Is 24-hour solar that includes storage cheaper than PV with gas augmentation in the evening? Is this why SolarReserve contracts are over MPR?
This is the second part of an interview I had with Tom Georgis, the SVP of SolarReserve, about the new wave of solar Power Purchase Contracts (PPAs) being signed with California utilities, including theirs. I had noticed that their contracts with California utilities were a bit above the price of BrightSource PPAs without storage. (Part I covered What is night solar worth to California utilities?)
These SolarReserve PPA contracts – which include storage for night solar power – appeared to be for more than 8 or 9 cents a kilowatt hour, the Market Price Referent (the price of a natural gas contract), while BrightSource solar PPAs – without storage – were below MPR.
Since their storage is inherent in their solar, I was seeing if I could find out what that inherent storage is worth, compared to solar with no storage – and how much inherent storage like theirs could displace the need for gas peakers.
How much augmentation capacity might the new solar (without storage) need? (If renewables do not include storage like SolarReserve’s, then they will need augmentation by natural gas peaker plants in the early evening.)
The latest estimates from Cal-ISO – and I don’t think it’s a final report – is that California’s probably going to need at least 2,000 to 3,000 megawatts of capacity – assuming it’s going to be natural gas – to deal with the intermittent issue.
So quantifying that – combining that with PV or wind or direct steam or trough with no storage – I don’t think that that analysis has been fully done yet.
How does California incentivize renewables to produce power when it’s needed – our afternoon/evening peak?
There’s Time of Day pricing in California put forth by the IOUs, so if you are delivering power in the morning – like if you are a PV facility, or direct steam, you actually get penalized a little bit – you get a multiple like point seventy five of your contract price.
But if you are delivering during afternoon/evening peak periods; you get a one point five, one point seven, or even a two point something multiple of your contract price, so your incentive is to deliver megawatt hours during that period.
But California will need additional new storage just to cope with all the new PV?
We certainly think so. We think that having the majority of the 33% being an intermittent resource brings tremendous challenges for the transmission system in California.That either means augmentation from more natural gas peakers or the deployment of storage.
We’re unique in that we have inherent storage in the way our system operates.
Yeah, Kevin Smith told me it’s up to two months! But from the utility’s point of view, is it cheaper to have solar just during the day and to augment that for the evenings by firing up a gas peaker – or is it cheaper to get solar with included storage like yours?
That’s the hundred thousand dollar question that everybody’s wrestling with! There are stakeholder processes going on with the Cal-ISO, with the utility commission (CPUC), and with the California Energy Commission taking a look at that; its going to be an issue in California because they are probably going to have to retire a lot of once-through cooling generation assets.
The best we can do is rely on that NREL study that I told you pegs the value of storage at somewhere between 1.6 and 4 cents per kilowatt hour – and those studies are progressing, so we’ll get greater fidelity around those numbers as the studies progress and more analysis is done.
Our own John Farrel covers more of this cost/benefit analysis of solar with storage)