California is making a lot photo voltaic vitality that enormous industrial operators are more and more pressured to cease manufacturing, elevating questions in regards to the state’s pricey plan to shift completely to carbon-free sources of electrical energy.
Within the final 12 months, California’s photo voltaic farms have curtailed manufacturing of greater than 3 million megawatt hours of photo voltaic vitality, both on the orders of the state’s grid operator or as a result of costs had plummeted due to the glut, in accordance with an evaluation of knowledge by The Instances.
That’s sufficient to energy 518,000 California houses for a yr, based mostly on common electrical energy utilization.
The quantity of curtailed solar energy has greater than doubled from 1.5 million megawatt hours in 2021, state information present, and is up eight instances from ranges in 2017.
The waste would have been even bigger if California had not paid utilities in different states to take the surplus photo voltaic vitality, paperwork from the state’s grid operator present. Meaning inexperienced vitality paid for by California electrical energy clients is shipped away, decreasing payments for residents of different states.
Arizona’s largest public utility reaped $69 million in financial savings final yr by shopping for from the market California created to eliminate its extra solar energy. The utility returned that cash to its clients as a credit score on their payments.
Additionally reaping income are electrical energy merchants, together with banks and hedge funds.
The growing oversupply of solar energy has created a scenario the place vitality merchants can purchase the surplus at costs so low they change into destructive, mentioned vitality marketing consultant Gary Ackerman, the previous govt director of the Western Energy Buying and selling Discussion board. Meaning the photo voltaic plant is paying the merchants to take it.
“This is all being underwritten by California ratepayers,” Ackerman mentioned.
California grid officers warned in 2017 that the curtailments had been an indication that the state was overbuilding renewables and “not financially sound.”
Since then the issue has grown exponentially. As soon as the state curtailed solar energy solely on sunny gentle spring days when there was no need for air-con. Now photo voltaic farms should be shut down even on sizzling summer time days when demand is excessive.
Photo voltaic is the linchpin of California’s plan to generate all its electrical energy from carbon-free sources by 2045, however some vitality specialists query the feasibility of the plan given the state’s incapability to make use of its current photo voltaic capability.
On some days, greater than half the accessible solar energy goes to waste, mentioned Phillippe Phanivong of the California Institute for Vitality and Setting situated at UC Berkeley.
He calculates that the quantity of energy curtailed elevated by 500% between 2017 and 2022 — an increase he known as “alarming.” Throughout that very same time, the state’s renewable vitality era elevated by 40%.
“Can we even get to 100% renewable energy with this growth rate of curtailment?” Phanivong requested.
The photo voltaic glut additionally means greater electrical energy payments for Californians, since they’re successfully paying to generate the facility however not utilizing it.
California’s electrical charges are roughly twice the nation’s common, with solely Hawaii having greater charges. Charges at Southern California Edison and Pacific Fuel & Electrical elevated by 51% over the past three years.
“Ratepayers aren’t getting the energy they’ve paid for,” mentioned Ron Miller, an vitality trade marketing consultant in Denver. He calculates that the retail worth of the photo voltaic vitality thrown away in a yr could be greater than $1 billion.
Officers within the governor’s workplace declined to be interviewed, however issued an announcement saying the curtailments are sometimes due to congestion on transmission strains, somewhat than a statewide oversupply of energy. The state has been spending closely to improve transmission strains to ease the congestion.
“It’s also important to have extra energy resources available that can help the state during periods of extreme weather and historic heatwaves when demand is particularly high, which have happened the past few years,” the assertion mentioned.
The photo voltaic vitality glut was one cause the California Public Utilities Fee, whose members are appointed by the governor, voted in late 2022 to slash monetary incentives for residential rooftop photo voltaic panels.
Properties with rooftop photo voltaic have elevated the curtailments on the industrial photo voltaic farms by lowering electrical demand, mentioned Guillermo Bautista-Alderete, an official with the California Impartial System Operator, which runs the state’s energy grid.
Grid operators should match the quantity of energy being produced to demand to forestall the grid from overloading, he mentioned.
Bautista-Alderete mentioned the state has been in a position to scale back the quantity of curtailed energy by making a broader market the place energy could be despatched to different states. As a result of different states might not want the facility, California usually has to pay them to take it, he mentioned.
Requested how a lot the state has paid utilities in different states to take the surplus photo voltaic, he mentioned, “We don’t track that number specifically.”
Stories from the grid operator, which is also referred to as CAISO, present hints of which out-of-state utilities have benefited.
In 2022, the Public Service Firm of New Mexico paid a mean of $14 much less per megawatt hour when California’s grid grew to become clogged with photo voltaic, in accordance with a CAISO report. That yr, the New Mexico utility mentioned it saved $34 million by collaborating out there California created to eliminate its extra energy.
Different utilities that benefited in 2022 from decreased costs, in accordance with the report, had been PacifiCorp and the Bonneville Energy Administration, which each have headquarters in Portland, Oregon, in addition to Avista Corp., based mostly in Spokane, Washington, and Tacoma Energy.
CAISO, a nonprofit firm, is overseen by a board nominated by the governor and confirmed by the state Senate.
The industrial photo voltaic trade contends that the enlargement of storage capability to financial institution solar energy will ultimately remove the glut.
“Successfully increasing storage and solar together will reduce our reliance on natural gas power plants, helping to meet California’s clean energy goals,” mentioned Shannon Eddy, govt director of the Giant-Scale Photo voltaic Assn., a commerce group.
Eddy acknowledged that curtailments deprive Californians of low cost vitality.
“Other states do benefit, which helps reduce carbon emissions more regionally,” she mentioned.
