For years advocates of wind and solar energy have been telling us that prices would fall and these clean, renewable technologies would be competitive with natural gas. That sweet spot is often referred to as grid parity.
Congratulations that day of grid parity success has arrived!
At its December meeting the California Public Utilities Commission approved more than 500 MW of solar procurements by regulated investor owned utility and more than 294MW of those contracts were at or below the market price referent (grid parity). Today we have a situation where demand for wind and solar is strong around the world and prices for solar photovoltaic panels and wind turbine prices are falling. Other than California with its 33% renewable portfolio standard, many states are closing in on their more modest RPS goals for renewable energy.
Grid parity and falling prices for solar panels and wind turbines should be good news. But renewable energy has never felt more threatened. Why?
Low Natural Gas prices make renewable energy less attractive today. The growth of unconventional oil and gas is expected to keep gas supply plentiful and prices low tomorrow and for the foreseeable future. Low natural gas prices are savaging the economics of coal fired generation and new nuclear power plants just as they put added pressure on solar and wind long term to improve efficiency to stay competitive.
Fish versus Wind Energy Competition for Environmental Re-dispatch. Wind producers were curtailed last year by Bonneville Power Administration when heavy run-off forced BPA to release water in the Columbia. To comply with Federal Court orders on dissolved gasses in the run-off water to protect fish, BPA said it had to run the generators to reduce turbidity. The result more energy supply than demand so BPA curtailed wind generation. Generators filed a discrimination complaint at FERC and FERC agreed with them ordering BPA to write new rules for environmental re-dispatch. If that decision sticks renewables become harder to integrate since it raises prospect of take or pay contract requirements utilities are loathe to agree to. This issue also could turn into a conflict over who gets priority in environmental re-dispatch—wind or fish? The problem for wind in that argument is fish protections are covered by Federal court orders and environmental settlement agreements not easy to change.
Falling solar and wind turbine prices mean grid parity day of reckoning has arrived (competitively priced with gas). That grid parity reality thus undermines the argument for continued tax subsidies. Consolidation in renewable sector is expected to accelerate as weaker firms sell out to bigger players with deeper pockets. Only the industrial giants can withstand the huge China oversupply by diversifying into new falling price global markets to take market share from local players. And guess what, those same industrial giants like GE, Siemens and others also have high efficiency natural gas combined cycle power plants to sell as well so it is not a question of whether they will have sales just what you buy.
Falling PV prices threaten or kill off utility scale concentrating solar power (CSP) and molten salt projects because they no longer are competitive with fast falling PV prices to meet state RPS goals. Remember that 54% of California’s last batch of solar project approved below the market price referent (grid parity). And some existing CSP and molten salt projects are switching technologies to cheaper PV panels on the same sites. These shifts from utility scale solar to distributed PV solar raises different integration issue. The good news is you need less high voltage transmission if new PV projects are built in load centers. The bad news is you need more distribution automation faster to make the grid more efficient and reliable. Worst case: you need more of both.
Power grid instrumentation is next wave of smart grid as smart meter saturation is reached. This is both good news and bad news for renewable energy integration. It opens the door to expanded renewables use in demand response and energy efficiency applications from customer aggregation. It encourages more commercial and industrial combined heat and power (CHP), microgrids and prospects for energy storage and time shifting. But it forces renewables to compete on a grid parity basis with those ruthlessly efficient natural gas advanced combined cycle plants coming to market with efficiency ratings +60%.
It’s tough love competition ahead for renewable energy. If you must backup every MW of renewable energy with gas and gas fired generation is cheaper why not just build more gas? Holy Inverter!
Welcome to grid parity!
- Map Projects When U.S. Cities Will Achieve Grid Parity for Solar (cleantechies.com)
- Renewable Energy Must Make Tax Policy Change its Friend (insightadvisor.wordpress.com)
- Solar Grid Parity 101: How the Cross-Over Occurs (thinkprogress.org)
- California puts Solar PV on Utilities Christmas Shopping List (insightadvisor.wordpress.com)
- When Solar gets cheaper than the grid (tobiasbuckell.com)
- Grid Parity Reality Hits Home for Renewable Energy (insightadvisor.wordpress.com)