California hits the solar wall

[ What is a solar wall?  Read part 1: California could hit the solar wall and then excerpts from the following article in the financial times, Britain’s Wall street journal.  I’ve also reworded some of it.

Renewables are rendering existing natural gas and coal plants unprofitable, plants that cost $2.5 to 5 billion and were able to borrow money because the banks believed they be generating power much of the time.

It may be that natural gas and coal plants are in or will become in as much financial trouble as nuclear power plants.  In 2013 Mark Cooper wrote a paper making the case that at least 37 nuclear power plants were in danger of closing called “Renaissance in reverse: competition pushes aging U.S. nuclear reactors to the brink of economic abandonment“.

Since this article was published in 2013, 10 of the 37 at risk plants Cooper listed have been or are scheduled to close down: Diablo Canyon, Clinton, Fitzpatrick, Ft. Calhoun, Indian Point, Oyster Creek, Pilgrim, Quad Cities, Three Mile Island, Vermont Yankee.  Plus four plants he didn’t list are scheduled to shut down as well: San Onofre 2 & San Onofre 3, Diablo Canyon 1 & Diablo Canyon 2. In addition, not long before this article was written, Kewaunee (2012) and Crystal River (2009) closed for financial reasons.

Here are the remaining plants Cooper listed that have yet to close: Browns Ferry, Callaway, Calvert Cliff, Commanche Peak, Cook, Cooper, Davis-Besse, Dresden, Duane Arnold, Fermi,  Ginna, Hope Creek, LaSalle, Limerick, Millstone, Monticello, Nine Mile Point, Palisades, Perry, Point Beach, Prairie Island, Robinson, Seabrook, Sequoyah, South Texas, Susquehanna, Turkey Point, Wolf Creek
Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Dizard, J. June 2, 2017. Forget Trump, there’s still money in the climate business. Financial times.

Far mMore significant than Trump’s walking out on the Paris Climate agreement was the administration’s legal move in March to abandon Obama’s Clean Power Plan (CPP). If the rejection of the CPP happens, that will make it much more difficult for fossil fuel-dependent regulated utilities to get new renewables and gas-fired plants paid for by their ratepayers.

Because of low natural-gas and power prices, renewable energy development  has more challenging economics than it did a couple of years ago.

And politically, the alliance of convenience between the gas-fired power sector and the renewables industry is fraying to breaking point. As long as both could face off against the coal industry, the gas-fired generators were fine with having green activists demanding reductions in carbon emissions. Gas barons could contribute to environmental groups, smug in the belief that the greens were helping them get market share.

The natural gas drillers, though, became far too efficient at finding and producing the stuff for their own good, so prices went down and stayed down. Therefore the Exploration & Production industry has not, collectively, managed to cover its costs from operating cash flow, but that has not mattered. Even when gas producers were facing insolvency, they were able to borrow money, sell shares and keep drilling. So the Saudis and the Russians lost their betAs did the gas-fired generators.

Power prices are set, at the margin, by natural gas prices, and the independent natural gas power producers are in financial distress. Wind and utility-grade solar plant owners, in contrast, have long-dated fixed-price contracts to back up their project financing. [Thanks to all the Americans unknowingly plowing their money into 401K and IRA mutual funds with investments in money-losing oil and gas companies, who would be out-of-business otherwise.  But keep giving them money and they’ll keep on drilling].

The gas barons had figured that their generators would be complementary, rather than competitive, with intermittent renewables. [Because natural gas is essential for balancing intermittent wind and solar power now since there is no scalable energy storage system of any kind remotely close to being commercial].

In recent years, though, in states such as California and Texas, renewables generation has been crushing the power markets on which the gas generators depend. In Texas, tax credit-supported wind generation can be economic even in hours when power prices are negative: when you have to pay the grid manager to take your energy.

In California, ratepayers who install rooftop solar panels receive “net metering”, which means they receive retail power rates for their intermittent production. In effect, during the hours their panels work, the cost of maintaining the transmission and distribution grid, along with the back-up capacity of hydro, nuclear and fossil-fuel plants, is borne by ratepayers who do not have rooftop solar.

This did not matter when rooftop solar was just a cute green gadget. Now solar generation in California can lead to rapid swings in net load of up to 16,000MW, or about one-third of the total demand in the state, which is about equal to that of the UK grid. Much of the rooftop and “utility scale” solar generation occurs in the middle of the day, which creates the so-called duck curve, or cat’s ears of net requirements for the grid operator.

This means that the very time in the middle of the day when the gas generators were supposed to make money is a time when they are idle, just spinning away without any revenue but with the same requirements for debt service. So they are going broke.

[Yet because of the huge 16,000 MW ramp up, which wasn’t expected until 2020, another natural gas plant may need to be built, even though solar provides only 5.5% of California’s power.  Huh? Isn’t renewable energy supposed to shut down fossil fuel plants?]

The gas generators’ owners, and, with them, the transmission and distribution utilities, are not taking this assault on their cash flow lying down. They are responding, in the passive-aggressive electricity professionals’ manner, by changing the rules for solar and wind generators’ access to the grid.

In several states, including Nevada, Arizona, Indiana and even, hesitantly, California, regulators are making it less financially attractive to sell intermittent renewable power to the grid. Subsidies are being limited for new renewables, and will eventually be eliminated.

Of course the greens and the renewables owners are pushing back, but the old alliance with the gas crowd has been broken. As the renewables and gas plant owners fight over generation market share, the distribution utilities and even electricity storage developers are gaining power, so to speak. Because balancing the variations in power load is an increasingly demanding task, state regulators are more willing to allocate revenue to those who can manage the process.

Also, while the Trump administration has decided to dump the Paris climate accord and the Clean Power Plan, corporate America is still under political pressure to use green power. Big tech already contracts for renewable energy. As that preference filters down to other companies, Wall Street is ready to intermediate the trade.

So whatever the White House announces, there is still money to be made from the climate business.

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3 Responses to California hits the solar wall

  1. Mark says:

    Excellent summary of the forces in play that are going to make it painful over the next few years as the banquet of unintended consequences have to be dealt with.

    Roger has an post up http://euanmearns.com/a-highly-misleading-article-on-solar-power/ that puts some of the recent hype into perspective.

    On the demand management side of things. The move of peak time to the early evenings took some getting use to at our place.

  2. Mark says:

    I wonder if anyone attending the upcoming “Pathway to 2050″(1) meeting- “covering annual California energy policy event brings together an influential group of advanced energy business leaders and state policy-makers to discuss opportunities to accelerate California’s economy through the growth of advanced energy….”

    will be discussing the recent MIT paper https://www.technologyreview.com/s/608126/in-sharp-rebuttal-scientists-squash-hopes-for-100-percent-renewables/

    1) http://info.aee.net/pathway-to-2050-agenda

    • energyskeptic says:

      It would be a waste of my time, the session “100% Clean Grid: Is It Possible?” doesn’t have a panel of scientists, but 3 renewable industry experts selling renewable power. I predict they’ll say that of course a 100% grid will be possible, how else can they sell their products and expertise? And the PG&E guy worked on renewables there. In fact, there aren’t any scientists, just political and business leaders. I didn’t see any mention of the MIT paper, but that would be interesting!