The market value of utility-scale solar declined in California in recent years as its penetration grew, according to a new report from Lawrence Berkeley National Laboratory that provides a detailed look at the impact of solar in the Golden State.
The report, titled "Solar-to-Grid: Trends in System Impacts, Reliability, and Market Value in the United States," comes at a time when solar in California has far outpaced other states and regions. The resulting ramping needs, price and net-demand impacts make California a test bed for the technology as more states adopt clean-energy standards.
Despite the decline in market value, "the value proposition of solar hasn't actually changed," Andrew Mills, principal author of the report, said in a video interview with California Energy Markets. "That was surprising to me." Cost declines in solar keep the resource competitive, according to Mills, who said the report also provides signals about the value of ramping resources. The findings didn't indicate that dealing with the evening ramp when solar declines was overly challenging in the California Independent System Operator, he said.
Whether the report is good news or bad news for solar depends on one's perspective, and whether you are a consumer or a seller of solar that has seen the market value of solar diminish, author Joachim Seel told CEM. The market is providing access to carbon-free energy at really low prices, he added, and "the market here kind of works."
The report, which includes data through 2019, provides analysis of the grid down to the individual project level, as well as some awe-inspiring statistics on the amount of utility-scale solar installed in CAISO territory. Installed solar in CAISO is 21 GW AC, which is more than half of such solar in all the nation's ISOs combined. The next-highest penetration of solar capacity is in the PJM Interconnection's Mid-Atlantic territory, where 6.7 GW of solar resides. But that solar concentration is spread over 13 states and the District of Columbia. The report counted utility-scale solar projects larger than 1 MW.
In reaching its conclusions, the report defined the "market value" of solar as the sum of its energy and capacity values. According to the report, the market value of solar in CAISO declined between 2012 and 2019, both overall and relative to annual average energy and capacity prices.
The energy value is based on the hourly solar generation and real-time power prices at pricing nodes near solar plants. Of all the ISOs and regional transmission organizations across the U.S., CAISO had the lowest average solar energy value at $42/MWh, while the Electric Reliability Council of Texas had the highest at $60/MWh.
The second half of the market-value evaluation—capacity value—is based on the capacity credit of solar and a capacity price, which declined in CAISO in 2018 and 2019.
The report compares the market value of solar compared with other resources by measuring against a "flat block of power," which represents the value of a generator that operates at full power in every hour of the year. In 2012, solar power market value in CAISO was 40 percent higher than the value of a flat block of power. But by 2019, it was 31 percent lower than a flat block of power's value.
However, as solar power's market value declined in CAISO, its cost also fell, keeping it competitive in California, according to the report. The cost of solar was defined as a levelized power-purchase agreement price.
The report also notes that the impact of solar on flexibility needs at low penetrations can be the opposite of flexibility needs at higher penetrations. In CAISO, the new-load ramp rates exceed the ramp rate without solar by 30 to 54 percent, but at lower penetrations, solar can lead to a decline in the flexibility need. Net-load ramp rates for high solar penetration exceeded the net-load ramp rate by 32 percent for utilities in Arizona and by 35 percent in Nevada.
The report notes that solar curtailment in CAISO rose sharply in 2019, but has been "modest" overall at 3.6 percent of total generation in 2019.
The report focuses strictly on solar and provides new in-depth information on solar resources, but the planning focus in California right now is on energy storage. Further research will be done on the impacts of energy storage, the authors said.