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3 Factors That Can Accelerate Wind & Solar Adoption
3 Ways Wind and Solar Can Continue To Grow In a 21st-Century Grid
How a holistic view of grid economics can solve the “problems” of renewable energy integration
By Mark Dyson, James Mandel, Ph.D., & Amory B. Lovins
Earlier this year, MIT researchers were the latest in a series of analysts to raise alarm about the perceived limitations of solar PV’s continued growth. In short, these analysts propose that variable renewables will depress wholesale prices when they run, thereby limiting their own economic success. These concerns have garnered coverage in other venues (including Vox, Greentech Media, and The Financial Times), leading observers to suggest that the future prospects for renewables may be dim.
But are these concerns really justified, or do they rely on outdated assumptions ...
<snip>
UNDERSTANDING THE “PROBLEMS”
There has been increasing concern that variable renewables such as wind and solar may face an upper limit to adoption in the U.S. grid. The argument is that large amounts of variable renewables will create excess supply concentrated at the particular times of day when they produce. The notorious “duck curve” is an example of this—the duck-like shape of a particular, daily demand curve modeled for California’s grid when the production of large amounts of solar photovoltaics (PV) is netted out.
Critics argue that this technical characteristic of variable renewables, specifically PV—a daily generation pattern that is not perfectly matched with load—can have economic consequences for all forms of generators, especially the renewable resources themselves.
<snip>
THE OTHER HALF OF THE THOUGHT EXPERIMENT: THREE FACTORS THAT CAN ACCELERATE RENEWABLE ENERGY ADOPTION
Analysts who have put forth these arguments have elaborated only the first half of a microeconomics thought experiment. The problems they hypothesize hinge upon the laws of supply and demand, but omit important aspects of both, drastically overstating the perceived “problems.” Let’s see how.
1) Supply is changing holistically, not incrementally
Many of these thought experiments consider adding just a single supply resource (often solar PV) without considering many of the other supply-side changes happening at the same time. In reality, solar PV, wind, and natural gas are all joining the supply mix in a big way at the same time; the first two are often complementary and the third is dispatchable, so together, they can do a lot to mitigate the “duck curve” often portrayed.
At the same time, retirements of uneconomic assets will provide a countervailing buoyancy to wholesale prices. For example, even though old, dirty plants often have low production costs, they may exit the market anyway due to high costs of compliance upgrades or other fixed costs that erode their profits. The resulting less-abundant supply can cause the marginal supply curve to contract in quantity, leading to higher prices and higher profits for renewables and remaining fossil generators—unless demand drops too, as it’s doing in the industrialized world...
http://blog.rmi.org/blog_2015_11_30_3_ways_wind_and_solar_can_continue_to_grow_in_a_21st_century_gridHow a holistic view of grid economics can solve the “problems” of renewable energy integration
By Mark Dyson, James Mandel, Ph.D., & Amory B. Lovins
Earlier this year, MIT researchers were the latest in a series of analysts to raise alarm about the perceived limitations of solar PV’s continued growth. In short, these analysts propose that variable renewables will depress wholesale prices when they run, thereby limiting their own economic success. These concerns have garnered coverage in other venues (including Vox, Greentech Media, and The Financial Times), leading observers to suggest that the future prospects for renewables may be dim.
But are these concerns really justified, or do they rely on outdated assumptions ...
<snip>
UNDERSTANDING THE “PROBLEMS”
There has been increasing concern that variable renewables such as wind and solar may face an upper limit to adoption in the U.S. grid. The argument is that large amounts of variable renewables will create excess supply concentrated at the particular times of day when they produce. The notorious “duck curve” is an example of this—the duck-like shape of a particular, daily demand curve modeled for California’s grid when the production of large amounts of solar photovoltaics (PV) is netted out.
Critics argue that this technical characteristic of variable renewables, specifically PV—a daily generation pattern that is not perfectly matched with load—can have economic consequences for all forms of generators, especially the renewable resources themselves.
<snip>
THE OTHER HALF OF THE THOUGHT EXPERIMENT: THREE FACTORS THAT CAN ACCELERATE RENEWABLE ENERGY ADOPTION
Analysts who have put forth these arguments have elaborated only the first half of a microeconomics thought experiment. The problems they hypothesize hinge upon the laws of supply and demand, but omit important aspects of both, drastically overstating the perceived “problems.” Let’s see how.
1) Supply is changing holistically, not incrementally
Many of these thought experiments consider adding just a single supply resource (often solar PV) without considering many of the other supply-side changes happening at the same time. In reality, solar PV, wind, and natural gas are all joining the supply mix in a big way at the same time; the first two are often complementary and the third is dispatchable, so together, they can do a lot to mitigate the “duck curve” often portrayed.
At the same time, retirements of uneconomic assets will provide a countervailing buoyancy to wholesale prices. For example, even though old, dirty plants often have low production costs, they may exit the market anyway due to high costs of compliance upgrades or other fixed costs that erode their profits. The resulting less-abundant supply can cause the marginal supply curve to contract in quantity, leading to higher prices and higher profits for renewables and remaining fossil generators—unless demand drops too, as it’s doing in the industrialized world...