Myth of the month: Gas generators are needed for reliability

March 12, 2020

Myth of the month: Gas generators are needed for reliability

The Haynes Generating Station in Seal Beach, California. Photo by John Sullivan, Flickr cc.

As California moves toward a 100 percent clean power supply, the rapid growth of wind and solar power has many people wondering how a modern, 24-7 society will still have reliable power. After all, wind and solar are only available when the wind is blowing and the sun is shining.  

The conventional wisdom is that gas-fired power plants will be necessary to provide power in dark and windless hours. Only gas, they say, has the flexibility to ramp up and down, following the variability of wind and solar generation and power demand throughout the day.

It has become a popular talking point for the natural gas industry, that “natural gas is the foundation for renewables.”  

But that conventional thinking is increasingly being challenged by alternatives.  

How the grid works now

To understand the future power system, we should start with the present.  Electricity demand in the CAISO region (the California Independent System Operator, which covers most of California) rises and falls every day, from a minimum of about 18,000 MW in the early morning hours to a peak of as high as 50,000 MW, typically around 6:00 pm. Patterns change by season, with higher peaks in the summer driven by air conditioning. (You can follow along here, in real time.)

Demand is met by an army of generating plants, in California and around the West.  They range from huge hydroelectric and nuclear plants down to rooftop solar panels.  Nuclear, geothermal, and biomass plants are typically run at a steady rate, while wind and solar generators vary with the strength of the wind and the sun. Other plants are turned up and down to meet demand — called “balancing” — usually gas and coal plants.  

Power plants are also operated to meet local needs, support power quality, and reduce grid congestion. And a significant part of California’s power is imported from neighboring states, especially as demand picks up in the afternoon. Much of this comes from dams in the Pacific Northwest or from coal, gas, and renewable plants around the region.  

Alternatives to Gas

As we move toward a completely clean power system, the challenge will be to integrate wind and solar power without using fossil fuel plants for balancing.  

Fortunately, there are many options, with varying costs, capabilities, and ease of implementation.  Changing system operations and market rules have typically been the cheapest options, followed by more flexible load and supply, then building new transmission lines, and lastly, energy storage.

But things are rapidly changing, and California is on the forefront of those changes.

Source: 21st Century Power Partnership, as of May 2014.

Batteries and storage

Thanks to the growth of electric cars, battery prices have plummeted in the past decade.  They can be deployed at any scale, from single batteries in a home to thousands clustered near a power plant.  California is home to some of the largest battery installations in the world, and state law mandates construction of 1,325 megawatts of storage by 2020. As a point of comparison, EBCE has already contracted for 130 megawatts of battery storage.

Batteries are starting to be used as direct replacements for “peaker” plants, fast-acting turbines or engines that supply power only during peak periods.  EBCE’s project to replace the Jack London Square power plant with batteries is a notable example.

Batteries can provide higher value when they are distributed near customers. EBCE is partnering with other Bay Area CCAs to share the cost of up to 30 megawatts of distributed batteries, including some sited in commercial properties and multi-family affordable housing.  

A Bigger Grid

Another part of the solution is a bigger grid. A highly connected power network smooths out the variability of load and of wind and solar generation, making everything more predictable. Moving wind and solar power around the region can replace the need for local gas generation. 

Making a more connected Western grid could require more physical connections — power lines — as well as greater integration of markets and operations.  CAISO’s Energy Imbalance Market (EIM) makes it easier to do last-minute balancing, which reduces curtailment of renewable energy and cuts carbon emissions. Over the last five years, the EIM has prevented one million MWh of renewables from being curtailed, and prevented 433,000 tons of CO2 emissions.

Responsive load

Another growing alternative is “demand response,” where customers vary demand in response to requests (and payments) from retail suppliers. Most often this means cutting demand during peak periods, but it can also mean shifting demand to soak up daytime solar power.  Factories and air conditioning can be big sources of demand flexibility. Customers in CAISO provided 2400 MW of flexible demand in 2018, about 5 percent of peak demand.  

Rate design can reduce demand when prices are high and encourage demand when prices are low. As California sees more and more solar power, mid-day wholesale power prices are crashing, sometimes going negative.   New “time-of-use” rates being rolled out in 2021 will have much lower daytime pricing, while evening prices will increase. Giving the right pricing signals can encourage customers to shift demand to lower-cost hours, for loads such as electric vehicle charging. 

Overbuilding and curtailment

Lastly, while turning down solar and wind generators seems like a big waste of clean energy, it is often the cheapest way to balance the grid.  CAISO has been increasingly curtailing solar power, especially in the spring months when there is low demand and lots of hydropower and solar power.  As solar becomes the least-cost power source, it may be cheaper to simply build more panels to meet morning and early evening load, and pay to curtail it mid-day, rather than build batteries. Research by E3 for The Nature Conservancy has found developing 6000 megawatts of solar in the San Joaquin Valley and curtailing it at certain times is cheaper than building new transmission lines to more remote sites.

The Squeeze

While the technical solutions are plentiful, financial issues pose their own complications. Here too alternatives to gas may be smarter.  

In the conventional strategy, gas plants jump into action to fill gaps in wind and solar generation.  But research by Bloomberg New Energy Finance shows that in a scenario with 50 percent wind and solar generation, the use of gas plants (their “capacity factor”) will fall in half.  If power plants make their living by selling power, their income will plummet.

So gas plants will instead have to get paid for their availability.  That availability is called “capacity,” or in California, resource adequacy (RA).  While RA payments are currently only a small part of total revenues for a typical gas plant, in a high renewables future they may have to make up a majority of their value.  But as RA values rise, batteries, demand response, and other options will also benefit.

The other coming squeeze on fossil fuel gas plants is California’s 100 percent clean energy mandate, from 2018’s SB 100.  The law specifies that all power must be carbon-free by 2045, with 60 percent from renewable sources by 2030. A portion of the remaining 40 percent will probably come from existing large dams, leaving the potential for natural gas paired with carbon capture and storage (CCS).  

Such plants are being tested, like the NET Power plant in Texas.  But while the technology seems viable, CCS will increase the cost of gas power, again exposing it to competition from cleaner alternatives.

It’s clear that solar power will be central to California’s clean energy future.  But what will fill in the rest of the picture is unclear. In the end, the cheapest and cleanest options for integrating renewables will be the winners.