The downside of cheap renewables

The downside of cheap renewables

Europe’s love-affair with renewable energy is still going strong: this month, Germany set a new record by briefly generating 87 percent of its total energy needs from renewables, while Portugal went one better by running on 100 percent renewable energy for a 107-hour period. 

Sounds like good news, right? Well, on one level, of course, it is: the more clean energy the world uses, the better. But Europe’s successes also highlighted a potential problem now looming for utilities, renewable-energy developers, and clean energy investors. As Germany began to lean more heavily on hydro, solar and wind power, its lumbering baseload power-plants were left producing more electricity than was needed, forcing them to pay to dump their surplus energy onto the grid. That sent the country’s electricity prices plunging into the negative, with major commercial customers literally being paid to dial up their power consumption. 

The episode was partly due to the nature of conventional baseload generation: coal and nuclear plants take time to change their output, and can’t respond nimbly to fluctuating demand. But it also speaks to a fundamental problem with intermittent renewable-energy sources: as wind and solar start to make up a bigger proportion of a grid’s total supply, plant operators become more vulnerable to energy gluts sparked by dramatically windier or sunnier weather. “As more solar comes on line, there’s going to be a surfeit of electricity on sunny summer days, meaning no one will want to buy yours. You will have to sell it cheap if you can sell it at all,” explains Michael Le Page in the New Scientist

The big concern is that if the energy supply becomes over-saturated with weather-dependent intermittent renewables, both developers and investors might begin to see the sector as fundamentally unprofitable. “Rather than being something to celebrate, this is a sign of a serious economic problem that could bring the renewables revolution grinding to a halt,” warns Le Page. 

And while American grid operators aren’t yet paying customers to use electricity, some are edging dangerously close to that point. In Texas, which produces more power from wind than any other state, many residential customers benefit from packages that allow them to use as much electricity as they want for free after 9pm each night, when demand typically dips but utilities’ wind-turbines keep spinning.

Part of the problem for Texan utilities is that the Lone Star State, unlike most of the lower 48, has an electricity grid that is operated essentially independently from those of neighboring states. Unable to sell excess electricity to energy-hungry neighbors, Texan clean-energy providers are forced to resort to creative but un-lucrative schemes such as discounted off-peak services. 

Temporal shifting of energy demand isn’t inherently a bad thing: increased off-peak usage brings a corresponding decrease in peak-period usage, meaning that grid operators can get away with building fewer expensive peak-load power plants. “That is a proverbial win-win for the utility and the customer,” says Omar Siddiqui, director of energy efficiency at the Electric Power Research Institute. 

Still, there’s little question that energy providers would prefer to sell their electricity rather than giving it away — or, worse still, paying customers to take it off their hands. Fortunately, there are a few potential solutions to the problem. One is to keep making wind and solar cheaper to install, allowing companies to wring profits out of their installations even as energy prices fall. More efficient solar panels, for instance, might allow electricity to be generated at a lower cost, allowing developers to eke out a profit even in an energy market saturated by intermittent renewables. 

Utility-scale energy storage will also have a role to play, by helping companies to smooth out dips and surges in their energy supply. Storage is currently an expensive and technologically challenging option, although there are some interesting projects underway: Novatec Solar spinoff FRENELL issued a report this month claiming that its molten-salt thermal-storage technology could deliver stored solar energy at a price competitive with electricity from coal power-plants, while a lithium-ion battery project built by S&C Electric Company in Ohio also looks promising

Such projects could eventually prove game-changers, but for now there are plenty of wrinkles still to be ironed out. In the meantime, the most straightforward way to address renewable-energy gluts would simply be to improve regional energy transmission systems: after all, if Texas wind farms could shunt their surplus energy to consumers in neighboring states, or even further afield, there would be no need to give it away for free.

Researchers at the National Oceanic and Atmospheric Administration and the University of Colorado at Boulder envision a nationwide “energy interstate” — a sort of free market for energy spanning the entire country. Besides shoring up prices for renewables, that would dramatically reduce the need for grid operators to use fossil fuel power plants to top up their supplies when local wind and solar supplies are scarce. In total, the researchers estimate, a national energy-transmission network would reduce energy-sector emissions by a whopping 80 percent within 15 years. 

If that sounds like pie in the sky, take another look at Europe. One day last summer, unusually high winds saw Denmark produce 140 percent of its energy needs from renewable energy. Grid operators didn’t panic, or resort to paying their customers: instead, they plugged into a regional transmission system, and quickly sold their surplus to consumers in Germany, Norway and Sweden. “It shows that a world powered 100 percent by renewable energy is no fantasy,” says Oliver Joy, a spokesman for the European Wind Energy Association. 

That’s true enough — but it also shows the work that still needs to be done if renewable energy companies and investors are to profit from the new reality. Fortunately, U.S. energy companies appear to have gotten the memo: they’re expected to invest $47.9 billion in transmission projects through 2025. That might not be enough to provide the kind of flexibility enjoyed by Denmark’s grid operators, but it is a big step in the right direction.

Ben Whitford is the US correspondent for The Ecologist. He has written for the Guardian, Newsweek, Mother Jones, Slate, and many other publications.


Originally published on May 25, 2016