t posted yet.
According to the 2019 DOE report (weighted numbers), a new advanced CC natural gas plant has fixed costs of $8.5/MWh that must be paid whether the plant is generating electricity or not and variable costs (mostly fuel) of $30.7/MWh. So the total cost would be $39.2/MWh anytime. Older plants have higher fixed costs because interest rates were higher when those plants were being built. When the sun is shining brightly, LA can turn off the gas (saving $30.7/MWh), directly use solar from this new farm for the subsidized price of $20.0/MWh, while always paying the fixed cost of the natural gas plant. That is a great deal for LA. The US taxpayers at providing a subsidy (via the PTC) of $8.5/MWh – a lousy deal for them – but the unsubsidized price of using a gas+solar combination is now lower than natural gas alone! Taken in isolation, the net cost of reducing CO2 emissions by 30% using solar farms is zero in Southern California compared with natural gas alone.
California has a 30% tax credit for storage of renewable energy. The battery adds a subsidized $13/MWh to the cost of electricity from from the solar farm, raising the total cost to $33/MWh, a little more than from a brand new gas plant, but probably less than the cost of existing gas plants. Without both subsidies, this battery add $18.5/MWh to the unsubsidized price of $28.6/MWh for a total of $47.1/MWh, almost 50% higher than the $30.7/MWh variable (fuel) cost of electricity from natural gas. Without subsidies, adding the battery costs more money.
It is sunny in the Mohave desert about 75% of the time. If you stored 3 MWh in a battery ($56/3 MWh) for every 1 MWh directly delivered, stored power would certainly cover a full 24 hour on the average sunny day. If one stored 2 MWh of solar generation (added unsubsidized cost $37/2 MWh) in a battery for every 1 MWh directly delivered, it might be possible to rely on solar power for 24 hour on many SUNNY days. Let’s pick the cheaper option and rely on natural gas when storage falls a little short. 100% backup (fixed cost $8.5/MWh) by natural gas would needed for nights following cloudy days and occasional nights when there is a shortage of power stored in batteries. The result would be an 80% reduction in the CO2 emissions for an unsubsidized cost of about $75/MWh, a little less than twice what natural gas from a new plant costs today and perhaps only 50% more than the existing mix of natural gas plants built when interest rates were higher. This is much cheaper than the DOE’s $126/MWh cost of ordinary solar power without storage just 5 years ago.
With the low fixed cost of 100% backup by natural gas and the likely high cost of storage, it is never going to make financial sense to reach for 100% renewable power
Solar PV plants in the Mojave desert only deliver 33% capacity factors.
The LCOE for CapEx, Fixed O&M and Transmission are never “turned off.” The LCOE fore Variable O&M is only incurred while the plant is generating electricity.
This solar PV plant is barely competitive with natural gas entirely due to the subsidies.
David: 100% renewably electricity is an unrealistic concept right now. Every number I calculated included the LCOE for CapEx and Fixed O&M (fixed costs) for the gas plants needed to provide 100% of LA’s needs. That cost was $8.5/MWh in the DoE’s 2019 report. For the older plants serving CA that were built when interest rates were higher, CapEx is higher. These fixed costs must be paid whether LA is powered 100% by natural gas or by a mix of gas and solar. (Transmission costs must also be paid in both scenarios, but don’t necessarily favor one generation technology over the other. California relies on a lot of out-of-state plants to meet variable demand.)
With subsidies, LA can turn off the gas to gas plants on sunny days saving the $30.7/MWh VARIABLE cost of gas and pay $20/MWh to the owner to this solar farm whenever it is delivering power directly to the grid. That certainly isn’t “barely” competitive. That’s 33% CHEAPER! Admittedly, the savings come from US taxpayers.
When the sun is shining, natural gas is “barely competitive” with the UNSUBSIDIZED cost of this solar farm. If one assigns any value to reducing CO2 emissions or to not depleting a finite natural resource needed in less sunny locations, then the unsubsidized solar farm is a winner. (If you think in terms of negative externalities, the same thing is likely true. Discussing the negative externalities of natural gas and covering the desert with PV panels is beyond my expertise.)
Citing data from 2014 article from Real Clear Energy was grossly misleading when the DoE tells you the price of solar has declined 75% since then. So is saying CapEx is 7% today. Subsidies are confusing: There is an ITC every business can use when investing that shouldn’t be counted. Renewables can take advantage of a 30% Production Tax Credit (PTC) that is simple to analyze or a Solar Investment Tax Credit that is much less transparent. I calculated unsubsidized prices based on the PTC.
Now that solar is as cheap as gas when the sun is shining (which is about 30% of the time), the question becomes how much more does it cost to store renewable energy so solar can provide more than 30% of the power. Since storage is expensive, no one can afford to get rid of gas generation capable of handling any intermittence. IMO, we are always going to need the capacity to meet 100% of demand with natural gas. However, the fixed cost associate with that capacity is cheap – less than $10/MWh. Even with today’s low gas prices – about 75% of the cost is the fuel. So anytime you turn the gas off and replace it with wind or solar that costs less than about $30/MWh, you SAVE money. The critical question then becomes, how much does storage add to the cost of renewables? If you consume 1 MWh from solar immediately and store 2 MWh to be consumed at night, in the early morning and late after noon, you have a system that can get almost 100% of its electricity from solar on sunny days, perhaps 30% of its electricity from solar on cloudy days, and still able to meet 100% of demand with natural gas (because the fixed cost of natural gas is so cheap). If the liberals in California want to pay the higher cost of this system, the price appears to be similar to electricity from nuclear and far below what the idiots in Germany are paying today.
The fossil fuel companies get huge subsidies too:
” In the 2015-2016 election cycle oil, gas, and coal companies spent $354 million in campaign contributions and lobbying and received $29.4 billion in federal subsidies in total over those same years “