Some Rare, Real Talk from a Utility About Competition with Rooftop Solar
insideclimatenews.orgWith a domain like insideclimatenews.org, I feel this article meets my expectations in treating more competition -> less profits as some sort of news.
The major issue we've seen was showcased in Germany [0] where renewable sources simultaneously destroyed profits and drove record high prices for consumers, because they were bought in by a program of subsidies that decoupled retail and wholesale prices. As long as solar demand is driven by actual market forces, then it'll follow the usual market dynamic of more entrants with lower costs leading to lower prices. The only way that can't happen is if legislators roll in to do something stupid, like a special subsidy.
There are also the secondary reliability issues; things like the Texas cold snap a few years ago where wind was so unreliable the contingency plans just assumed it wasn't there from what I recall. But then the reliable generation didn't work either and it was a double whammy into major crisis. That will do weird things to profits, I won't attempt to forecast that one.
[0] I don't speak German so if someone wants to challenge this go ahead, but the prices seemed to speak for themselves.
> As long as solar demand is driven by actual market forces, then it'll follow the usual market dynamic of more entrants with lower costs leading to lower prices
Nope. With actual market forces you end up with Texas-like situations.
The fundamental problem with the electricity market is that as soon as you're not using fossils fuel to produce it, there's a disconnect between what you pay for(energy, in kWh) and what you actually need the supply side to provide (power, in Watt).
When using fossil fuel it's all good because the costs for the producer come from the fuel cost, which is cost for energy. But with whatever else (be it nuclear, solar, hydro, wind…) the producer costs aren't related to energy production but to power installation, hence the market is fundamentally unable to reconcile the two sides.
Exactly, with renewables the marginal cost is zero (once the system is installed producing a kWh is free, no fuel to pay for).
And when marginal cost is zero price goes to zero as well (unless there is scarcity or artificial scarcity thanks to a sort of monopoly or cartel)
This easy to understand: imagine that A and B have invested in capacity production. If A sells at x dollars, B will sells at x-0.1 dollars stealing the market to A. Etc... there is no bottom since the marginal cost is zero.
> Nope. With actual market forces you end up with Texas-like situations.
The Texas situation was low costs leading to low prices.
But the reliability of renewables isn't to a high enough standard so it'll do odd things to the profits of the remaining suppliers. They probably won't drop by as much as a naive prediction would estimate.
> The Texas situation was low costs leading to low prices.
Yes, see the sibling comment: it was low (marginal) cost leading to low price, leading to insufficient investment in anything else that would have been more reliable, leading to crash.
That's because you don't pay for available power, you pay for energy and then there exist situations where the market equilibrium is blackout. Oops, too bad.
The Texas point hurts your argument and you'd be better off leaving it out.
As you pointed out the reliable energy failed, but it was all due to bad regulation and lack of enforcement. IE if Texas had never put up a single windmill they'd still have
Texas, last time I lived there, windmills and all, didn't have high energy prices. Many Texas energy experts do claim windmills do help prices more than hurt them (not an expert myself but living in Houston and working with energy companies this came up a lot).
Indeed, the governor of Texas blamed the green new deal/windmills for the power failures. I was quite surprised to learn that my state, governed by Republicans for most of my life, had implemented any sort of green new deal.
Nevertheless I learned, much to my surprise, that most of the state's natural gas system (which supplies the majority of energy for electrical generation and lots of home heating) had frozen. I (naively) thought that would be impossible since methane doesn't even turn into a liquid at any temperature ever to occur on Earth, but it turns out there's plenty of water mixed in hydrocarbon deposits.
I suspect the governor knew (or could easily have been told) all this, he just thinks he leads a state full of fools, and after a lifetime of observation, I'm inclined to concur.
There's also an aspect where pieces of infrastructure control systems (valves etc) can freeze over externally, and some systems will have cooling system that can't run at too low temperature - Essentially, you have either not enough heat entering the cooling system and the system freezing itself, or the system cooling the heat exchange materials too much thanks to increased efficiency from cold air - freezing the system again. Happens for example when you install in a server room a too powerful HVAC system that can't "dial down" low enough to actual heat that your room gives out, freezing the HVAC heat exchanger resulting in cooling system downtime.
Much of the prices originate from the solar more than 10 years ago. The prices were much different then. But the subsidies arguably jump started some of the global solar industry.
I've been watching the W/$ price charts of solar panels for a while now. I don't think that argument is very good, the price trends are too consistent. It looks a lot like Germany just screwed itself over by being impatient. The AfD vote isn't the sign of a happy voter base enjoying a thriving real economy.
But it is too late now and insofar as there may be a problem, it is one for the Germans.
