We have long lamented that while solar energy production is a mature generation technology that should be used in nearly the entire U.S., the inability of our electronic grid in much of the country to store solar-generated energy limits its use to when the sun is shining. This almost always requires a backup (usually burning natural gas) for those hours when the sun does not shine.It’s been a few years since we last talked about the baseline load problem that causes utilities that have abundant solar generation, particularly subsidized photovoltaic silicon panels on homeowners’ roofs, to bring energy costs down to zero during the day while the complete lack of generation at night forces them to give much of their short-term stored energy away before the sun goes down.
California Dreamin’: Solar for All
The Wall Street Journal recently reported that, stepping in where government and university research have failed to deliver solutions, for-profit California utilities — including PG&E Corp. (NYSE:PCG), Edison International (NYSE:EIX) and Sempra Energy (NYSE:SRE) — are testing new ways to network solar panels, battery storage, two-way communication devices and software to create “virtual power plants” that manage green power and feed it into California’s power grid. In California, real-time wholesale energy prices often hit zero during the day while the need for energy at night can spike them to as high as $1,000 a megawatt hour.
If California wants to stand as a land of free-flowing solar without even the need of the fossil fuel industries that the Trump administration says it wants to re-energize, then it will need a way to store its solar power, particularly if it wants to retire its last nuclear plant in 2025. Power company AES brought 400,000 lithium-ion batteries online last month in Escondido, Calif., (near San Diego) where Sempra plans to use them as a “virtual power plant” to smooth out its energy flows over the 24-hour service day. Electric car manufacturer Tesla (NASDAQ:TSLA), Inc. is supplying batteries to Los Angeles area network that will serve Edison International, to create the largest storage facility in the world if no one builds a bigger one by 2020 when it’s slated to be completed. The facility will be able to deliver 360 mw/h to the grid for a full day on short notice.
The 2,2000-mw Diablo Canyon nuclear plant is owned by PG&E, which wants to retire it by 2025 to meet stringent state energy codes as well avoid costly upgrades to the aging plant. Its first unit began churning out power in 1986 for the company then known as Pacific Gas & Electric. Many utilities avoid building lithium-ion battery virtual plants because they remain considerably more expensive to build and set up than traditional power plants. California’s state laws make them more desirable there because of both environmental policies (read, climate change goals) and the regulatory hurdles and costs of just building a new plant in the Golden State. Of course, that hasn’t stopped the state from approving and building them, but the utilities that have shuttered plants early are now turning to the virtual plants to shore up their own bottom lines. PG&E Is testing batteries, software and several technologies to upgrade its grid and replace Diablo Canyon.
Intermittency, What is it Good For?
If Tesla, PG&E, Sempra and Edison can solve the grid intermittence problem in California then economies of scale could reduce the costs of virtual plants elsewhere and incentivize grid modernization via market prices rather than regulation. The costs of energy from a virtual plant will still likely cost more per mw/h than those of a new gas peaker plant, but only experimentation in cost reduction from actual working plants providing energy 24/7 can bring down those costs and deliver the innovation necessary to both optimize and right-size battery-based virtual plants. The utilities deserve praise from both customers and investors for boldly going where none have gone before. Once again, the market provides. The Renewables MMI inched up 1.9% this month in the very mature actual metals market.