As more solar and wind come onto the grid, prices go down but new questions come up

May 23, 2018 by Joachim Seel, Andrew Mills And Ryan Wiser, The Conversation
Solar lowers prices and shifts when daily peak demand hours are. Credit: Duke Energy, CC BY-NC-ND

Wind and solar energy are growing rapidly in the U.S. As these energy sources become a bigger part of the electricity mix, their growth raises new questions: How do solar and wind influence energy prices? And since power plants last for decades, what should policymakers and investors think about to ensure that investments in power infrastructure pay off in the future?

Our research team at the Lawrence Berkeley National Laboratory decided to look at what effect a higher share of and solar will have on these questions. In our latest study, we found that high shares of these energy resources lead to several profound changes in electric systems.

In particular, our study shows how solar and wind tend to lower energy prices, but they add new complexity for operating the grid, which has big implications for regulators. For consumers, this research is a reminder that making the grid cleaner with wind and solar is an evolving process that requires significant changes to how the power grid is currently run—but one that offers large opportunities, if we as a country can become more flexible when we use electricity.

Long-term decisions

Previous analyses, including our own, showed that solar and wind already impact wholesale electricity markets, leading to more fluctuations in energy prices.

Solar power production, of course, follows the sun, increasing in the morning, producing most at midday, and falling off in the evening. Wind energy output depends on weather, seasons and geography. Solar is fairly predictable, especially in dry climates, and wind power can be forecast days and hours in advance with some accuracy, but both can vary widely. For these reason, solar and wind are also called variable renewable energy (VRE) sources.

Wholesale price effects are projected to go down substantially – between 15 and almost 40 percent over the course over a year – with 40-50 percent of electricity supplied by wind and solar. Credit: Lawrence Berkeley National Lab

Our latest study looked at whether certain policy decisions that are made based on assumptions reflecting low VRE levels will still achieve their intended objective if wind and solar are used at a high level in the future.

For example, a program administrator at a utility is asked to choose the most cost-effective set of options for energy efficiency measures. With a high percentage of solar, the utility may want to reduce demand in the evening when solar output is falling, rather than midday when there is plentiful emission-free electricity. So the efficiency focus may shift from air conditioners, typically needed more during the heat of the day, to lighting.

Another question is how to deploy electric vehicle chargers: With lots of solar generation, it may be best to put chargers at stores or office buildings, to charge when solar power output is high at midday. But in a region with strong winds at night and many wind turbines, power may be cheapest and cleanest when electric vehicles are parked at the owner's residence.

No fuel cost equals lower wholesale energy prices

Our study looked at how prices change under two different scenarios: high and low VRE levels. We used detailed grid simulations to focus on the year 2030 for four electricity markets in the U.S.: CAISO in California, ERCOT in Texas, SPP in the Midwest and NYISO in New York. The analysis contrasts modeled market results for high wind and solar shares of 40-50 percent with a low renewable baseline reflecting 2016 levels.

Solar will tend to be the preferred power source during the middle of the day because there are no fuel costs, causing low prices for all power generators, which becomes more acute with more solar on the grid overall. Credit: Lawrence Berkeley National Lab

For context, the Californian market had 14 percent solar and 7 percent wind energy in 2016 (state laws will require an increase to about 40 percent wind and solar in 2030). While Texas is the nation's leader when it comes to the overall capacity of wind turbines generating 13 percent of all Texan energy, the regions in the Midwestern wind belt have the largest share of wind electricity – nearly 20 percent in 2016, but next to no solar. New York, meanwhile, has ambitious targets for 2030, but so far only very little wind (3 percent) and solar (1 percent).

The most fundamental changes of high levels of wind and solar relate to the timing of when electricity is cheap or expensive and the degree of regularity in those patterns.

In competitive wholesale markets, companies compete to supply power to the entities that operate regional electricity grids. Prices are determined by bidding, and set hourly based on supply and demand. All winning bidders are paid the market clearing price.

Since solar and wind have no fuel costs, they can bid low to make sure their power is accepted in the market. The more wind and solar in a market, the more often the clearing price falls. In today's markets, we already see sometimes prices go to zero or even negative.

Large amounts of solar change the daily price patterns significantly. With high solar shares in Texas, for example, wholesale prices would slump in the middle of the day to an average of $10/MWh and then rise in the evening to an average of $80/MWh. For reference, a megawatt-hour (MWh) is a little more than the amount of electricity that the average American household consumes in a single month.

As more solar and wind come onto the grid, prices go down but new questions come up
Share of hours with energy prices below $5 per MWh. Credit: Lawrence Berkeley National Lab

In a scenario with a high percentage of wind and solar contributing energy to the grid, the frequency of periods with low prices (below $5/MWh) increases to between 3 percent and 19 percent of hours depending on the region and mix of renewables. High solar in Texas, with its limited electric connections to neighboring regions, experiences the highest frequency of periods with near-zero prices.

Average hourly wholesale prices decrease with more VRE penetration, by $5-$16/MWh depending on the region and mix of wind and solar. Decreases in average wholesale prices and common occurrences of periods with very low prices will affect the profitability of VRE and inflexible generators such as nuclear and coal plants that operate in these hours.

Greater need for on-demand power

Price volatility increases with higher VRE shares, particularly in the high wind scenarios. Morning in the spring in CAISO can vary between $0 and $50/MWh with much wind, but fall in a much narrower range in the low VRE scenario.