The W/$ is trending down aligned with log of volume. If there wasn't volume then there wouldn't have been a price drop and vice versa.
The Germans pay but it is most internally circulating money.
The Afd vote is mostly a vote discoupled from reality (xenophobic to begin with).
I dunno, my favourite stats [0] are telling me that the solar market in Germany is actually pretty tame and they ended up going with wind.
The thing about the economies of scale is that usually there is a sort of burning front where there is some niche that an expensive technology makes sense in (like solar in remote sites) followed by slow drawing down of the cost curve and the niches that get filled moving ever more mainstream.
Forcing the issue just resulted in them phasing out a bunch of perfectly serviceable nuclear plants. It hasn't pushed solar along much compared to economic applications of the tech. I mean, maybe China have been doing something stupid to push the market along but it'd be them not Germany.
> The Afd vote is mostly a vote discoupled from reality (xenophobic to begin with).
I am agape at the sloppy thinking people use for their political enemies. Are AfD voters like mushrooms in that it rained a few years ago and they suddenly pop up? People cope with migration if times are good; but they're going to get unhappy when the economy isn't expanding in real terms.
This is the same dynamics as Trump and Brexit. You have these countries with 20%, 30% per capita energy draw downs [1] and then it turns out there is a big local populations who are rather perturbed by the fact that they are being squeezed by the hand of the market and want something to change.
It continues to amaze me how people never try to link the most obvious things that would be upsetting people to the large number of upset people. I promise to stop talking about the AfD now.
[0] https://ourworldindata.org/grapher/share-energy-source-sub?c...
[1] EDIT I'm just going to jump back in and add this graph of GDP v. energy per capita. Some might suspect there is a link of some sort... https://ourworldindata.org/grapher/energy-use-per-person-vs-...
> The major issue we've seen was showcased in Germany [0] where renewable sources simultaneously destroyed profits and drove record high prices for consumers, because they were bought in by a program of subsidies that decoupled retail and wholesale prices.
What do you mean? Showcased when in Germany? What prices are you referring to and in what period of time?
There was nothing said about Germany in the article, I'm trying to understand what you're suggesting here.
I don’t find the quotes shared actually proof of the claims made. Of course rooftop solar messes with utility profits, but the operative question is how. The article seems assume simple 1:1 demand reduction as the driver of lowering profits, but, for example, a larger driver could be a shift from base load generation (cheaper) to peaker generation (more expensive). Another possibility could be net metering laws creating demand for services (usage of utility at night as if it were a giant battery) without actually paying for the cost of utility infrastructure and the services provided by incorrectly equating a kWh as the same no matter when it’s generated.
Full disclosure: I have rooftop solar and also benefit from net metering, so I am not speaking as one who can’t see why the consumer desires those things.
It's quite obvious how solar messes with utility profits. If you generate 1kw of energy, the utility company loses profits on 1kw. And if you feed back to the grid it's even worse, that means you've completely removed them from the equation (temporarily) and instead have excess for them to buy from you.
There is no way power companies and solar rooftop can coexist with one of those seeking to gain additional profits every quarter.
So while I may be incorrect I do believe that power companies should be own by the state/what ever. As it is impossible to have coexistence between a future of renewable energies and microgrids and a company seeking profitability quarter after quarter.
If we don't they'll do exactly what they are doing, increase rates everytime possible, increase level of certification required (new UL codes every year, new weird requirements for wall mounted batteries, building code requirements, etc etc). They'll get new laws passed making it nearly impossible to add solar panels to your house. Taking years to get permits, etc. What ever they need to do.
Surely this is because utilities don't separate the costs of the infrastructure from the cost of the energy. In market based systems like Norway we pay for three distinct items: the energy, the fixed costs of the infrastructure, the cost of transporting the energy (the losses in the infrastructure). So I pay the first item to one company and the second and third to the local company that owns an maintains the infrastructure. The infrastructure owning company will still charge me for the cost of maintaining the infrastructure regardless of how much energy I buy from the energy supplier.
Of course, net metering is a GIANT implicit subsidy for solar.
Even simply allowing to use the grid to co-consume electricity from it while ALSO using rooftop solar for self-consumption, without ability to feed solar power back into the grid, is a small-time subsidy now, and will be a huge subsidy a few years down the road. Because it means rejecting all the cheap energy which utility can produce with solar (which will become nearly free very soon, and is already quite cheap), and consume only the most expensive electricity the utility produces.
Net metering was always meant to be a temporary perk, it will cease to exist soon. Then crackdowns on rooftop solar will follow (people will be allowed to either have an off-grid solar+batteries setups, or use the grid, but not both at same time).
Peaker generation isn't that expensive. Because you have almost no fuel cost.