The Energy
Information Administration reported in October 2023 that solar curtailments
were rising in California. In fact, solar curtailment has been rising
significantly since 2017.
“Grid operators must balance supply and demand to
maintain a stable electric system. The output of wind and solar generators are
reduced either through price signals or rarely, through an order to reduce
output, during periods of:
·
Congestion, when power lines don’t have
enough capacity to deliver available energy
· Oversupply, when generation exceeds customer electricity demand
California power system operator CAISO also explains renewables curtailments:
“During the middle of the day, California’s robust
renewable resources, especially solar generation facilities, sometimes generate
more electricity than is needed to serve demand. The ISO’s market automatically
reduces, or curtails, renewable generation to match supply with demand. Solar
curtailment occurs most frequently in spring and fall when demand is low
because of moderate weather, and sunny, breezy days produce an abundant supply
of renewable generation.”
“While curtailment is an acceptable operational tool, as
increasing amounts of renewable generation comes online without commensurate
amounts of demand to consume midday generation, oversupply conditions will
continue to occur.”
California has also been aggressive in adding battery
storage capabilities so that during times of solar overgeneration the power can
be used to charge the grid-scale batteries. This can cover the oversupply, but
the congestion is often due to a lack of transmission to move the generation to
other places. Thus, adding new transmission can help alleviate the congestion problems. The power system operator must balance energy supply and demand
during big changes in demand and during the loss of solar generation in the
evening which also comes at times when demand increases, known as the ‘duck
curve’ must be very quickly replaced by other ready-to-go power sources, mostly
natural gas.
California has
curtailed 3 million MW of solar energy in the past 12 months, a new record. Thus,
it increased over 25% from 2022. The graph below from EIA shows curtailment through
most of 2023. That equates to the amount of energy that could power 518,000 California
homes for a year. This does not include the solar power exported to neighboring
regions for very low prices. CAISO’s generators can recoup some of their losses
this way and some of the buyers of the ultra-cheap excess solar generation and
energy traders benefit significantly. The article in the LA Times explains:
“The waste would have been even larger if California had
not paid utilities in other states to take the excess solar energy, documents
from the state’s grid operator show. That means green energy paid for by
California electricity customers is sent away, lowering bills for residents of
other states.”
“Arizona’s largest public utility reaped $69 million in
savings last year by buying from the market California created to get rid of
its excess solar power. The utility returned that money to its customers as a
credit on their bills.”
“Also reaping profits are electricity traders, including
banks and hedge funds.”
It is clear that
California has reached a solar overbuild tipping point where real losses are
occurring at higher and higher rates, despite efforts to recue those losses.
On some days, more than half the available solar power
goes to waste, said Phillippe Phanivong of the California Institute for Energy
and Environment located at UC Berkeley.
He calculates that the amount of power curtailed
increased by 500% between 2017 and 2022 — a rise he called “alarming.” During
that same time, the state’s renewable energy generation increased by 40%.
“Can we even get to 100% renewable energy with this
growth rate of curtailment?” Phanivong asked.
The solar glut also means higher electricity bills for
Californians, since they are effectively paying to generate the power but not
using it.
Californians pay twice the rate for electricity as the
national average, and they have increased by 51% over the past three years.
Solar curtailment is one of the major reasons why this has occurred.
Ron Miller, a Denver energy consultant, noted that the
retail value of California’s curtailed solar output adds up to about $1 billion
per year. The solar output does have other potential uses such as being
available to help during heat waves. Again, it is congestion rather than
oversupply that results in most of the curtailment. The solution to congestion
is to build out more transmission, which the state is attempting to do. However,
these projects are often time-consuming. The solution to oversupply is charging
more grid-scale energy storage which the state is also doing. However, they are
not providing these solutions fast enough to peak out the lost energy as losses
have been growing continuously.
In late 2022 the
California Energy Commission voted to reduce net metering energy payments for
rooftop solar sold back to the grid. This obviously raised electric bills for
those consumers with rooftop solar. Bills have also risen for those without
rooftop solar. In a sense, they were paying those consumers for their overproduction
that was then simply lost. The reduction in payments also makes the economics
of rooftop solar less attractive. It was expected that more homeowners would
add home battery storage as a result, but I am unsure if that has happened yet.
There are other factors in California’s high electricity prices such as needed
investments to reduce wildfire ignitions caused by inadequately maintained
power lines. However, net metering in general does increase power prices. Spokespeople
for the utilities argued that the reduction in net metering payments did not go
far enough and those payments should be decreased even more as the LA Times
reported.
