Solar’s Growing Pains - Part 2: Is Solar Reliable?
What Grid Critics Get Right and Wrong About Solar
Introduction
In my last post, I covered criticism against solar receiving subsidies. Today, I’ll evaluate what I believe to be solar’s biggest flaw – its reliability.
There are two main reliability arguments I see solar critics make.
1. Solar’s intermittency makes it unreliable
2. Not only are solar plants unreliable, they actually harm the economics of reliable units. This forces them to retire and leaves the grid more vulnerable
I’ll take these arguments one at a time.
Argument #1: Solar’s Intermittency Makes It Unreliable
Intermittency vs Reliability
Solar intermittency being an issue is widely accepted by solar advocates. What I see a lot of reluctance around is using the word “unreliable”.
Ask a solar proponent, “Is solar unreliable?” and you’ll almost always get an answer with a caveat: “Yes, but…” or “Yes, when…”
Yes, but only during the day.
Yes, solar irradiance is as predictable as it gets. Solar is very predictable and performs when the sun is out.
But if I had to answer the question with no caveats and no qualifiers, the answer would be:
No, solar is not a reliable resource.
What Reliability Actually Means
A reliable resource is one that you can count on during a grid emergency. We cannot count on solar during all grid emergencies.
Solar is predictable.
When solar is supposed to be on, it performs very well. When it’s a hot day in Texas and you’re worried about the strain on the grid, you can count on solar to pull its weight.
But when a grid event occurs outside of the summer months, you can’t rely on solar.
And I get it, it’s a spectrum. Gas isn’t fully reliable either. Look at Winter Storm Elliot when the gas pipelines froze. But still, it is more reliable than solar.
If you believe that the grid is short capacity, and you look at the interconnect queue, you do not get reassured seeing a massive tsunami of solar. Instead, what reassures you is seeing gas and batteries in the mix. You want baseload and you want dispatchable.
Argument #2: Solar Harms the Economics of Reliable Units and Forces Retirements
The Critics’ Narrative
Imagine this: You are a coal plant that relies on a few revenue streams. One is energy payments for producing energy. The second is capacity payments for being available to produce energy if a grid emergency occurs.
Suddenly, a ton of low cost (subsidized) solar hits the grid driving mid-day energy prices to zero or even negative. Now the coal plant gets way less energy revenue and is forced to retire.
The grid is less one reliable plant that is available when the grid needs it. In return, it gets several solar plants that don’t turn on when we need them to and will likely be unavailable when needed.
This is the story solar critics like to paint.
Reality Check: Solar Didn’t Kill Coal
My Take: Yes, solar plants harm the economics of reliable units. No, solar did not force reliable units to retire.
The above story may be happening today. But, solar is not the reason a majority of coal plants have had to retire in the past. Gas is.
The graph below shows this.
Ask yourself this:
Was it really that sliver of solar that killed coal? Or was it the resource that was cleaner, cheaper, and more dispatchable?
Gas was better than coal in nearly every way. Yes, renewables did play a part in putting coal away, but only after natural gas did most of the damage.
Where We Are Today
With that being said, people are concerned about the present. And currently solar, in combination with wind, is driving retirements and even preventing new buildout of gas.
New build gas is not happening in competitive markets like PJM for a variety of reasons, one of which is that solar and wind are depressing the forward energy prices.
Gas is now suffering from the same market forces that allowed it to outcompete coal.
Why the Market Isn’t Fixing Itself
We have a situation where a less reliable resource (solar) is preventing a more reliable resource (gas) from being built.
Why? Because the less reliable resource is more cost competitive than the more reliable one. Gas can’t compete against renewables on cost.
But, shouldn’t the market properly reward reliability and not just reward cost?
The market does reward reliability, but not in a way that new-build needs to be rewarded in order to obtain financing.
That is the major flaw and where things break.
It’s the Markets that Need Fixing
Competitive markets like PJM give new-build the chance to earn scarcity energy pricing and provides 3 years of visibility on a capacity price (1 year now with all the delays).
But, it doesn’t give a long-term fixed price, which new-build needs to obtain financing.
The markets that do give this are CAISO and ISO-NE with 10-year RA contracts and 5-7 year FCA contracts.
It is PJM and ERCOT’s market constructs that are a huge part of the problem.
Conclusion - Generation, Not Capacity
Solar is not reliable, but it was never supposed to be. Solar was meant to provide a ton of generation during the day and has done so at an incredibly low cost.
There is a lot of added complexity with solar. Let’s not pretend that planning a grid around power plants that run for 20-30% of the year is as easy as planning power plants that run 60% of the year and can run 80%+ if needed.
But this added complexity comes with the benefit of lower energy costs and vastly lower emissions. That is the tradeoff.
Yes, reliability is top of mind right now. But you don’t get to the grid of the future by immediately penalizing your cheapest and cleanest resource. You get there by first fixing market designs that aren’t properly incentivizing new reliability.