The Glass Ceiling on Solar

It is exciting to see how solar is developing as a technology and competitive energy source. Costs continue to come down at an aggressive rate. Installations are skyrocketing. We’re crossing meaningful milestones… We just witnessed the millionth rooftop installation of solar.

Forward leaning cities like San Francisco, San Diego and Santa Monica are pushing even further. SF and Santa Monica are mandating solar for new construction. San Diego set a goal of 100% renewable power by 2035.

The momentum is strong and there is seemingly no stopping solar’s trajectory.

Except, there’s a problem.

There’s a ceiling on solar unless we incentivize, develop and deploy new solutions to break through it.

Here’s why. There is decreasing marginal value to every new deployment of solar. Some call it the Duck Curve problem. It also has to do with the fact that solar energy is “use it or lose it”.

The chart below depicts how this plays out. It’s hand-drawn, and loosely based on the CAISO load curve. The gray line represents the current load profile. The blue dashed line represents generation to support “baseload” from utilities’ most highly utilized generation assets. The orange lines represent different stages of solar penetration in a market.

  1. In stage A, the ITC, net metering and solar advocacy drive the first meaningful penetration of solar on a grid. The utility may not love the new dynamics, but it can relatively easily accommodate the new solar production.
  2. At stage B, solar represents an increasingly meaningful generation source in the market. When the sun sets, the utility needs to manage steeper ramping of other generation to support peak load. Intermittency issues are magnified. The utility starts bearing real costs and pushes regulatory efforts to request relief.
  3. By stage C, solar production is digging into the utility’s baseload, turning a highly efficient asset into an operational headache. The utility is dealing with real challenges that bear significant costs, borne across a shrinking base of non-solar subscribers. Regulatory efforts by the utility are intense at this point. Net metering at a retail rate is under fierce, legitimate assault from the utility. The utility is exploring changes to rate structure such as residential demand charges and time of use rates.
  4. Stage D represents the point at which more solar is being produced than is being consumed at that time. Unless technology has been developed and deployed to 1) store the energy (batteries), 2) move the energy to another grid, or 3) shift load from later in the day to when solar is generating, the generated solar energy goes to waste.
Unless we get ahead of it, there is a ceiling on solar.

You might say, “Sure, but we’re a long way away from solar hitting any real walls like these.” But we’re not. In advanced solar markets like California and Germany, we’re seeing it happen.

In California, the grid is starting to encounter the scenario where solar is producing more energy than the grid needs. It has happened several times already. In these scenarios, the grid operator cuts panels off the grid, leaving the excess energy “on the shop floor”.

It’s been happening in Germany for some time now. Believe it or not, Germany curtailed 1,581 gigawatt-hours of renewable energy in 2014. That’s staggering and a sign that investment in renewables is getting ahead of the market’s ability to deal with renewables’ generation profile.

You may think I’m making a case here for slowing down deployment of renewables. I’m not. At all. I’m highlighting a real and growing issue that threatens to derail solar’s momentum if left unaddressed.

By the way, wind is in the same boat. In Texas, Germany and elsewhere we’re seeing cases of market saturation without outlets to otherwise deploy the excess energy.

It’s crazy at this point to push renewable generation without contemplating storage, demand management and/or new transmission.

Whether through incentives, rate reform, carbon tax or some other structure, we need solutions to break through the ceiling atop renewables.

More active discussion about storage and demand management is warranted and wanted. Given what’s at stake, the press around the issue has been relatively soft voiced. We need broader understanding. We need industry, activists, legislators and entrepreneurs engaged. The challenge and opportunity ahead are massive.

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