Lastly, we found that peak hours are shifted from midday to the evening, after solar output declines. These new "net peaks" are shorter in duration yet are distributed over more days of the year. While peaks are typically met by ramping up conventional power plants, the shorter duration of net peaks creates opportunities for targeted efficiency, reducing the demand for electricity (demand response), changes in retail rates to reflect new peak times, or even batteries.

This study only highlights the possible impact of these altered price patterns on demand- and supply-side electric sector decisions. But it provides a foundation for later planned quantitative evaluations of these decisions in low and high VRE futures.

The average price for ancillary services, used to fill short-term gaps in power, are projected to rise substantially with more variable wind and solar. Credit: Lawrence Berkeley National Lab

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8 comments

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WillieWard
3.3 / 5 (4) May 23, 2018
"As more solar and wind come onto the grid, prices go down..."
So why the electricity prices are skyrocketing everywhere, e.g. Germany, Denmark, South Australia, California, Denmark, Minnesota, etc., except in places with abundant cheap coal or gas that need to be "greenwashed" by intermittent renewables, e.g. Iowa, Kansas, Oklahoma, etc.
"Since solar and wind have no fuel costs"
What about fuel costs of coal/gas-fired backup plants that keep lights on when wind isn't blowing or sun isn't shining?
"sometimes prices go to zero or even negative"
It means that energy is produced when it isn't needed, but when the energy is most needed, it's coal/oil/gas that prevent people from freezing in the dark.
rrwillsj
3 / 5 (3) May 23, 2018
Ahh Willie, your the guy who remembers five years ago. When the bus you were waiting to board, arrived five minutes late and you blamed the bus driver for the heavy traffic impeding his route.

Today, you make a habit of arriving at the bus stop five minutes late. And then blaming the bus service for being on time and leaving without you.

Sorry to hear that reality is such a bummer for you. Better luck in your next incarnation.
WillieWard
3 / 5 (4) May 23, 2018
...the bus...
Is the bus powered by "cheap" sunshine&breeze unicorn energy?

What about the waste?
"If Solar Panels Are So Clean, Why Do They Produce So Much Toxic Waste?" - May 23, 2018
"Solar panels often contain lead, cadmium, and other toxic chemicals that cannot be removed without breaking apart the entire panel. For this reason, the whole solar panel is considered hazardous by many experts and governments, including the state of California, which is trying to prevent the flow of old solar panels to landfills."
https://www.forbe...c-waste/
"New Study: Solar Panel Owners Sitting On A Pile Of Hazardous Lead And Cadmium" - May 23, 2018
https://climatech...cadmium/
Zzzzzzzz
3.7 / 5 (3) May 23, 2018
The delusionals have always been wrong, and are still wrong now. This means you, Willie. I live in shale gas country - gas so cheap that you can hardly give it away. I just signed up for two years contract for wind generated electricity. The rate was cheaper. The company I retired from last year was in the business of building gas fired generation. Cheap gas everywhere, but no one building plants.....and no one is "freezing in the dark".... after a career spent in the power generation business, I can tell you that you just don't know that much about it. Your lack of knowledge doesn't seem to get in the way of you running your mouth though..... typical of delusional people.
Eikka
5 / 5 (2) May 24, 2018
While peaks are typically met by ramping up conventional power plants, the shorter duration of net peaks creates opportunities for targeted energy efficiency, reducing the demand for electricity (demand response)


Aka. energy rationing, the modern implementation of rolling blackouts.

If you can't meet demand, re-branding it as demand response is simply normalization of deviance. That's when a hack to overcome a fundamental issue in your design, or even ignoring the problem alltogether, becomes seen as "business as usual" because it has worked so far, until the seventh wave comes and your ship sinks.
WillieWard
3.7 / 5 (3) May 24, 2018
The delusionals ... I live in shale gas country - gas so cheap that you can hardly give it away ...wind generated electricity... Cheap gas everywhere, but no one building plants.....and no one is "freezing in the dark".... ... typical of delusional people.
Where do you live? in the Lala Land?

Eikka
5 / 5 (2) May 24, 2018
I just signed up for two years contract for wind generated electricity. The rate was cheaper.


That's because they have to dump the energy somewhere to keep generating federal subsidies. Utilities in Texas are already giving away wind power for free to customers during the night time peak output, because if it isn't generated then the state doesn't recieve the money and they have to pay the owners of the wind turbines compensation for curtailment.

Ken_Fabian
not rated yet May 31, 2018
Investments in the solutions to intermittency will come readily enough when the proportions of intermittent solar and wind approach levels when they are needed. Before then they will be resisted - as all strong emissions policies are resisted - with alarmist fears of unreliability and cost as the primary justifications.

I think letting intermittency become the de-facto carbon pricing mechanism (that governments have been too divided and cowardly to commit to) should be welcomed - periods of low cost wind and solar forcing existing FF plant into intermittency in response, ready or not - because if we limit the W&S until FF owners are ready it won't happen. Ever.

The value of energy outside those periods of W&S abundance will be elevated - and that will make Interconnectors and "On Demand" backup worth investing in. The market will sort out whether gas (with it's risk of ever rising emissions standards) will be chosen over batteries and hydro. (Or other players).

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