Renewables+Storage Begins to Outpace U.S. Natural Gas for Peak Power Supply

Natural gas generators in the United States are beginning to feel the heat from up-and-coming solar plus storage projects, as plummeting renewable energy and battery costs bring new competition to the traditionally pricey market for peak electricity generation.

The news is breaking in the U.S. in the same week that a new Canadian study shows how provincial utilities could save between $17 and $110 per tonne on their greenhouse gas emission reductions by replacing combined cycle natural gas plants with wind, wind plus hydroelectricity, wind with natural gas backup, or bioenergy where it’s available.

“Known as peakers, the natural gas-fired plants are expensive to run, and typically are called into service only when demand rises and regular supplies are insufficient,” the Wall Street Journal explains, in a report picked up by the Institute for Energy Economics and Financial Analysis (IEEFA). “That makes them vulnerable to inroads from lithium ion batteries, which have fallen in price in recent years, and are emerging as a competitive alternative for providing extra jolts of electricity.”

Until now, natural gas peakers have played a crucial role, giving power utilities the capacity to “generate extra surges of electricity during peak hours,” the Journal notes. But that dependency creates a tempting target, particularly in the southwestern U.S., where big battery arrays can usefully “store inexpensive solar generation in the morning, when power demand is low, and deploy it in the heat of the afternoon.”

The WSJ, Bloomberg, and Greentech Media all carried stories this week on a new 15-year contract between Arizona Public Service, the state’s biggest utility, and First Solar Inc., in which a 65-megawatt solar farm in Maricopa County will feed a 50-MW battery and create what Bloomberg calls a “powerful combination for meeting peak demand”.

APS spokesperson Annie DeGraw said First Solar’s bid was “very competitive, and it had the added benefit of being clean”—even though Greentech reports the utility “didn’t set out looking for storage, per se.” The system should be up and running by 2021.

Bloomberg notes that Next Era Energy Inc. finished installing a similar battery system in Florida last week, and California regulators recently mandated Pacific Gas & Electric “to change the way it supplies power when demand peaks,” as the news agency reported at the time. “Instead of relying on electricity from three gas-fired plants run by Calpine Corporation, PG&E will have to use batteries or other non-fossil fuel resources to keep the lights on in the most-populated U.S. state.”

Greentech says the Arizona project “suggests a new paradigm for solar-rich markets: the solar peak power plant,” a configuration that portends “a significant escalation of storage activity” for a utility that currently has storage systems at the single-megawatt scale.

But the shift makes sense to Brad Albert, APS vice president of resource management. “When you look at the desert Southwest, you’re already seeing the growing pains of having so much solar on the system and having to curtail,” he told Greentech. “This is a necessary evolution of how we deploy solar energy and take advantage of what we have in abundance in the Southwest.”

In a separate report released Wednesday, IEEFA looks into nine national and sub-national markets around the world—Denmark, South Australia, Uruguay, Germany, Ireland, Spain, Texas, California, and Tamil Naidu—that are leading the shift to wind and solar.

“Our report shows that on the ground now, and in a variety of markets, these renewable energy leaders have raced ahead of much of the rest of the world in proving how power grids can be readily sourced with up to 50% of their energy from wind and solar,” said IEEFA energy finance consultant and lead author Gerard Wynn.

“As we speak, renewables are being integrated in these states and nations at levels in excess of 10 times global averages by using a menu of options and actions to integrate these clean, low-carbon power sources into electricity markets,” he added. “The tools exist now to spectacularly grow the global generation of wind and solar power worldwide.”