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How Distributed Solar Can Reduce Electricity Prices

By John Farrell
February 13, 2012 | 39 Comments

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What if installing more solar could reduce electricity prices? It's already happening in Germany, world leader in solar power, and it's likely to happen in the U.S., too.

Right now the idea of solar reducing electricity prices seems silly. After all, when subsidies aren't factored in, the cost of residential solar will be higher than residential retail electricity prices in all but 3 states until after 2016. But solar has two key factors in its favor:

Electricity, like many things, costs more when in high demand. And while many U.S. ratepayers on are flat rate electricity plans, the truth is that their utility pays more to deliver electricity on those hot, sunny afternoons in the summer when air conditioners are running like mad. Utilities call these times "peak periods," when electricity use spikes and they have to turn on every last power plant.
Solar PV arrays tend to produce at their best during these peak periods.

The following chart shows how PG&E (a California utility) charges significantly more for electricity during the afternoon hours when demand is high, and how a south-facing, fixed-tilt solar array can produce a lot of electricity during those peak hours.

Solar output can actually match this peak curve better, if the panels are angled toward the southwest rather than due south, resulting in more late afternoon output.

Either way, however, solar adds electricity to the electricity system when it needs it most. And when that happens, it supplants electricity that was previously supplied by the dirtiest and most costly fossil fuel "peaking" power plants. In Germany, the sharp growth in solar power output (from 3,000 gigawatt-hours in 2007 to over 18,000 gigawatt-hours in 2011) reduced the cost of electricity during their mid-day peak period by 40%, almost completely eliminating the price differential between peak electricity and the base cost.

The process where solar supplants expensive peaking power is called the "merit order effect." It works because utilities buy solar power on long-term contracts and there is zero marginal cost to take solar electricity at any particular time (they've already paid for it). The peaking plants, on the other hand, tend to sell their power on the spot market. Therefore, every megawatt of additional solar on the grid during a peak period supplants a megawatt of peaking power, eventually putting those costly plants out of the picture. Ultimately, it means that during periods of high solar PV output, there won't be peak power events with higher electricity prices.

Admittedly, the U.S. has a ways to go. Solar produced enough electricity for as much as 17% of peak demand in Germany in 2011, while one of the U.S. leaders in solar per capita – Gainesville, FL – only serves about 1.5% of its peak demand with solar.

But solar is growing at an exponential rate in the U.S., just as it did in Germany. And since solar can provide power when the grid needs it most, there's a lot more to its cost than cents and kilowatt-hours.

This post originally appeared on Energy Self-Reliant States, a resource of the Institute for Local Self-Reliance's New Rules Project.

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The information and views expressed in this blog post are solely those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

39 Reader Comments

Comment
1 of 39

Anonymous

February 13, 2012

The author writes "What if installing more solar could reduce electricity prices? It's already happening...."

However, all the evidence provided is merely for PV's effect on spot market prices--not average prices. Naturally, if supply--of any kind--increases spot market prices will tend to decrease, and if the new supply aligns well with peak demand this will have more of an effect than for other distributions. However, only a small percentage of electricity is purchased from peaking sources on the spot market. If one has to pay ~$0.30/kWh for ALL of the solar output to decrease spot prices modestly (the overall effect was a 10% reduction, the 40% reduction was only for the hour of maximum prices) overall electricity prices still go up. Costs of the German FIT program go up every year and are now at ~$0.048/kWh; electricity prices are ~$0.30/kWh--triple what they are in the US. These are not figures one would associate with the words "reduced prices".

It is also interesting to note that solar PV now provides only ~3% of total generation in Germany but already the peak in the spot market price has moved from roughly noon to about 7PM (at least within the 8AM-8PM time frame plotted in the study referred to above). Thus, additional solar PV, above and beyond what was available at the time of the study, will have only a weak effect on the new peak spot market price, which occurs when solar generation has started to peter out. Thus, those advocating additional PV will need to search for a different rationale than the one discussed in this article.
Steven

Comment
2 of 39

dimitar-mirchev-14630

February 14, 2012

Steven
The original article states that the industry is benefiting from the reduced spot prices and thus buys cheaper electricity so here goes the argument that the industry is suffering from the renewables.

Electricity price for households on the other hand is getting more expensive. But this is another stimulus for the people to install even more renewables and go even more efficient. Not to mention that the German people are not against paying more when the "more" comes from renewables.

Germany FITs will get reduced big time in the next 2-3 years so probably their impact on the electricity bill will get lesser. An interesting point is that the FITs are not adjusted for inflation thus in 10 years they will actually cost much less. Which will not be true for fossil fuels and nuclear power.

