Getting More Wind and Solar is 100% Possible, But Not 100% Straightforward. Here’s Why

June 25, 2018
Mike Jacobs
Senior Energy Analyst

With wind and solar prices beating the cost of fossil-fuel generation in many places, we have a great opportunity to replace and modernize our energy supply with more renewables—and we can do so reliably. The Union of Concerned Scientists congratulates grid operators who have demonstrated that replacing old generation with wind and solar does not cause reliability problems. In the United States and in Europe, grids have run without coal, and with wind at 60% of the total mix. The director of reliability assessment of the North American Electricity Reliability Corporation has stated that with planning, any level of renewables on the grid could work.

Regional record for use of renewable energy in a single hour. Chart UCS.

Renewables and storage substitute for conventional generation

To really nail the energy transition, and increase the buildout of wind and solar, renewables and storage will have to substitute for conventional generation in increasingly technical ways.

In fact, several grid practices are vitally important for growth of large-scale renewables. They include:

  • expanded transmission,
  • increased operational flexibility (for example: incorporating renewable forecasts with existing schedules), and
  • increased coordination with neighboring utility areas through centralized dispatch or consolidation.

Operators making steady progress with these practices have hit renewable energy production records.

Value beyond wind and solar contributions today

The number one product from wind and solar today is Energy. The wind blows, cheap energy flows. The sun shines, cheap energy results.

The grids that host lots of renewables demonstrate that variability is not a show stopper. The economics of power contracts, renewable energy credits, and production tax credits all reward maximized energy production.

The challenges can be seen when demand is not so high, and the renewables are more abundant. The grid still requires a physical balance of supply and demand. In those times grid prices are low or negative based on marginal cost of the next unit. Very low prices can signal curtailment risk and discourage buyers and sellers from adding more renewables.

UCS took up analysis of several scenarios with over 50% annual energy from renewables to find how to reduce predicted curtailment. Our examination identified practices that can lower the curtailment of wind and solar as renewable energy becomes a larger part of the energy mix.

Market prices for wind and solar beating fossil fuel prices demonstrates technology advances.

Adding more wind and solar, or adding more gas?

When studies and decisions consider new energy supplies, they start with the present power system. Discussing the value and impact of a new plant investment, assuming nothing else changes, is a necessary early step.

But what happens next is very important. Any new supply, (gas, wind, solar, coal, or nuclear), has integration and transmission needs which are managed with a range of strategies. Understanding when a new plant will operate, how much transmission is needed, whether there will be exports to neighboring utility areas—those are all are central considerations to finding the value of the new plant.

Some solutions, like building new transmission to deliver from supply-rich areas to population centers with demand, require time and money. Limiting over-supply by dispatch and turning down more expensive supplies is expected and normal but can reach the point where too much of a good thing becomes its own challenge. A lot of new wind in an area with plenty of hydro and existing wind, for example, needs transmission and export options if there aren’t any fossil-fuel units to turn down.

What is role of fossil fuel in oversupply and curtailments?

Whenever demand is not at its highest, some generation is idle. When grid operators believe that flexibility and ancillary services are available only from fossil units, they keep fossil generation running, even if that crowds out renewable generation.

To get this flexible reserve from a gas generator, the unit is turned on and run at least at its minimum level. For combustion turbines, that minimum production level is generally 35% of generator capability and 70% for a combined cycle plant. Because that flexibility is only available with the unit producing at or above those levels of energy, running combined cycle units at 70% will crowd out renewables, causing more curtailment. This has been verified in Hawaii and California, as well as replicated in studies.

How does this affect the future growth of wind and solar?

Expectations of curtailment will discourage both the buyers and seller of future renewable generation. When existing contract structures focus on maximum energy production, the value proposition is to sell more commodity into increasingly well-supplied situations. In these cases, both supply and demand interests are bypassing the opportunity to operate renewable resources for ancillary services and reserves.

Where a utility has more insight and ability to adapt reserves practices, more techniques can be developed to make greater use of the renewables.

As more wind and solar are built, we will see high penetrations of renewables with relatively lower demand and resulting lower prices during more hours.  These are the times when the ability to obtain ancillary or essential services from renewable generation is most important and most beneficial to pushing gas offline. This also coincides with when the risk of curtailment is greatest.

What’s holding back the solutions we can implement?

It’s not an issue of technology. Storage and renewable energy technologies can provide essential services, ancillary services, or reserves. These capabilities in wind and solar have been demonstrated by technology providers,  illustrated by industry experts, and even narrated by the California ISO to its Board. The trajectory of advanced storage on the grid, providing reserves and services around the world, is narrated in these slides.

Where do we go from here?

The contracts and revenue structures used today are the obstacle. Bilateral agreements between buyers and sellers to a different contract would make the difference.

Examples from the industry offer alternatives. Contracts for conventional generation function without assuming all revenue is based on production. Contracts for energy storage are emerging for capacity and performance, with revenues separated from total hours of utilization. When confronting the challenge of expanding the role of wind and solar in the energy supply, the revenue model used by other technologies that provide services other than commodity energy will be useful.

For folks that want to take this gradually, perhaps start with a contract that splits the payments during the year. In the months with curtailment risk, capacity payments make sense. The rest of the year, use energy payments to maximize production.

As the grid supply changes, and wind and solar are a larger fraction of the supply, the buyers and sellers of renewable energy will want to maintain the highest values for the renewables installations. A key strategy for pushing the fossil energy out of the dispatch is to make the fossil generators redundant and unnecessary. When the fossil units are being used for ancillary services, and wind or solar is curtailed, let’s make the problem become the solution. Cut the fossil generation, use the curtailment of the renewables, and thereby increase the demand for more wind and solar.