Solar plus Storage is Displacing Natural Gas Peaker Plants

By Shayna James | Sep 8, 2020

Falling prices and increases in efficiencies have brought solar + storage into direct competition with fossil fuel sources of power generation. Over the past decade solar power plants have gained wide adoption due to dropping panel prices and the long-term cost advantages of solar over fossil fuel power generation. The Achilles heel of solar however, has always been the unreliability of the sun. This immutable constant rendered solar an unsuitable standalone replacement for the coal or natural gas peaker plant. With rapidly falling battery prices over the last five years however, the addition of battery energy storage to solar has become not only economically viable, but has also resulted in the displacement of the natural gas peaker.

Video Disk
Few times in history has one technology begun to
displace another and in turn get displaced so rapidly.

Few times in history has one technology begun to displace another and in turn get displaced so rapidly. The displacement of coal by natural gas began around 2016, when gas prices began to drop and climate change began to take center stage in our collective consciousness. While it would be nice to attribute the bulk of this shift to our environmental altruism, the truth is that natural gas is simply much less expensive than coal, and re-invigorating an ageing coal peaker plant made less sense than replacing it with natural gas. Less than four years later, the natural gas peaker finds itself sliding into obsolescence much faster than its long-standing coal counterpart.

Out of the total power generation capacity added to the grid in 2019, the SEIA reported that 40% of it was solar. Global annual solar installations grew from 16 GW in 2010 to 105 GW in 2019. Solar has enjoyed a sustained growth rate of 49% per year since 2010, a feat that can be attributed to two major developments: the technological advancement of battery and solar panel technologies, and the falling prices of both.

Solar panel and battery storage prices began to fall precipitously in 2015. Today panels cost 89% less than they did in 2010, and storage prices dropped an equally impressive 84% over the same period. Panel costs continue falling as modules improve their efficiency. Battery prices are predicted to drop 64% between 2020 and 2040.

The main cost driver of a fossil fuel peaker plant is that in order to meet peak demand, it needs to be fully manned and in operation 24/7. The PEAK coalition reported that in the past decade, peaker plants cost ratepayers an estimated $4.5 billion just to be on standby, and are utilized for only a few hundred hours a year. Contrast that with a solar + storage peaker that requires minimal human supervision and does not need to be constantly refueled, and a strong argument emerges for solar + storage for peak power generation.

Natural Gas Plant
The PEAK coalition reported that in the past decade, peaker plants cost ratepayers
an estimated $4.5 billion just to be on standby, and are utilized for only a few
hundred hours a year.

Today it is more economical to build new renewables generation sources than to run existing coal or to build new natural gas plants. By 2032 it is predicted that the cost of building new solar + storage plants will be lower than the cost of running existing natural gas plants. This means that 90% of the currently proposed natural gas plants which would come online by 2032 will become uneconomic to operate by the time they are brought online. There is no need to wait until 2032 to see this begin to play out, however. In 2019, General Electric announced plans to close a 750 MW natural gas peaker that had 20 years remaining in its planned lifespan. One of the main reasons cited for that closure was a problematic 1-hour ramp up time, as opposed the immediate availability of solar + storage.

Energy regulators have not traditionally considered energy storage as a source of power, because it does not “generate” electricity, but simply stores it and releases it. The same could be said however of pumped hydro, which has enjoyed the same regulatory framework and incentives as fossil fuel power generation. These regulators are now catching up to the value of energy storage; in 2018 the Federal Energy Regulatory Commission's (FERC) Order 841 allowed solar + storage access to the wholesale energy marketplace, creating the opportunity for the industry to compete on an even playing field with fossil fuels.

There are a growing number of government mandates requiring states to procure significant amounts of energy storage. Batteries can now compete for as much as 82% of projected new combustion turbine capacity over the next decade. Wind and solar installments scheduled to come online could displace up to 1.42 billion cubic feet per day of gas demand for electric power.

Energy storage has solved the variability problem of renewable energy, enabling it to not only compete with traditional power generation, but to push natural gas peaker plants towards extinction. It will be interesting to see how these greener technologies impact the electricity grid in the coming years.


References

Xiaojing Sun. “Solar Technology Got Cheaper and Better in the 2010s. Now What?” GTM, December 17, 2019. https://www.greentechmedia.com/articles/read/solar-pv-has-become-cheape…

 “Solar Industry Growing at a Record Pace.” Solar Energy Industries Association. https://www.seia.org/solar-industry-research-data

“Will solar panels get cheaper? (Updated for 2020)” The Solar Nerd, January 16, 2020. https://www.thesolarnerd.com/blog/will-solar-get-cheaper/

Xiaojing Sun. “Solar Technology Got Cheaper and Better in the 2010s. Now What?” GTM, December 17, 2019. https://www.greentechmedia.com/articles/read/solar-pv-has-become-cheape…

“Dirty Energy, Big Money.” Peak Coalition, May 2020. https://8f997cf9-39a0-4cd7-b8b8-65190bb2551b.filesusr.com/ugd/f10969_9f…

Andrew Berger. “Natural Gas Power Stranded Asset Risk Reaches a Tipping Point” Solar Magazine, October 07, 2019. https://solarmagazine.com/natural-gas-power-stranded-asset-risk-reaches…

Alwyn Scott. “General Electric to scrap California power plant 20 years early.” https://www.reuters.com/article/us-ge-power/general-electric-to-scrap-c…

Julian Spector. “Just How Much Business Can Batteries Take From Gas Peakers?” GTM, May 16, 2018. https://www.greentechmedia.com/articles/read/just-how-much-business-can…

Matt Egan. “Report: Capacity for renewable energy now tops coal” Wral TechWire, June 11, 2019. https://www.wraltechwire.com/2019/06/11/report-capacity-for-renewable-e…