No More Ducking the Duck: Negative Electricity Pricing Comes to America
April 10, 2017
In commercial-scale electricity generation, the duck curveis a graph of power production over the course of a day that shows the timing imbalance between peak demand and renewable energy production.
- Solar capacity on the California Independent System Operator (CAISO) system spiked last year, leading to negative prices at times when output is highest but demand is not.
- According to the U.S. Energy Information Administration, total solar capacity in California (including both distributed and utility-scale systems) grew from less than 1 GW in 2007 to nearly 14 GW by the end of last year.
- The rapid growth has led to low power prices in March, when energy demand is relatively low and solar production is high. On one day last month, real-time CAISO prices dipped below $0/MWh for roughly six hours, EIA said.
There is more evidence that the rapid growth of renewable energy is causing upheavals in organized power markets.
Power prices in CAISO plummeted last month, at times going negative, compared with average prices from $14/MWh to $45/MWh during the same time periods in recent years.
EIA explains the negative prices materialize when generators with high shut-down or restart costs are forced to compete with other generators to avoid operating below equipment minimum ratings or shutting down completely.
“Large price spikes immediately before and after mid-day periods when both utility-scale and distributed solar generation reaches its peak level suggest a need for dispatchable generation sources to help cover ramping periods, when the need for power from the grid to meet load is rapidly changing,” EIA concluded.
On March 11th, the California power grid broke 50% solar power for the first time – when considering ALL sources of solar power in the state:
Additional generation from customer-sited solar generators installed in California (such as those on residential and commercial rooftops) further adds to the total solar share of mid-day electricity generation. As of December 2016, utilities in CAISO reported 5.4 gigawatts (GW) of net-metered distributed solar capacity. EIA estimates that this capacity would have generated approximately 4 million kilowatthours (kWh) during the peak solar hours on March 11. This level of electricity reduced the metered demand on the grid by about the same amount, suggesting that the total solar share of gross demand probably exceeded 50% during the mid-day hours.
Per the EIA, there are multiple reasons why March is the season most probable for negative wholesale rates, including one unique to this year – heavy amounts of hydroelectric power due to flooding this winter. The other major reason is that spring and fall are low demand seasons due to the temperate climate not needing as much heating or cooling. Solar will produce more electricity in the summer – but the high demand of summer means the solar is a lower overall percentage.
California is expected to add a similar amount of solar power in 2017 – and is showing no signs of slowing down after this year. Curtailment will become a bigger issue and an opportunity for energy storage.
Battery investors will build to have access to $0/MWh solar power during the daytime – so they can later sell it from 3-6 PM as the duck curve grows driving the cost of energy to more than triple the full day average.
Note: not just California. Deep Red Texas is rapidly sliding into the Renewable age.
In Texas, wind farms are generating so much energy that some utilities are giving power away.
Briana Lamb, an elementary school teacher, waits until her watch strikes 9 p.m. to run her washing machine and dishwasher. It costs her nothing until 6 a.m. Kayleen Willard, a cosmetologist, unplugs appliances when she goes to work in the morning. By 9 p.m., she has them plugged back in.
And Sherri Burks, business manager of a local law firm, keeps a yellow sticker on her townhouse’s thermostat, a note to guests that says: “After 9 p.m. I don’t care what you do. You can party after 9.”
The women are just three of the thousands of TXU Energy customers who are at the vanguard of a bold attempt by the utility to change how people consume energy. TXU’s free overnight plan, which is coupled with slightly higher daytime rates, is one of dozens that have been offered by more than 50 retail electricity companies in Texas over the last three years with a simple goal: for customers to turn down the dials when wholesale prices are highest and turn them back up when prices are lowest.
It is possible because Texas has more wind power than any other state, accounting for roughly 10 percent of the state’s generation. Alone among the 48 contiguous states, Texas runs its own electricity grid that barely connects to the rest of the country, so the abundance of nightly wind power generated here must be consumed here.
Wind blows most strongly at night and the power it produces is inexpensive because of its abundance and federal tax breaks. A shift of power use away from the peak daytime periods means lower wholesale prices, and the possibility of avoiding the costly option of building more power plants.
“That is a proverbial win-win for the utility and the customer,” said Omar Siddiqui, director of energy efficiency at the Electric Power Research Institute, a nonprofit industry group.
For utilities, the giveaway is hardly altruistic. Deregulation in Texas has spurred intense competition for customers. By encouraging energy use at night, utilities reduce some of the burdens, and costs, that the oversupply of wind energy places on the power grid.
Similar experiments are underway elsewhere.