Published on December 3rd, 2018 |
by George Harvey
December 3rd, 2018 by George Harvey
Shortly after reading Tina Casey’s CleanTechnica article, “New Report Outlines Investor Risk of Supporting Coal Power,” I found myself looking at the November edition of the EIA’s Monthly Energy Review. Of course, I found myself connecting the two.
As natural gas has taken market share from coal-powered electric generation, it has pushed emissions from coal down. But the EIA document shows that natural gas is emitting carbon dioxide at a record level, and, sadly, its own levels of emissions seem to be increasing faster than those of coal are dropping. As I looked at information on carbon dioxide emissions, I found myself wondering how long it will take for the natural gas industry to go into its own steep decline.
The answer to this question may be becoming clear, and rather quickly. There has been a series of developments in California that anyone interested should notice.
The underlying context is a general switch to renewable energy that has been going on there for many years. As wind and solar systems have been added to the system, prices for electricity from renewable systems have declined. They have pushed down wholesale power prices in the state, especially those of peak demand times, when prices have been highest.
As the cost of renewable power has declined, however, the cost of electricity from fossil fuel plants has held rather steady. As can be seen in Lazard’s Levelized Cost of Energy Analysis, Version 12.0, the costs of renewably-sourced electricity have generally fallen so that they are often below those of coal-burning and gas-burning plants. And the fossil fuel plants have seen their profits disappear with more powerful competition.
Now we come to a specific example of unfolding events that is particularly revealing. In 2005, Calpine Corporation brought a new gas-burning combined-cycle plant online at the Metcalf Energy Center (MEC) in California. A brief history of the plant can be found at Wikipedia. As a combined-cycle plant, it was of the type that generally produces the least expensive power available from fossil fuels.
By 2017, the MEC was finding market conditions difficult. In June of that year, Calpine notified the California Independent System Operator that the plant would have to run on a reliability-must-run basis, or it would be shut down because it was losing money. Calpine wanted to keep the plant open and was requesting extra income, to be charged in the end to ratepayers. To do this, it would require a special license from the Federal Energy Regulatory Commission, to be renewed annually.
In November of 2017, the California Public Utility Commission (CPUC) authorized Pacific Gas and Electric (PG&E) to look for a less expensive source of electricity that could replace the MEC’s gas plant. Thereupon, PG&E made a procurement request for that electric power. And in the first weeks of last summer, PG&E announced that it had requested approval from the CPUC for a specific solution to reducing customer costs.
That solution included four battery systems, two of which would be much larger than the 100-MW / 127-MWh Hornsdale Power Reserve (HPR) in South Australia, currently the largest battery in the world. A posting of July 3 at Utility Dive said the total energy storage capacity of the project would be 2,270 MWh, almost eighteen times that of the HRP.
In November, the CPUC approved the battery system. It is expected to be the largest battery system in the world. An article at Commercial Property Executive details this.
While all of the four batteries are huge, the largest is just about mind-boggling all by itself. Vistra Energy is set to produce and own a battery of 300 MW / 1,200 MWh, three times the power capacity and nearly ten times the energy storage capacity of HPR. To this will be added a battery of 182.5 MW / 730 MWh, to be produced by Tesla but to be owned by PG&E. The smaller batteries are systems of 75 MW and 10 MW, whose specifications called for four hours of storage each.
What I find most interesting about this is not the record-setting sizes of the battery systems. It is that a relatively new fossil fuel plant, of a design that produces the least expensive electricity we can get from combustion, is being replaced by batteries, which do not generate electricity but just store it as it comes from the wind and sun. A gas plant is being put out of business by lithium-ion batteries, because the energy storage costs, combined with the cost of the electricity from solar and wind plants, are more attractive than the cost of the least expensive fossil fuels.
The Utility Dive article cited above had a quote in it from Alex Eller, a senior energy research analyst at Navigant. He said, “Storage at this scale is likely now cheaper than the total cost to run the gas plants.” More natural gas plants may be coming online, but they look destined to be the next round of stranded assets.
We are not talking about some day in the future here. Renewables are pushing gas out already.