‘Peaker’ Gas Plants May Have Peaked After All

Source: By Nathaniel Bullard, Bloomberg • Posted: Thursday, July 16, 2020

A new study by three California utilities is good news for solar-plus-storage developers.

An undated artist's rendering of an 8minute solar-plus-stroage project.

An undated artist’s rendering of an 8minute solar-plus-stroage project. Source: Business Wire via AP Photo

The findings are striking and significant for California’s future electricity mix, and really for the future of any grid aiming for, say, 100% carbon-free electricity by 2035. The study determined that wind energy will have a 19% effective load carrying capability in 2022, a wonky way of understanding how much wind power can get from plant to the grid in moments when the grid needs it most. A 100-megawatt wind power plant, in other words, would be capable of supplying 19 megawatts of energy.

That value is fairly stable out to 2030. Add four hours’ worth of energy storage in the form of a battery and it performs better. But that’s still far from a natural gas-fired power plant that can almost always be relied on to generate its peak capacity if needed.

Solar is not wind. Industrial-scale installations are close to useless at managing electrical load when the risk of blackouts is highest, and it gets even worse at residential-scale, with an effective load carrying capability of just 4% in 2022.

But add four hours of energy storage and solar’s capabilities change dramatically. A solar project with four hours of storage in 2022 will have a 99.8% effective load carrying capability—essentially a total ability to ensure the grid remains reliably supplied with power. That value declines slightly over time, as more solar comes on line, but by not much.

From the Bottom to the Top

California effective load carrying capability (ELCC) for solar PV applications

Source: Southern California Edison

Note: California Independent System Operator (CAISO) total

There’s a reason for the wind and solar disparity here. According to the California utility study, solar can be better counted on to charge a battery so that it’s ready when needed. Wind isn’t as consistent, and thus doesn’t have the same reliability.

First, and fairly obviously, the findings are good news for solar-plus-storage developers such as 8minute Solar Energy and AES Corp. The disparity between solar with and without storage suggests that storage will become all but universal in solar projects in future years.

Equally important is what this study implies for any other technologies meant to keep the grid operating with a very high percentage of renewable energy—and for natural gas in particular. As I wrote a few weeks ago, the future of gas plant development looks like a lot of small “peaker” plants meant to meet relatively brief periods of high electricity demand, or times when renewable energy generation declines significantly.

But if solar-plus-storage is highly predictable and highly reliable, that’s likely to change the demand for peaker gas plants. California, for instance, has 52 peaker plants, the majority of which typically run in stretches of less than four hours. That means that solar with four hours of storage will compete with those existing peaker plants, challenging the business case for building more of them.

Mostly Under Four Hours

California open cycle gas turbine power plants by hours of maximum peak capacity duration

Source: BloombergNEF

The California utilities’ study isn’t a death knell for gas plants in competitive power markets, where gas-fired power generators are still able to earn high prices at times of peak demand or production shortfall. In Texas, for instance, on-peak average wholesale prices near Houston spiked to $1,858 per megawatt-hour last summer. (As of this writing, the price was $19.83.)

Texas Summers Are Spiky

Houston hub real-time on peak power price

Source: Genscape

Note: Ercot ISO Nodal Houston hub real-time interval on-peak average price. Bloomberg ticker ERH215ON GENS Index

What I expect we’ll see in the future is more and more developers building solar power projects with energy storage attached, and potentially fewer developers willing to take the other side of that bet by building peaker plants. High reliability can now be a feature of renewable-plus-storage operators’ business proposal. It’s also still a feature for peaker gas plants, but with fewer operational hours per year in which to recoup investment, the business case becomes more challenging to make.

Nathaniel Bullard is a BloombergNEF analyst who writes the Sparklines newsletter about the global transition to renewable energy.