Here are the calculations on how much the electricity cost from PV depending on the cost per kWp and the yearly kWh produced:
http://de.wikipedia.org/wiki/Photovoltaik#Stromgestehungskosten

Comment
3 of 39

jgubman

February 14, 2012

Steven, those $0.30/kWh prices in Germany have little to do with support for solar power and a lot to do with the fact that they don't subsidize energy to the same degree we do in the US.
And the FIT program costs, meanwhile, are not just for solar, but for all renewables combined. You might find a recent study from Prognos interesting: http://www.prognos.com/Detailansicht.436+M59d972084ed.0.html. They found that going from 4% solar in the 2012 generation mix to 6.8% in 2016 (a 70% increase!) would raise electricity prices, but by a mere 1.9%. Presumably if the savings from the merit order effect were distributed to households, that number would be even lower.
I personally think it's quite reasonable to ask people to pay an extra 1.9% on their energy bills in order to support development of a sustainable energy supply that will soon be cheaper than fossil fuels (expected for 2017 in Germany).

Comment
4 of 39

Anonymous

February 14, 2012

@Dmitar
1) I agree having residential users pay the entire EEG surcharge does shield industry from its share of the cost of renewables and allows them a minor savings from the decrease in spot prices.

2) Raising the price of electricity so that it becomes affordable to switch to switch to PV is a pernicious way to reach grid parity. I think a funding mechanism that forces pensioners in apartments to subsidize PV systems on the roofs of large land owners is deeply flawed.

3) I also agree that FIT payments will be declining significantly in the future, but the EEG surcharge is expected to INCREASE significantly. In 2011 the EEG went up 72% (from 2.047 to 3.53 eurocents/kWh), in 2012 the increase was nominal (to 3.592 eurocents/kWh) but the estimates for 2013 suggest a raise to between 3.66 and 4.74 Eurocents/kWh. (See http://www.germanenergyblog.de/?p=7846) At an exchange rate of $1.32/Euro the EEG in 2013 could cost as much as $0.0626/kWh. For comparison the mean cost of electricity generation in the US is ~$0.06/kWh with another ~$0.04/kWh costs for distribution and transmission.
Steven

Comment
5 of 39

Anonymous

February 14, 2012

@jgubman regarding comment #3:

It would be fair if the author made the claim that increased solar PV led to decreases in spot market prices. Instead he implies that increased solar PV led to decreases in electricity prices, which is a much stronger claim and one that is not supported by the data. Actually, increased PV has led to price increases. We could have a discussion about whether or not the increase in renewables merited this cost increase but it is disingenuous to suggest the cost increase does not exist.

You claim Germany's high electricity prices as compared to those of the US are mostly due to differences in subsidy policies. I note that a generous estimate of US subsidies to fossil fuels is ~ $10 Billion/year, much of which goes to oil (which is rarely used for electricity generation). This is only enough to affect prices by less than 1 cent/kWh. The push for renewables is only one factor in the high prices German's pay for electricity, but it is a significant one and is growing rapidly. It would be interesting to see a study for what the other factors are. The decision to eliminate the cheap nuclear component of generation is going to lead to the need for expensive imports and a greater reliance on fossil fuels. The push into offshore wind is also going to be expensive. Germany is clearly headed for significant price increases in the near term.

About 56% of the current EEG surcharge is due to solar PV and this percentage is increasing.

The Prognos study might be politely described as highly dubious. There is a very good change the next increase in the EEG will lead to price increases of more than 2% and exceed in one year the study estimate for cost increases 4 years into the future.

Continued

Comment
6 of 39

Anonymous

February 14, 2012

continuation of comment #5

I don't know what the monthly statistics are for solar generation in Germany, but in the US generation in July of the last two years was a factor of 10 higher than the winter low (January in the US data, likely December for the German data). By comparison overall electricity usage for July was only 15% higher than in January. This very high seasonal variability means that even at low market penetration solar PV shifts the peaking power needs away from summer afternoons into times that do not overlap well will solar insolation. Maybe you should call this the dis-merit effect. Already at 3% of overall generation the data quoted in this article suggest the peak in spot market prices has shifted to early evening. Perhaps, as you predict, solar PV prices will continue to drop rapidly (a significant percentage of the recent price decline has been due to a death spiral in the industry as companies sell product at below cost). By that time however Germany will already have installed much of the PV that can easily be accommodated on their grid, and they will have done so at premium prices that are being financed by ~20 years of high EEG payments.

