Last Updated on April 7, 2021 by Mary Pressler
by Leonardo David for Quick Electricity
Just two decades ago, solar panels and wind turbines were not cost-effective for electricity production. However, they are now among the fastest growing power sources around the world. In many cases, solar and wind power can now achieve a lower kilowatt-hour cost than fossil fuels. These renewable sources also reduce the environmental impact of power systems, since they produce no carbon emissions while operating.
In spite of their economic and environmental benefits, solar panels and wind turbines bring an important technical challenge:
- Sunlight and wind cannot be controlled, and the electricity generation of these systems is constantly changing. For this reason, they are referred to as variable renewable energy, or VRE.
- Solar panels and wind turbines can deliver low-cost electricity with zero emissions. However, VRE sources by themselves cannot meet the power demand peaks that occur in Texas during summer.
An electricity grid must have balanced generation and consumption, or the power supply becomes unstable within seconds. If power generation cannot keep up with a sudden peak in consumption, voltage and frequency drop below their normal values of 120V and 60Hz. A disturbance like this trips electrical protection devices at substations, disconnecting large portions of the grid. Electricity production must be flexible enough to keep up with changes in consumption, and this is not possible with VRE alone.
How to Make the Power Grid More Reliable
An electricity grid is only reliable if it has power plants that operate on demand. Among all generation methods, hydroelectric turbines and natural gas turbines are the best suited for this task. Both turbine types can respond very quickly if power consumption starts to increase, and the electric supply can keep up with demand.
- Hydroelectric power plants make the grid more reliable, but finding a suitable site for these projects is challenging. Even when a site is available, there is a significant environmental disruption during the construction phase, and the project permit is not guaranteed. The reservoir of a hydropower plant also floods the surrounding ecosystem, and the facility blocks the natural movement of water.
- Natural gas power plants are not demanding in terms of site conditions, but they produce carbon emissions. However, they release around 50% less carbon dioxide than coal-fired power plants.
Coal and nuclear power are normally used as baseload power plants, since they have a constant but inflexible electricity output. In other words, their electricity output is stable, but it cannot be ramped up to meet a sudden peak in consumption. The limitation of these power stations is different from that of solar panels and wind turbines, but they are also unreliable for meeting peaks in demand.
Stabilizing Power Grids with Large-Scale Battery Systems
Energy storage systems have the potential to provide ancillary services to the grid, but only if their cost can be reduced. The International Renewable Energy Agency (IRENA) estimates that battery systems could become around 60% cheaper by 2030. This is like the challenge faced by solar panels and wind turbines before their cost was reduced to competitive levels.
Large-scale batteries are viable when the owner is paid directly for grid stabilization services, such as frequency control. They can also store electricity when prices are low, and supply it back to the grid when prices are high, which is called energy arbitrage. However, grid stabilization services are much more profitable.
South Australia has had excellent results with a 100-MW and 129,000-kWh Tesla battery, which had a cost of around US$66 million. However, the profit comes mostly from grid stabilization, and not from energy arbitrage. A similar approach could be used in Texas, and batteries can help prevent “spikes” in the kilowatt-hour price, like those in August.
The Electric Supply Challenge in Texas
Texas has a wholesale electricity market, where the megawatt-hour price (1 MWh = 1,000 kWh) is constantly changing based on supply and demand. The price drops when there is an excessive supply, and it peaks when there is high demand. The electricity price limit established by ERCOT is $9,000 per MWh, equivalent to $9 per kWh.
On August 2019, there were times when demand was high due to air conditioning loads in thousands of buildings, while production was low. This caused electricity prices to surge throughout Texas, reaching the limit of $9,000/MWh.
Homes and businesses have two main options to reduce power bills. One option is reducing their energy consumption, while the other is producing their own energy locally. Both options reduce the net consumption measured by power companies, but there are important differences:
- When building systems are upgraded with energy efficiency measures, their electricity consumption is reduced permanently.
- The performance of onsite generation systems depends on the specific technology used. For example, solar panels are very productive around noon, but their output is much less in the early morning and late afternoon.
In spite of the high electricity prices in August, electricity costs in Texas are average compared with the rest of the US. For example, tariffs above 20 cents per kilowatt-hour are the norm in California and the Northeast, while Texas only experiences them in summer. On the other hand, Texans can often get electricity plans below 10 cents per kilowatt-hour. This reduces power bills in the long run, but it also extends the payback period of solar power systems:
- For residential solar power systems in the US, you can expect to pay around $3 per watt of installed capacity. This means a 10-kW system will cost around $30,000.
- The 30% federal tax credit for solar power reduces the net cost to $21,000.
- A 10-kW solar power system will likely produce around 15,000 kWh per year in Texas. This is worth around $1,800 for a Texas household paying 12 cents/kWh, and the payback period is between 11 and 12 years.
- However, the same yearly energy output is worth $3,000 in a state with electricity tariffs of 20 cents/kWh. The payback period is shortened to 7 years in this case. Even shorter payback periods are possible, depending on local incentives.
From the financial standpoint, energy efficiency measures tend to perform better for homes and businesses in Texas. Energy efficiency also reduces consumption permanently, while solar panels are ineffective at night and on cloudy days.
In the specific case of Texas, energy efficiency measures for air conditioning systems have the most potential: they reduce power bills for building owners, while reducing the power grid burden for ERCOT. Electricity consumption is reduced, and a lower demand on the grid reduces the chance of “spikes” in the kilowatt-hour price.
Stabilizing the Texan power grid in 2020 can represent a challenge, since demand is constantly growing and network upgrades are expensive. There are many viable measures to make the electricity service more reliable – some target the generation side, while others target the consumption side.
Power generation must be flexible to offer stability, but not all generation systems have this feature. Solar panels and wind turbines are too variable in their energy output, while nuclear and coal power plants are inflexible. Only gas turbines and hydropower can keep up with sudden shifts in supply and demand, and energy storage is emerging as a viable option.
The stability of the power grid can also be improved with energy efficiency at the point of use. One efficient building may not have a significant impact on the total grid demand, but the effect is cumulative. For example, if 1000 buildings cut their demand by 25 kilowatts on average, the burden on the power grid is reduced by 25,000 kW.