“Kathy Fairbanks, a spokesperson for the Affordable Clean
Energy for All campaign — which is funded by Edison, PG&E and SDG&E —
described the vote as “a missed opportunity that will prolong the harm to
low-income Californians and renters.”
“The current solar subsidy program forces low-income
families, renters, seniors and anyone who doesn’t have rooftop solar to
bankroll wealthier Californians’ solar systems,” she said in an emailed
statement.
This is perhaps kind of a Catch-22 since California requires
most newly built homes to include rooftop solar. Utilities are hoping that more
homeowners will install home batteries as it could help reduce demand during
peaks. The decision resulted in some last-minute changes to try to help lower-income people with rooftop solar panels, but it has been criticized as not being enough.
“Under the new solar rules, low-income homes enrolled in
subsidized rate programs will receive higher payments for solar power they
export to the grid — as will all homes in disadvantaged communities and on
tribal lands, a last-minute change approved by the utilities commission. But
environmental justice activists say those higher payments are still much too
low.
“It’s not enough to really expand low-income customer
access,” said Katie Ramsey, an attorney with the Sierra Club. “The goals
they’re stating are good, but the implementation is really risky — particularly
the fact that the export values drop so sharply.”
In periods of
high demand, California will actually pay neighboring states to take their
excess grid power. Apparently, they don’t track how much money they pay neighboring
grids to take the excess power, which seems odd. However, there are ways to
estimate it.
“In 2022, the Public Service Company of New Mexico paid
an average of $14 less per megawatt hour when California’s grid became clogged
with solar, according to a CAISO report. That year, the New Mexico utility said
it saved $34 million by participating in the market California created to get
rid of its excess power.
Another Catch-22 is the state’s aggressive emissions reduction goals. According to those
goals, they need to triple the current amount of solar by 2045.
Solar generators
often put power on the grid even when they are losing money due to negative
pricing because they can make money in other ways. Two important ways are
collecting subsidies, both federal subsidies and state RECs that pay generators for
the power they supply to the grid even when the grid doesn’t need it.
“Among solar farms' revenues are federal tax credits.
Miller, the energy industry consultant, estimated that federal taxpayers paid
$54 million to subsidize the 2.6 million megawatt hours that California
curtailed in the 12 months ending in October 2023.”
These issues
can be a huge source of profit for energy traders at the expense of federal
and state taxpayers.
“As California and other states have required
utilities to buy more renewable power, demand for the RECs has skyrocketed. So
has their price, from $15 to $75 a megawatt-hour in the last two years, experts
say.
“All of a sudden there was a huge demand” for the
credits, Ackerman said.
That means a solar farm can still earn a profit even
when prices are deeply negative. Last year, prices plunged to negative $145 per
megawatt-hour or below as the sun was shining, CAISO said in a recent report.
Then the sun sets. And power prices can spike to $50,
$100 or far more.
This volatility is a gold mine for electricity
traders.
“Any fluctuation, any variation, they’re making money
off that,” Chien said.
Some of the energy traders work for the utilities and are
trying to recoup their curtailment losses but others work for banks and hedge
fund managers who are basically playing the system to profit at the expense of
ratepayers and taxpayers, who are the same people.
“Consulting firms help the traders by closely tracking
data on curtailments, weather and congestion on the grid. They calculate when
prices are expected to fall and then surge.”
Arizona power
operators said they sometimes turn off their own solar generation to purchase California’s
excess at such favorable pricing that it benefits them and their ratepayers.
The EIA reported one year ago that California’s efforts to increase storage, transmission, and distributed energy resources were significant. However, those projects have yet to slow the growth of curtailment. They may in the future as we will see but as more solar generation is built they may not be enough. The bottom line is that if solar generation grows faster than transmission to reduce congestion and energy storage, power will be lost at the expense of utilities, taxpayers, and ratepayers. Thus, grid integration and storage should be considered part of solar development, and economics should always reflect this.
References:
Solar
power glut boosts California electric bills. Other states reap the benefits. Melody
Petersen. LA Times, November 24, 2024. Solar
power glut boosts California electric bills. Other states reap the benefits
Solar
and wind power curtailments are rising in California. Energy Information
Administration. Solar and wind power curtailments are rising in California.
October 30, 2023. Solar and wind
power curtailments are rising in California - U.S. Energy Information
Administration (EIA)
Managing
the evolving grid. California ISO. Managing
the evolving grid | California ISO
California
just slashed rooftop solar incentives. What happens next? Sammy Roth. LA Times. December 15,
2022. California
just slashed rooftop solar incentives. Now what? - Los Angeles Times
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