Guest “why?” by David Middleton
Why? Because California…
OCTOBER 9, 2020
Solar photovoltaic generators receive higher electricity prices than other technologies
In 2019, the average U.S. wholesale price for electricity generated by solar photovoltaic (PV) technology was significantly higher than average wholesale prices for electricity from other technologies. The weighted average wholesale price for solar PV-generated electricity was $83 per megawatthour (MWh) in 2019, more than double the price paid to producers for electricity generated by wind, fossil fuels, or nuclear. The higher average wholesale price for solar PV relative to other technologies is partly driven by geography and timing.
Wholesale electricity prices are the prices that electricity retailers, such as utilities, pay electricity producers, such as power plant owners and operators. In wholesale markets, the price of electricity changes based on changes in electricity demand, the price of fuels that power plants use to generate electricity, and the availability of the generation fuel sources. These prices are calculated as the revenue that generators receive in wholesale power markets divided by their technologies’ electricity generation and do not reflect the cost of building the power plants or the cost of generating electricity.
About one-third of all U.S. solar PV capacity is located in California, where the average wholesale electricity price across all technologies was $74/MWh in 2019, more than double the national average of $36/MWh. The weighted average wholesale solar PV price in California was $100/MWh, or more than 20% higher than the national average for solar PV. Because California had the most PV capacity in the country, the state’s higher wholesale electricity prices contributed to solar PV’s higher national average price.
Wind farms in Texas, Oklahoma, and Kansas collectively produced 45% of total U.S. wind generation in 2019. The average wholesale wind price in these states was $26/MWh compared with $47/MWh for wind generation in all other states. Wholesale wind prices in Texas, Oklahoma, and Kansas tend to be lower because their favorable wind resources lower wind generation costs.
Wholesale electricity prices are generally higher when electricity demand within an area is greater. Because consumer demand for electricity varies throughout the day, the time of day when generation occurs also influences wholesale prices. Solar PV only generates electricity in the daytime, when electricity demand and wholesale power prices tend to be higher, but wind turbines generate electricity whenever the wind blows and tend to reach their greatest output overnight. In 2019, more than half of wind generation occurred at night, resulting in lower average wholesale prices for wind-powered electricity than solar-powered electricity.
Principal contributor: Eric HarrisonUS EIA
Funny thing… The wholesale price paid for solar PV generated electricity in Texas, Oklahoma and Kansas is lower than the average wholesale price from all sources in California…
But, it’s still higher than the other sources in those states… Why?
Because solar power doesn’t work late at night, when demand is lowest. It works best in mid-afternoon, when demand and prices are high… Then it crashes just before demand peaks, creating the “duck curve”.
Confronting the Duck Curve: How to Address Over-Generation of Solar Energy
OCTOBER 12, 2017
In 2013, the California Independent System Operator published a chart that is now commonplace in conversations about large-scale deployment of solar photovoltaic (PV) power. The duck curve—named after its resemblance to a duck—shows the difference in electricity demand and the amount of available solar energy throughout the day. When the sun is shining, solar floods the market and then drops off as electricity demand peaks in the evening. The duck curve is a snapshot of a 24-hour period in California during springtime—when this effect is most extreme because it’s sunny but temperatures remain cool, so demand for electricity is low since people aren’t using electricity for air conditioning or heating.
The duck curve represents a transition point for solar energy. It was, perhaps, the first major acknowledgement by a system operator that solar energy is no longer a niche technology and that utilities need to plan for increasing amounts of solar energy. This is especially true for places that already have high solar adoption, such as California, where one day this past March, solar contributed nearly 40% of electricity generation in the state for the first time ever.
High solar adoption creates a challenge for utilities to balance supply and demand on the grid. This is due to the increased need for electricity generators to quickly ramp up energy production when the sun sets and the contribution from PV falls. Another challenge with high solar adoption is the potential for PV to produce more energy than can be used at one time, called over-generation. This leads system operators to curtail PV generation, reducing its economic and environmental benefits. While curtailment does not have a major impact on the benefits of PV when it occurs occasionally throughout the year, it could have a potentially significant impact at greater PV penetration levels.
While the mainstream awareness of these challenges is relatively recent, the U.S. Department of Energy’s Solar Energy Technologies Office (SETO) has been at the forefront of examining strategies for years. Most of the projects funded under SETO’s systems integration subprogram are performing work to help grid operators manage the challenges of the duck curve.
[…]US Office of Energy Efficiency & Renewable Energy
The more solar PV capacity added to the grid, the deeper the “duck curve”…
From about 9:00 AM to about 5:00 PM, solar power displaces other generation sources. As the Sun goes down, other sources have to ramp up in order to meet peak demand. The more solar in the grid, the steeper the ramp.
This actually creates a situation where solar PV could wreak even more havoc on our electrical grid, with or without government subsidies.
Based on the average wholesale prices received and the capacity-weighted levelized cost of electricity can expect to generate a profit of over $54/MWh, including nearly $9/MWh in tax credits.
While the averages aren’t truly representative because the actual costs and revenues vary widely geographically and by the manner in which the technologies are applied, the market is clearly encouraging the over-build out of solar PV power plants. Fortunately, most utility companies realize that, despite the falling construction costs, the Sun doesn’t always shine…
Natural gasUS EIA
Compared with other generation technologies, natural gas technologies received the highest U.S. investment in 2018, accounting for 46% of total capacity additions for all energy sources. Growth in natural gas electric-generating capacity was led by significant additions in new capacity from combined-cycle facilities, which almost doubled the previous year’s additions for that technology. Combined-cycle technology construction costs dropped by 4% in 2018 to $858 per kW.