it would be wildly optimistic to think solar PV generation is going to become cheaper than fossil fuels in the next 5 years. The cost of coal generation (at least for extant plants) is in the ballpark of $0.05/kWh. New natural gas generation costs are below $0.10/kWh for combined cycle plants that allow a significant degree of load following. Even if we neglect issues of intermittency (both short term and seasonal) PV generation is very unlikely to hit these price points in this decade. After costs associated with variability are factored, in PV is going to remain quite costly for locations with climates similar to that of Germany.
Steven

Comment
7 of 39

dederick

February 14, 2012

The cost of fossil fuels is higher in Germany, especially natural gas. This high cost of natural gas in Europe is the reason that US companies are building LNG plants on the Gulf coast. US shale gas will soon be exported to Europe. I would not bet against the success of Germany's energy policy, they are taking a long term view. Not many countries base policy on science as well as Germany does, this may be helped by having a Chancellor that has a Ph.D in Physics. We should also remember that fossil fuels have costs that the US policy chooses to ignore.

Comment
8 of 39

Anonymous

February 14, 2012

@dederick:
I recall Merkel's Ph.D. as being in Chemistry. I'd like to believe a Ph.D. confers vast wisdom, but I'm surrounded by counterexamples. However, please feel free to believe my Ph.D. has conferred vast wisdom on me :-)

As for the claim that Germany has taken a long term view, I must disagree. Their decision to abandon nuclear power--23% of their generation before last year--was made suddenly. Their PV plan was to add ~3000 MW of capacity per year but their oversize FIT payments caused the market to dramatically overheat. Growth in wind generation has slowed to well below 10%--the last several years capacity additions have only averaged ~1700 MWp/year. Plans for offshore wind are off to a slow start with bottlenecks in the buildout of needed transmission. Germany spends lavishly for PV installations but does not do nearly as well funding R&D. I see no evidence of anything resembling even a short-term plan. The nuclear phaseout is going to be complete in less than a decade, so if there is a shred of a plan please enlighten us about what the generation mix will be at that time? Looking further out than that, what non-intermittent renewables are they planning to use to reach non-CO2 generation targets. Plans to meet heating needs without fossil fuels seem even less developed than those for electricity generation. Given the disaster that the common currency is, I would think confidence in German long term economic vision would be at a low ebb....
Steven

Comment
9 of 39

GeraldR

February 14, 2012

@anonymous. Nice try. Just the main subsidies for oil and gas amount to more than $12B per year ($10B is very low ball). Coal receives about $3B of the same. Comparitively, NG is more subsidized than coal; while both cost the rate payer more than it would seem from electricity prices, NG is proportionately more expensive than coal even now when NG prices are depressed. As far as coal goes, the true cost is only low if you burnt the coal but you didn't inhale.

Comment
10 of 39

Anonymous

February 14, 2012

@GeraldR:
It is something of a game to try to bulk up claims for the size of fossil fuel subsidies by counting the strategic Petroleum reserve, LIHEAP (which is a subsidy but to poor people who need help heating their home--not to fossil fuel cartels), tax rules that hold for every business, etc.

Here is a summary article mentioning data from a 2011 EIA study:
http://www.instituteforenergyresearch.org/2011/08/03/eia-releases-new-subsidy-report-subsidies-for-renewables-increase-186-percent/

You will find a chart showing the portion of subsidies going to electricity generation. The numbers are $1.2 Billion for coal, and $0.65 Billion for natural gas and oil (only that portion of oil used for electricity generation)--well below a penny per kWh.

Check out tables ES2 and ES4 of the full report if you want to confirm the summary faithfully represents the government report of its own subsidy activity:
http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

To understand the large price differentials between the US and Germany you must look for an excuse other than US subsidies. I note that there is also a large price differential between Germany and most of the rest of Europe--it would be hard to argue that US subsidies cause those price differences too....
Steven

Comment
11 of 39

simpleenergy

February 14, 2012

Very interesting points. The fact is every installed kilowatt of PV power currently goes directly towards offsetting "peak power."

Any power currently purchased at peak rates could have been offset by PV power.

It follows that whatever is the going rate for peak power is should also currently be the price for solar (at least during those peak hours- as Steven pointed out).

This fact does make solar more desireable... it works in solar's favor. The whole point of the article.

We are still a long way from a "fossil parity" especially if one is not allowed to factor in pollution/health effects.

But believe me, the utilities understand that peak power is expensive. If kwh's are bought for over $1.00 per kwh at high peak times it starts to make a lot of sense to start to shave that peak time down to as little as possible (which solar PV helps to do).

An interesting point about peak times now shifting to winter- which will be the natural outcome of increased PV. We don't have to worry about this for years, but it will be an issue.

