Solar plus storage spells doom for gas peakers

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Renewables paired with storage could see gas peakers become a rarity, only selectively and sparingly used in systems with challenging limitations or localised constraints.

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Solar generated power is now broadly acknowledged not only as the cleanest form of generating electricity but also the cheapest – a fact established by a number of competitive power purchase auctions in different parts of the world.

There is, however, a big catch. Sun does not shine continuously, 24/7, or as predictably as does a nuclear, natural gas or coal-fired plant – although these plants also occasionally fail, and when they do it can be massively disruptive due to the sudden and significant loss of generation, which must be instantly compensated for.

The rapid growth of solar generation over the past decade, mostly from utility-scale but also distributed solar, has resulted in frequent episodes where there is an excess supply of capacity during mid-day sunny hours followed by a precipitous drop as the sun sets at the end of the day – the famous California Duck phenomenon, which is appearing in different versions in other parts of the world.

To counter this cyclical pattern of solar feast and famine, grid operators have mostly relied on natural gas peaking plants, or peakers, to balance variable generation and load. Wind, of course, is also variable and must also be balanced with other flexible forms of generation to keep the grid reliable.

As described in a related article in this issue, the need for flexibility has grown in importance due to the increasing variability of renewables, primarily solar and wind – both of which tend to follow particular patterns yet are not fundamentally dispatchable.

Flexibility, of course, can come from the supply or the demand side. As the cost of energy storage systems (ESS) drops and the technologies improve, however, they are expected to play an increasing role in balancing supply and demand.

One obvious approach that is gaining traction is to pair the sun and the wind with storage from project inception – not as an afterthought, as is currently the case.

Instead of investing in a massive wind farm or solar plant in isolation and relying on the grid operator to balance the load and generation, why not include storage at the same site with the purpose of providing more-or-less a steady, reliable supply of generation to the grid.

Grid operators, no doubt, would be relieved and be willing to pay a premium. Bottlenecks on the transmission network will be reduced.

For these reasons, the co-mingling and co-locating variable renewable generation and storage is likely to take off. And when and if that happens, the need for peaking gas- fired plants is likely to diminish.

Over time, according to one line of thought, gas peakers will become a rarity, only selectively and sparingly used in particular locations or systems with challenging physical limitations or localised operational constraints.

There is encouraging evidence supporting this line of thinking as described in an article titled Big Batteries Are Taking a Bite Out of the Power Market by Russell Gold, which appeared in the 12 Feb issue of The Wall Street Journal.

In the article, Jim Robo, NextEra’s CEO is quoted telling investors that utility-scale batteries can provide power “for a lower cost than the operating cost of traditional inefficient generation resources.”

As further proof, Fluence Energy LLC in a joint venture with AES Corp. and Siemens AG is building the largest lithium-ion battery in Long Beach in Southern California, reportedly 3 times the size of the ESS built last year by Tesla Inc. in South Australia. Referring to the storage system John Zahurancik, CEO of Fluence, is quoted in the WSJ article:

“It really is a substitution for building a new peaking-power plant,” adding, “Instead of living next to a smoke stack, you will live near what looks like a big-box store and is filled with racks and rows of batteries.”

In other words, batteries, quiet, non-smoking, and presumably safe, would be much easier to site in urban centers than peaking plants – solving the not-in-my-backyard (NIMBY) problem. Any vacant parking lot in the city center will do. And having storage in the midst of a load center is a big plus.

What is likely to make ESS cost competitive is that peakers are infrequently used and only for limited number of hours, sometimes as few as 100-300 hours per year. This means that they are hard to justify economically.

And they are not particularly clean or efficient when they do operate. In the past few years, they have lost revenue from the fact that the historical pattern of mid-day peak demand hours has vanished with the rise of free solar generation in a number of key markets.

Their primary role in places like California has shifted to the late afternoon hours when the sun goes down and the peak demand occurs – the 3-hour ramping opportunity in the “California Duck.”

Citing EIA data, the WSJ article says, “a new gas-fired peaking plant could generate electricity for about $87/MWh.” By contrast, a subsidiary of Xcel Energy Inc. recently ran a competitive solicitation for solar-plus-storage projects and received multiple bids with a median price of $36/MWh, according to the WSJ article.

Commenting on the record-low auction price, Ben Fowke, CEO of Xcel Energy is quoted in the article saying,

“I could see in 10 to 15 years where you have 30% of what is traditionally a peaker market served by storage.”

