Old-old model: Utilities produce the power, you pay them. And shut up.
New Model: Contractor puts solar panels on your roof, for free. Utility has to shut up.
New-new model: Utility asks you politely if they can pay you to put solar on your roof.
Shut the front door!
For the past seven years, CPS has offered residents the ability to put solar panels on their roof under a net metering model—homeowners use the electricity the panels produce and then sell the excess to the grid. This effort has managed to sign up about 2,100 residential and business customers with a combined capacity of 24 megawatts distributed throughout the service territory. Which isn’t bad.
But Raiford Smith, vice president of corporate development and planning at CPS, said there’s a flaw in this strategy. When people consider solar for their rooftops, the main barrier typically has to do with the structural characteristics—the roof has to point the right way and has to support the panels, and there can’t be too many trees around. But CPS noticed that a second barrier loomed much larger: finance. While leasing programs do away with the need for big upfront payments, they still require credit checks and long-term financial commitments, and don’t necessarily offer immediate financial returns. As a result, the rooftop solar program “was just appealing to a very small group and it was tightly clustered in its geographic dispersion,” Smith said. Which is another way of saying that the vast majority of San Antonio residents putting solar panels on their rooftops tended to be well-off people in gated communities in the Stone Oak area. And the fact that an intermittent power source like solar (the sun shines only during the day) is so concentrated in a particular area has made it more difficult to manage the impact on the grid.
So CPS hit on an insight. It could rebalance the grid, and rebalance the rollout of solar, by putting its money where its low-emission plans were. The idea? CPS, which as a municipal utility can borrow money at lower rates than solar installers or homeowners, would start a program. It would make deals with local solar companies, which would buy panels and place them on roofs in the city. These companies would maintain and insure the panels, and reap the associated tax credits. CPS would commit to buy the output of the panels, which would be funneled into the grid, at a price that is competitive with what it pays for electricity from other sources.
And in exchange for offering up their roofs for a 20-year period, homeowners would get a credit on their monthly electricity bills of 3 cents per kilowatt-hour of electricity produced. Smith said a typical customer could get a credit of about $30 per month simply by hosting the panels.
Last week CPS announced that it wanted to place up to 10 megawatts of rooftop solar in its service area through this model—enough to cover some 100 acres, or about 2,000 rooftops. In the first three days after the announcement, more than 2,000 people applied—as many people as had installed rooftop solar in the past seven years. This isn’t an entitlement. Smith said CPS will evaluate each applicant and will put panels on roofs only where the conditions are appropriate.
Now, 10 megawatts of capacity is relatively modest—it’s equal to about 1.5 percent of CPS’s overall capacity. But this is an important and potentially revolutionary step nonetheless, for a few reasons. First, it’s the first large-scale program to pursue this model. (Arizona utility APS is trying a similar pilot program for a much smaller number of homes). If it works, CPS could easily scale it up. Second, it represents an important change in attitude. Typically utilities have fought or resisted the spread of rooftop solar because it cuts demand for their services while still requiring them to maintain the lines and system that feed electricity to solar-augmented homes at night. CPS has found a way to promote distributed solar in its service area without losing any customers.
More evidence that Texas is in Kansas anymore…
Slate again:
In the wee hours of the morning on Sunday, the mighty state of Texas was asleep. The honky-tonks in Austin were shuttered, the air-conditioned office towers of Houston were powered down, and the wind whistled through the dogwood trees and live oaks on the gracious lawns of Preston Hollow. Out in the desolate flats of West Texas, the same wind was turning hundreds of wind turbines, producing tons of electricity at a time when comparatively little supply was needed.
And then a very strange thing happened: The so-called spot price of electricity in Texas fell toward zero, hit zero, and then went negative for several hours. As the Lone Star State slumbered, power producers were paying the state’s electricity system to take electricity off their hands. At one point, the negative price was $8.52 per megawatt hour.
–At 3 a.m., wind was supplying about 30 percent of the state’s electricity, as this daily wind integration report shows. And because the state is an electricity island, all the power produced by the state’s wind farms could only be sold to ERCOT, not grids elsewhere in the country.
That gave wind-farm owners a great incentive to lower their prices. The data show that the clearing price in the real-time market went from $17.40 per megawatt-hour for the interval ending 12:15 a.m., to zero for the interval ending 1:45 a.m. Then it went into negative territory and stayed at zero or less until about 8:15 a.m. For the interval ending 5:45 a.m., the real-time price of electricity in Texas was minus $8.52 per megawatt-hour.
How could this be? I mean, even the most efficient producer couldn’t afford to provide electricity for free or pay someone to take it.
Well, there’s one more wrinkle. Typically, wind is bid at the lowest prices—because you don’t need fuel, it doesn’t really cost that much money to keep wind turbines moving once they’ve been built. But wind operators have another advantage over generators that use coal or natural gas: a federal production tax credit of 2.3 cents per kilowatt-hour that applies to every kilowatt of power produced. And that means that even if wind operators give the power away or offer the system money to take it, they still receive a tax credit equal to $23 per megawatt-hour. Those tax credits have a monetary value—either to the wind-farm owner or to a third party that might want to buy them.
As a result, in periods of slack overall demand and high wind production, it makes all the economic sense in the world for wind-farm owners to offer to sell lots of power into the system at negative prices.
Only in Texas, folks. Only in Texas.
As the video at the top of the page shows, that last statement is flat wrong.
Although the story is reported as “news” in Slate, it’s not really new. The Energy Information Agency discussed this phenomenon a year ago.
In addition to wind curtailments, the regional supply and demand imbalances caused real-time wholesale electricity prices at the West Hub in ERCOT to drop, and even go negative, during periods of substantial wind generation. The negative West Hub prices (see graph below) reflect the region’s local oversupply of wind power compared to its electric demand and the inability to move the excess wind power to other areas with more demand. Negative prices occur when generators are willing to pay for the opportunity to continue generating electricity.