Some specialists are skeptical that battery storage capability could be expanded shortly sufficient to remove the glut.
Most industrial-sized batteries can retailer energy for simply 4 hours, not lengthy sufficient to final by means of the evening. And when batteries are added to photo voltaic services, the fee is twice as costly as photo voltaic alone, mentioned Andrew Chien, a pc science professor on the College of Chicago.
“They tried all these things, there are all these programs in place, yet curtailment continues to increase,” mentioned Chien, who has led research of the curtailments, together with one printed in January.
Economics upended
To create incentives for corporations to construct that a lot solar energy, a 2018 legislation referred to as Senate Invoice 100 requires utilities and domestically run electrical energy suppliers to buy an growing quantity of renewable vitality, which then turns into a part of {the electrical} combine delivered to clients.
By 2030, 60% of the state’s electrical energy should be from renewable sources.
The state’s utilities purchase most of that vitality prematurely at a hard and fast value set by long-term contracts negotiated with the photo voltaic farms and different renewable vitality producers.
Eddy on the photo voltaic affiliation mentioned these contracts shield ratepayers from value hikes throughout instances of excessive demand. However the contracts may also require electrical clients to pay the fastened costs even when they need to cease producing as a result of the state has an excessive amount of electrical energy.
The Los Angeles Division of Water and Energy says that lots of its contracts include such phrases.
“Curtailed energy is energy that has already been paid for but cannot be used,” LADWP defined in its 2022 strategic plan, which emphasised it was attempting to attenuate the curtailments.
To cease the photo voltaic farms from sending vitality to the grid, CAISO typically calls the operator and orders it to close down, Bautista-Alderete mentioned.
Extra continuously, nonetheless, the software program that operates CAISO’s electrical energy market routinely sends costs plummeting when an excessive amount of vitality is flowing onto the grid, he mentioned. The operator then decides to close all the way down to keep away from shedding cash.
Within the final two years, specialists say, a wierd factor has occurred. When costs fall to $0 in the marketplace, the photo voltaic farms preserve producing. Some preserve producing even when costs plummet to deeply destructive costs, the place they then should pay closely to place their energy on the grid.
Ackerman mentioned vitality producers are prepared to pay to place their energy on the grid as a result of they’re creating wealth elsewhere.
Amongst photo voltaic farms’ revenues are federal tax credit. Miller, the vitality trade marketing consultant, estimated that federal taxpayers paid $54 million to subsidize the two.6 million megawatt hours that California curtailed within the 12 months ending in October 2023.
A good greater income for photo voltaic farms is the so-called renewable vitality credit score, or REC, Ackerman and others say.
Producers of renewable vitality get one REC for every megawatt hour they placed on the grid. Corporations purchase the RECs, permitting them to take credit score for the environmental advantages of that megawatt hour of photo voltaic. A utility or an airline can purchase the RECs after which say it burned much less fossil fuels than it really consumed, a apply some criticize as greenwashing.
As California and different states have required utilities to purchase extra renewable energy, demand for the RECs has skyrocketed. So has their value, from $15 to $75 a megawatt-hour within the final two years, specialists say.
“All of a sudden there was a huge demand” for the credit, Ackerman mentioned.
Meaning a photo voltaic farm can nonetheless earn a revenue even when costs are deeply destructive. Final yr, costs plunged to destructive $145 per megawatt-hour or beneath because the solar was shining, CAISO mentioned in a current report.
Then the solar units. And energy costs can spike to $50, $100 or way more.
This volatility is a gold mine for electrical energy merchants.
“Any fluctuation, any variation, they’re making money off that,” Chien mentioned.
Merchants see revenue
Scores of merchants purchase and promote electrical energy on the wholesale market that CAISO runs.
Lots of the merchants work for utilities attempting to purchase energy on the lowest value attainable. However some, together with banks like Citigroup and hedge funds like Citadel, are usually not distributing energy. They’re out there to generate income.
“These profits are losses to ratepayers,” CAISO officers warned about merchants attempting to gather cash from grid congestion of their most up-to-date annual report.
Consulting companies assist the merchants by intently monitoring knowledge on curtailments, climate and congestion on the grid. They calculate when costs are anticipated to fall after which surge.
“Power traders need to make a living — which means it doesn’t make sense for them to move power from one market to another if prices are the same,” defined Jake Landis at Sure Vitality, a consulting agency monitoring California’s market, in a weblog publish.
One well-liked technique is to purchase energy through the day when costs are low and even destructive after which promote it because the solar units and costs soar as photo voltaic panels cease producing.
The merchants additionally embody these working for utilities in different states, together with Arizona Public Service, which operates a 24-hour buying and selling ground in Phoenix on the lookout for California’s low cost or negatively priced solar energy.
Photo voltaic discipline building increasing
California grid officers say that paying different states’ utilities to take the surplus solar energy is a profit to the setting since it could actually change electrical energy that will in any other case be produced by fossil fuels.
However typically, Arizona Public Service turns off its personal photo voltaic fields to take California’s extra.
“We may make adjustments to our generation to purchase power … at prices that are economically beneficial to customers,” mentioned Yessica Del Rincon, a spokesperson for the Arizona utility.
A few of these initiatives have cleared hundreds of acres of pristine land within the Mojave Desert, the place it has angered native residents nervous about declining property values and environmentalists involved in regards to the lack of wildlife habitat.
“We have this planet to save and they are throwing away power?” mentioned Mark Carrington, a resident of Desert Heart, a city east of Joshua Tree Nationwide Park, which has been practically surrounded by photo voltaic initiatives. “That can upset people.”