Batteries, of course, are already used in power grids but their application to date has been mostly limited to provide regulation services such as stabilizing voltage and frequency – something batteries are exceedingly good at delivering – but not for filling in the gaps in variable renewable generation, say for 1-4 hours.

The WSJ article reports that the PJM Interconnection, the biggest US market operator, already uses batteries to provide about a quarter of its regulation services.

Moving forward, of course, ESS are expected to get much bigger and far cheaper than they currently are. The

WSJ article quotes David Hart, a professor at George Mason University saying, “Peaker replacement is the biggest market they (grid operators) have in sight.”

How soon are we likely to see the changeover? Not until the cost of ESS drops substantially and their capabilities improve significantly.

Estimates on when that may happen vary, but the crossover point is probably not too far off, certainly within 5-10 years depending on the response time, duration, capacity, number of charge/discharge cycles, the overall efficiency – that is how much energy can be extracted as a percentage of what was put into the ESS in the first place – parasitic losses, etc.

Some ESS technologies such as pumped hydro are far more advanced, come with large storage capacity and are proven while others such as compressed air energy storage (CAES) or flywheels are further off from commercial-scale deployment.

Being a heavily regulated business, regulators and policy makers play critical roles in how ESS technologies evolve and how soon and in what form (s) they may be deployed (related article on page 21).

Not surprisingly, several states including California with a mandated 1.3 GW storage by 2020 are pushing forward as are others such as New York and Massachusetts who are considering similar schemes, all driven by the need to meet their RPS targets.

Sunny Arizona, which is also pushing ahead at higher renewable penetration levels, is considering a 3 GW storage mandate by 2030.

In case you are still not convinced, in Jan 2018, California regulators ordered Pacific Gas & Electric Co (PG&E) to consider ESS rather than gas-fired peaking units.

The decision was driven by the conclusion that the former would be cheaper than the latter. Even the regulators, not always the first to know anything, have figured out this one.

It is not particularly good news for gas turbine makers such as GE and Siemens. They can, however, use the time to shift strategy to storage before it is too late.

Perry Sioshansi is president of Menlo Energy Economics, a consultancy based in San Francisco, CA and editor/publisher of EEnergy Informer, a monthly newsletter with international circulation. He can be reached at [email protected]

Source: EEnergy Informa. Reproduced with permission.

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23 Comments
  1. Joe 6 months ago

    Siemens have already seen the writing on the wall with their overhaul of their power and gas business. They see no long term future in building new Gassers.

  2. Kevan Daly 6 months ago

    Nobody is going to mourn the passing of gas peaking plants. They were just very expensive insurance policies against grid price spikes.

    • Andy Saunders 6 months ago

      Well, not really. The capital costs are pretty low, which makes them useful. What you don’t want is them being strategically bid into the market because they are part of a larger generation firm that occasionally has monopoly power.

  3. Askgerbil Now 6 months ago

    While waiting for Energy Storage System prices to fall there is an interim technology that can fill the void very quickly.

    For each 100 kWh of renewable energy stored in lithium-ion batteries, about 95 kWh are available on the discharge cycles. Pumped hydro storage is not nearly as efficient, returning only about 80 kWh for each 100 kWh stored.

    Another strategy is to use the renewable energy to be stored to convert waste into syngas in a plasma gasifier. This synthetic fuel replaces natural gas burned in gas power plants. This reduces waste-to-landfill, cuts consumption of natural gas, and returns over 200 kWh of electricity for each 100 kWh of renewable energy stored in this process.

    Problem solved. See examples of this technology in use – http://blog.gerbilnow.com/2018/03/efficient-renewable-energy-storage.html

    • Jon 6 months ago

      All the information I can find (which is only press releases and OpenNEM) is saying Hornsdale Power Reserve is running at around 80%, similar to pumped hydro.

    • Alexander Hromas 6 months ago

      our pumped storage round trip efficiency is too high look at the losses: penstock 2%, turbine 12%, generator 3%, transformer 2% total 19% i.e. 81% for say pumping. Losses on generation will be the same so overall efficiency 64% and these are optimal values for ideal sites!

      • solarguy 6 months ago

        Everything that I’ve read on PHES is that it’s 70% efficient round trip. So what, if it is powered by free renewables, who cares and what’s your point. There is always going to be losses!

        On efficientcy, modern ICE engine 28%, coal powered plant 33%, the rest is waste heat.

