I recently had the opportunity to attend the Storage Week conference in Santa Clara, CA. The conference had some excellent presentations focusing on energy storage applications. One topic that came up stood out to me in particular -- a study by consulting firm E3 looking at the concerns with overgeneration.
We’ve previously discussed some of the challenges with renewable power, namely, the intermittancy of wind and solar. Energy storage is one way to help smooth out the variation of renewables. Interestingly enough, energy storage can also be used to mitigate another challenge with renewables: overgeneration.
Overgeneration occurs when “must-run” generation -- that is, intermittent renewables, nuclear power, combined heat and power, run-of-the-river hydroelectricity, and so forth -- exceeds loads. These generators cannot be ramped up and down like conventional fossil-fired power plants, and as a result, they may produce more energy than required by the system at certain times of the day.
The study by E3 finds that this problem, “overgeneration,” is pervasive at Renewables Portfolio Standards (RPS) levels above 33%, and especially when that portfolio is dominated by solar power. Knowing that most states have Renewable Portfolio Standards in place, such as California, which requires the state’s “electric utilities to derive 33% of their retail sales from eligible renewable energy resources in 2020,” it becomes apparent that overgeneration has the potential to be problematic for grid operations.
The problem becomes even more evident when E3 modeled an extreme case in California, a system with a 50% RPS level and with high solar penetration. In such a circumstance, overgeneration must be mitigated over 20% of the day; this amounts to 9% of available RPS energy and reaches 25,000 MW in the highest hour. That’s right: 25,000 MW of overgeneration in a ~50,000 MW system!
Of course, this is another example of a challenge that could be overcome by energy storage. Storage could be used to absorb the overgeneration and then reinject it when load comes back onto the system. Of course, there are still unanswered questions: in particular, how would storage be compensated for this service?
This is where so-called “value of solar” dockets -- state regulatory reviews of the best methodology to calculate the rates paid by utilities to PV customers for net-metering -- come into play. Utility companies face fixed costs in developing a grid infrastructure, such as building a network of power lines, substations, and transformers. The utilities have been arguing that not only are they losing revenues from consumer-owned PV systems, but also that their ability to recover these fixed costs is being harmed as well.
Accordingly, many utilities argue that these fixed costs should be recovered from PV customers through an increased demand charge. Therefore, states’ efforts to determine this so-called “value of solar” has become a hot button topic, forcing the utilities, their regulators, and their customers to take a far more in-depth look at all the costs and benefits of distributed resources as well as the long-term implications on the existing utility business models.
In my opinion, to develop a successful compensation model for storage in overgeneration applications, the determined “value of solar” needs to be broader than “fixed cost” reimbursement for distribution utilities and include all of the costs and benefits received by the utilities when integrating solar. It might result in negative values for solar during overgeneration periods, but with the proper marginal cost signals from the utilities, it could open up a huge market for energy storage products.