Minnesota study finds it cheaper to curtail solar than to add storage

Source: By Peter Maloney, Utility Dive • Posted: Friday, January 25, 2019

A report on Minnesota’s renewable energy potential challenges what has become a common assumption about energy storage and the curtailment of solar power generation.

The Solar Potential Analysis (SPA) report found that wind and solar power could serve 70% of Minnesota’s electrical load in 2050, but “additional capacity coupled with energy curtailment is considerably less expensive than, and a viable alternative to, long-term or seasonal storage in a high renewables future.”

Essentially, “it is cheaper to overbuild solar than it is to add enough storage to avoid curtailment,” Josh Quinnell, senior research engineer at the Center for Energy and Environment and a contributor to the report, told Utility Dive. “That is not to discount storage. Storage is still important,” he added.

“We don’t have all the answers, but certainly the results challenge traditional thinking.”

Josh Quinnell

Senior Research Engineer, Center for Energy and Environment

The report, in fact, found that storage is a significant part of a high renewables future because it expands the dispatch capabilities of wind and solar assets and can smooth out the intra-hour variability of solar and wind generation. But, especially at higher levels of renewable penetration, it is more cost effective to overbuild a solar power facility than it is to add enough storage to offset the risk of solar power being curtailed during periods of peak output, Quinnell said.

“We don’t have all the answers, but certainly the results challenge traditional thinking,” Quinnell said. In most current conversations, “curtailment is to be avoided at all costs,” but the report found that “curtailment is a viable strategy.”

Ramping up to 70% renewables

The Solar Potential Analysis report is a modeling tool that estimates and optimizes the generation cost and resource capacities of solar power in Minnesota. One purpose of the SPA is to provide a framework for moving the state toward a more renewable future. The report is being used to model the generation costs of achieving the goals of Minnesota’s Solar Pathways program.

The Solar Pathways initiative is sponsored by the Department of Energy’s Solar Energy Technologies Office. It is a three year project designed to explore least risk, best value strategies for meeting the state’s solar power goals, which call for 10% of Minnesota’s electricity to come from solar by 2025, ramping up to 70% from solar and wind power by 2050.

The SPA report was prepared for the Pathways initiative and the Minnesota Department of Commerce by Clean Power Research, Morgan Putnam and Marc Perez.

It found that Minnesota could achieve its 10% solar goal at costs comparable to the cost of natural gas generation. Specifically, it found the cost for 10% solar by 2025 ranged from $33/MWh to $66/MWh. The lower-end of the range is a factor of the variable cost of natural gas generation and the upper end is a factor of the levelized cost of a new gas-fired plant.

Within that scenario, it would require 5 GW of solar power with no energy storage capacity to meet a minimal production standard that takes into account the dispatch of wind and must-run resources. If solar power is used to match forecasted day-ahead needs, 6 GW of solar and up to 2 GWh of storage would be needed.

The SPA report also found that expected cost declines of solar, wind and storage resources would be sufficient to enable Minnesota to meet its 70% by 2050 target at a cost comparable to the cost of natural gas-fired generation.

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The 70% scenario calls for between 14 GW and 22 GW of solar power, 12 GW to 22 GW of wind power, between 4 GW and 25 GW (16 GWh to 50 GWh) of storage, and 8 GW to 9 GW of other generation, yielding an overall cost of $37/MWh to $59/MWh.

“The [more] frequently we can take energy out of a battery, the more effective it is.”

Josh Quinnell

Senior Research Engineer, Center for Energy and Environment

That finding is particularly notable, according to the authors, because they used a high standard to model the 2050 scenario. They required that renewable resources would be able to meet 70% of needs for every hour, not just meet 70% of average load. That makes the 70% target more equivalent to a 100% target, Quinnell said.

The SPA report says the state’s optimal storage capacity is about 200 GWh, which is significant, but “one-hundred fold less than existing studies of 100% renewable energy suggest.” In addition, the report says that “energy curtailment is key to minimizing generation costs …  because energy curtailment significantly reduces the need for storage capacity.”

“The [more] frequently we can take energy out of a battery, the more effective it is,” Quinnell said.

The SPA approach, notably, does include storage for intra-hour load shaping, but not for curtailment. The report also found that the strategic use of “other generation” resources during brief periods of low wind and solar production could “significantly” reduce the amount of solar, wind and storage resources used and could reduce generation costs by nearly half.

In “other generation” the report authors include existing non-renewable resources or imports from MISO. For economic modeling purposes, other generation was assumed to be existing gas-fired resources.

To build or to overbuild

There could be a scenario where solar penetration is at 80% and “it is so cheap you don’t need all your energy,” David Shaffer, executive director of the Minnesota Solar Energy Industries Association, told Utility Dive. “I don’t think anyone would be opposed to overbuilding,” he added, “but how do you do that in a way that is financeable.” The results of the SPA study are “incongruent with the way solar projects are typically financed,” Shaffer said.

If a utility just pays for the output of a solar project, the uncertain revenue stream can make financing very difficult. Lump sum payments and dispatchable output that avoids curtailment was one of the key features of the recent low cost power purchase agreements signed in Hawaii by Hawaiian Electric. “If you can’t offer firm capacity, you are not going to get a good contract,” Shaffer said.

If state law or policy in Minnesota were to mandate utility curtailment because the SPA report says it is a good idea, “we would oppose it because it would ruin financing going forward,” Shaffer said. “If a utility were able to say, ‘we are going to take your energy, but curtail it,’ it would be hard to finance a solar project,” he said.

“Storage is just starting here.”

David Shaffer

Executive Director, Minnesota Solar Energy Industries Association

In Minnesota, however, curtailment is currently not a risk for solar developers because solar projects in the state are built under the buy-all, sell-all provisions of the Public Utility Regulatory Policies Act as long as they remain under the 20 MW threshold. As Shaffer points out, under that scenario, there is currently no incentive in Minnesota to use energy storage to make a renewable project dispatchable.

Where storage does work in Minnesota, Shaffer said, is in reducing demand charges. He pointed to solar-plus-storage facility being built by Connexus Energy, an electric cooperative based in Ramsey, Minn., that includes a 10 MW solar array and 15 MW, 30 MWh of energy storage. It is the first utility-scale energy storage project in Minnesota and the largest for an electric co-op in the United States.

“Storage is just starting here,” Shaffer said, noting that there is a bill now at the legislature that would require utilities in the state to include energy storage in their resource plans.