ORIGINAL REPORTING: How Cheap Renewables Block Climate Goals
Geothermal's surprise: Cheap renewables could keep states from achieving climate goals; Planners must think beyond the levelized cost for renewables to the value that each resource brings to the grid.
Herman K. Trabish, January 27, 2020 (Utility Dive)
Editor’s note: The need for baseload generation continues to grow with the penetration of variable and distributed generation and the value of California’s lithium supplies also continues to grow with the acceleration of transportation electrification.
Surprisingly, the plunging cost of some renewables could keep states from reaching ambitious climate goals if planners fail to recognize the higher value in some higher cost renewables.
States like New York, Massachusetts and California with ambitious 2030 renewables and 2045 emissions reduction mandates are starting to find a tension between cost and value. Offshore wind's reliability and emissions reduction values have raised its profile, though it remains more expensive than onshore wind. Now California policymakers are beginning to see the potentially extraordinary, but so far unrecognized value of its geothermal resources.
"We overbuilt natural gas and then we built so much solar that we have solar over-generation, so we have fallen in love with batteries," Center for Energy Efficiency and Renewable Technologies (CEERT) Executive Director V. John White told Utility Dive. "Batteries are great, but planning is too driven by costs, and not enough by the value in meeting grid needs, and not having a balanced resource portfolio could be the Achilles heel of our climate effort."
A debate between the California Independent System Operator (CAISO) and the California Public Utilities Commission (CPUC) is driving a new look at geothermal energy. Unlike solar and wind, geothermal is fully dispatchable. Like offshore wind in New England, it is abundant in the West but has gone underused because of development costs. Those costs, though, may be outweighed by a high capacity factor that can allow it to provide a wide range of grid services, and its brine's potential, being pursued by Warren Buffett’s Berkshire Hathaway Energy and others, to be an unmatched source of lithium for batteries.
"It can be more expensive to add cheap solar than to add expensive geothermal," David Olsen, a member of the CAISO Board of Governors, told Utility Dive, citing a CEERT study that substituted 1,250 MW of geothermal from California’s already developed Salton Sea resource for 3,800 MW of solar in modeling a 50% renewables portfolio.The unsubsidized levelized cost of energy (LCOE) for utility-scale solar is between $32/MWh and $44/MWh and geothermal is between $69/MWh and $112/MWh, according to a 2019 Lazard analysis.
But geothermal’s three times higher capacity factor would save California "$662 million per year in energy and ancillary service costs, $44 million per year in system resource adequacy costs, and $29 million per year in flexible resource adequacy costs," the 2016 CEERT study reported. It would also lower overall "California energy costs" $75/MWh. Even with new storage, geothermal is "over $20/MWh more valuable than solar," the study added. "The PUC’s focus is ‘least-cost resources,’ but California’s grid operator is concerned about meeting the state’s growing early evening peak demand when solar generation is diminishing, Olsen said. The CPUC "is directing the addition of low cost solar, which has almost no value when the grid needs it most."
To meet peak demand, CAISO uses natural gas and imported electricity, Olsen said. Natural gas peaker plants, with LCOEs between $150/MWh and $199/MWh, are costly and exacerbate greenhouse gas emissions. Imports may also increase costs or emissions, but, more significantly, may not be available, he added. Relying on natural gas is "counter" to California’s renewables and zero emissions goals, and "availability of imports are uncertain," affirmed CAISO Vice President for California Regulatory Affairs Mark Rothleder in a December 19, 2019, presentation to the CAISO board… click here for more