Houston, 20 April (Argus) — Increasing wind power penetration in Texas brought the return of negative real-time power prices during low-load hours in March as the state extends its lead in wind generation.
The Electric Reliability Council of Texas (ERCOT) said wind output on the evening of 19 February hit a record 11,154MW, or 83pc of the more than 13,000MW of installed wind capacity.
ERCOT set a wind penetration record of nearly 41pc when wind output was 10,308MW while total load was just 25,400MW in the early morning hours of 29 March.
Such high wind penetrations have pressed real-time power prices down to zero or slightly negative on several occasions, ERCOT president Trip Doggett told board members recently. Negative prices were seen on at least three nights during the last week of March.
Negative prices were a common complaint in ERCOT before the 2013 completion of a $7bn network of high-voltage lines, dubbed the CREZ lines, that allowed abundant wind power from west Texas to flow to the state’s power-hungry cities.
Pre-CREZ negative pricing resulted from transmission congestion and was generally limited to ERCOT’s west price zone where a majority of the state’s wind farms operate. Factoring in federal tax credits and state renewable energy certificates, wind farms could make money even when power prices were negative.
Such prices ended in late 2013 when the CREZ lines were energized.
Unlike those negative prices, Doggett said recent negative pricing was seen across all ERCOT price zones.
“That will have a significant impact on decisions that all generation owners will be making at that time,” Doggett said.
ERCOT’s vice chairwoman Judy Walsh asked Doggett what impact rising wind penetration will have on baseload generation. “What is middle of the night going to look like if we have that much intermittent resource?” Walsh asked. “Will the resource mix stay the same or will the baseload not be there?”
Doggett said ERCOT controllers were comfortable operating the system at 40pc wind penetration, but the agency is working on several fronts to determine how much wind “is too much.”
New transmission lines in the system are helping move West Texas wind to new markets, and, hopefully, will mean fewer instances of negative pricing.
Negative pricing is happening all over the place as renewables blow up the standard business models that electric utilities have relied on for more than a century. And as prices continue to drop for wind and sun, subsidies will cease to matter.
So much craziness in these two tales, it is difficult to know where to begin!
Let’s start with the first story about the machinations of CPS to use homeowners roofs to place solar panels. This, I think, is pretty illustrative of just how crazy is the notion of rooftop solar, at least from the viewpoint of a utility.
Homeowners are receiving an underwhelming $30.00 per month to host panels on their roof. That appears to be their only benefit, as they are receiving way less than what the utility would pay another utility for power at a wholesale rate, and they are not using any of the power generated on their roofs in their own homes.
The utility, meanwhile, is basically paying for the installation costs of rooftop solar, and the administrative expenses of dealing with the contractors and the State of Texas and municipal entities and the customers. They also have to pay evaluators to assess every property for suitability, and to choose which sites will be accepted into the program. They are also paying for whatever hardware improvements are needed to handle each and every house added to the plan.
And this is happening in Texas, a state which is overflowing with sunlight and empty spaces! Try to get your head around the breadth of this stupidity! Every home needs a custom install, a whole set of expensive electronic components, electric lines and meters installed and maintained to connect to the system, and a $30.00 outgoing payment every month.
The only people who are making any money in this boondoggle are the PV system manufacturers and the installer teams. They are happy as pigs in… Texas.
Why don’t they simply buy or rent an empty field and put up acres of panels there for a small fraction of the cost of doing what they are doing?
The reason has to do with the romance of rooftop solar and customer relations; and absolutely nothing to do with cost-effectiveness.
The second story line in this post is about negative pricing, a bizarre artifact of the nascent renewable energy utility industry to the ‘problem’ of too much renewable electricity being pushed into the grid.
You know how in business, they love to say that any problems are not problems, they are opportunities? Well, in this case they are absolutely correct. There is no such thing as too much renewable energy. And we are going to have excess renewable energy in larger and larger amounts as we quite properly overbuild our energy farms so that they can provide adequate baseline power even on poor days for generation (low sunlight, wind, or tide).
Eventually, we will come up with the best ways to use that ‘excess’ electricity – perhaps with flywheels, electrolysis of water to hydrogen, pumping water uphill, compressing air. Co-generation looks like a very good idea – producing heat as well as electric juice in the same plant, and using that heat communally. Very very efficient.
Could you provide anything that would give an estimate of the price difference for similar install sizes using larger plants? Not for this project obviously. Also wouldn’t larger plants defeat the purpose of trying to spread out the solar generation.
current best prices for solar are in the 5 cents per KWH range, and falling.
http://climatecrocks.com/2015/08/21/the-weekend-wonk-newest-texas-energy-boom-is-solar/
http://climatecrocks.com/2015/08/25/solar-coming-on-strong-in-texas-and-across-the-country/
As reported recently by Climatecrocks the Austin, TX electric utility has been investing in large scale solar PV. Out here in far west Texas El Paso Electric is doing the same. Next year ELP Electric will be completely divested from coal-powered electricity.
At the same time however ELP Electric is asking for a rate increase requiring rooftop solar homeowners to pay a higher basic monthly service charge. They promise ‘transparency’ at the public hearings. Transparency seems to be hard to come by in these proceedings.
http://archive.elpasotimes.com/news/ci_28772704/el-paso-electric-wants-increase-charges-solar-homes/
I put solar panels on the roof and have not paid for electricity for two years. We do not have any subsidies or government support but sell my surplus to the power company at NZ$0.10 and buy power when I need it at NZ$0.39. Its the best investment I have made and gives me a capital return of 15%. http://www.climateoutcome.kiwi.nz/clean-energy-alternatives.html