        Batteries 85-95% efficient

        • Alexander Hromas 6 months ago

          Renewable energy is not free its minimum cost is the levelised cost i.e. capital to build plus maintenance divided by the total energy produced over the “life” of the investment, typically 25y.
          Pumped hydro has a part in any grid it is used quite a bit in the coal fired grid that we have right now to overcome the limitations of fossil fuel pant. It will be important in the future to back up renewables. The 80% comes from a statement made by that well known power systems engineer M Turnbull and I am sick of it being repeated by folk who should know better

          • solarguy 6 months ago

            PHES life is up to 100yrs so what’s this about 25yrs.

          • Alexander Hromas 6 months ago

            That is the period most economic studies use. Much of the plant will be obsolete at the end of that time e.g. the Snowy scheme upgraded almost all of its turbines after 25 years with resultant upgrades of transformers swithchgear and generators. Yes this all represents less than 10% of the total build. No economic model is perfect

        • Alexander Hromas 6 months ago

          To get round trip efficiency to 70% you would need to get the one way losses to 16%. The penstock, generator & transformer losses are at the very lowest end of the scale so the turbine losses would have to be 16%. I doubt if you will find a machine with this performance. All of the losses are site specific. I expect that say Snowy 2 with its 32km pressure tunnel will have significantly higher penstock losses and probably higher turbine losses that the ones I have quoted.

          • solarguy 6 months ago

            Your missing the point, it doesn’t matter if it’s powered by free energy. Of course there is capital cost considerations and snowy 2 doesn’t appear worth it, but if you build a PHES plant it must make economic sense and a lot will. For two reasons they must use RE as the fuel is free for one.

          • Alexander Hromas 6 months ago

            That was never the point of my comment I simply indicated that based on my extensive engineering experience the efficiency of pumped hydro is being overstated. It is a very useful low carbon system in a grid with any level if renewable penetration and in tandem large batteries it will relegate gas peaking plat to history

  4. Brunel 6 months ago

    Strange that we do not know the cost of storage. It should be public info if the project is taxpayer funded.

  5. solarguy 6 months ago

    I agree with everything that has been said in this article, but we have a problem with methane,from sewage, animal and food waste. Billions of tonnes of methane escape into the atmosphere every year, a very bad and potent green house gas. We can burn it to turn it into CO2……………aaarhg………….not ideal, but it could be a power source for electricity, ocean going ships, heavy aircraft, heavy freight trains, rocket fuel and cooking.

    I have always been in love with solar, wind and storage and always will be………….but we need to do something about this problem, very bloody soon. It isn’t going to disappear!

    • Alexander Hromas 6 months ago

      Trains and cooking are easy. Electirify the rail network as Queensland did years ago and power with renewables switch to electric cookers and ovens most ovens already are and induction cookers offer better control than gas

      • solarguy 6 months ago

        Did you ever hear of gas BBQ’s? Ever tried to cook on an induction cook top in the bush while camping and gas fired water heaters while doing same.

        And something you still haven’t addressed is what are we going to do with the methane problem?

        • Alexander Hromas 6 months ago

          I did not intend to answer all of your questions. Most of us camp in the bush for very short periods compared to our normal lives. I for one use renewable fuel (wood) when so doing as for hot water direct solar heating is very efficient and electric heating with PV cells and heat pumps is now cheaper than gas. Methane form animal husbandry and farming is an ongoing problem with few solutions right now but that is not an excuse for not grabbing the low hanging fruit in the de-carbonising the economy problem

          • solarguy 6 months ago

            Some people use wood, I have but I have also used gas. What I was eluding to if that wasn’t obvious is that is a market for bio gas as a direct substitute for NG and LPG. Methane is produced by humans too, so it’s not just a matter of grabbing the low hanging fruit, is it, we have big problem.

            This may come as a surprise to you but I design PV power systems for a living and I also sell SHW systems. Now you can use PV to run a heat pump, but you’re taking generation away from other more useful loads like a/c. My E.T. SHW system provides hot water for over 95% of the year for free and doesn’t steal power from my battery and it’s cheaper than a H/P.

          • Alexander Hromas 6 months ago

            No problem I have used SHW for 30 years and PV systems at 2 properties for 15 years. Recent studies indicate that the cost of heat pump plus adequate PV is similar to SHW but have not delved into that one. Bio gas has some drawbacks as a large scale distributed energy system. One client for whom i consult uses it directly on site to power IC engines driving generators to provide all their electricity energy needs plus some export

          • solarguy 6 months ago

            On distribution, every major town has a sewage treatment works, the gas can be made and stored on site to fill 9kg and 45kg bottles and bigger and sold locally increasing employment. The main storage tank can keep enough for local power generation mostly for times of inclement weather or peak needs in a micro grid scenario.

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