Randy

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12 of 39

GeraldR

February 14, 2012

@anoymous you say potato I say potato. The study you refer to is some of the spending within the purview of the DOE only (out of a total budget of $27B). I does not refer to the many special tax measures and allowances. Read the box entitled 'Not All Subsidies Impacting the Energy Sector Are Included in this Report', putting it mildly. But, as they point out, this is a very tangled web, and to be fair, many industries receive various similar treatments at cost to the government purse: on a 'level playing field' basis one should only count the measures which are unique to or preferentially favorable to this indutry. The DOE's direct costs for electricity, according to them, was $11.8B in 2010 plus whatever percentage of conservation measures applied to increasing efficiencies in the fossil fuel power generation sector (several $B in announced project spending each year, much of it for coal - rebranding spending on fossil fuel generation infrastructure as conservation). However, the major spend is within the purview of the IRS not the DOE. Note that the DOE, by way of example, mentions a ~$3.25B spend due to a single tax measure outside their purview. The DOE's accounting, as they point out, does not cover local (state, county, municipal, etc) subsidies and tax measures either.
On another note, the government purchased a large number of water courses from the natives at some expense - for example, one single moderate purchase in Pennsilvanyia amounting to 3200 troy ounces of gold - which are now being used as refuse dumps at no charge.

Comment
13 of 39

Anonymous

February 14, 2012

Gerald:
We could quibble all day about the extend of subsidies and which should be counted as a subsidy benefitting the energy cartels and which counted as benefiting other groups (e.g., a large portion of coal subsidies are for R&D into carbon sequestration--that does not put a penny in the pocket of the coal cartels and has no effect on electricity prices). I'll resist the temptation to take this thread too far afield by delving into the details. Even if we double the EIA estimates the subsidy effect is still a small perturbation for US electricity prices. German prices are TRIPLE those in the US. Presumably distribution costs are comparable and if we remove those that leaves generation costs are roughly four times as expensive in Germany as in the US. A penny or two in subsidies per kWh does not change that overall picture.
Steven

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14 of 39

Bob Clemintime

February 14, 2012

@Steven... It is the same argument every time. Yet again I say look to the costs of states like CT. We do not use a lot of renewables yet our electricity prices are almost double. Higher costs of land and labor should definitely have an effect on prices as well as other factors.

Comment
15 of 39

Anonymous

February 14, 2012

@Bob regarding comment #14:
Connecticut's mean price of electricity was $0.175/kWh in 2010 and the US average was $0.0991 /kWh. That is 77% above average, not almost double. Connecticut has the second highest rate in the nation with only Hawaii, which depends on oil, being higher. Maybe we should be asking what Connecticut is doing wrong too! New England does have generally higher rates, partly because it depends more heavily on natural gas than some other regions (Conn. generation is about 50% nuclear, 35% natural gas, 8% coal, 7% misc.), but that is only part of the story and Connecticut's rates are 16% higher than the New England region average.

The US and German energy generation mixes are much more comparable to each other than Conn.'s is to the US average generation mix. Additionally, averages over large regions factor out anomalies from small regional effects, so comparing costs between the US and Germany or between Germany and the EU average is reasonable.
Steven

Comment
16 of 39

Bob Clemintime

February 15, 2012

My mistake on the almost double (though technically almost is a relative term). The point was that CT has significantly higher electricity prices than most of the rest of the country. Never said you were not being reasonable, I just think you are not factoring in major variables. The higher electricity prices tend to be in the wealthier states (such as CT) and the lowest in poor states (such as Mississippi. I think a lot of it boils down to the laws of supply and demand where the higher the income the higher the demand. Then looking at the supply side the higher minimum wage as well as increased average wages and higher costs of land shift the supply curve resulting in higher prices.

Also, just wondering. What is your PHD in? Not saying I don't believe you. Just curious.

Comment
17 of 39

dimitar-mirchev-14630

February 15, 2012

Steven

I think you are missing a very important point - there is a huge support for closing the nuclear reactors in Germany and a huge support for even more renewables. It's what people want and its what people will vote for even if it costs them more. That's why Merkel changed her mind about nuclear power.

I believe in 5-6 years the FIT will end or will cost soo little like 5 eurocents per kWh that they wont matter at all. And in 15-20 years FITs will end and Germany will have a huge renewable industry and energy independence.

QUOTE: "I think a funding mechanism that forces pensioners in apartments to subsidize PV systems on the roofs of large land owners is deeply flawed."

I believe in time the Germans will find a way to offset their electricity usage by owning renewable installations elsewhere. The more the domestic electricity price goes up the more people invent new ways to be efficient and new ways to install renewables. If they cant put PV on the roof of their apartments they will put it somewhere else.

Maybe I'm too optimistic about this but in medium to long term the FITs contracts will end and PV will cost virtually nothing thanks to the FITs.

Comment
18 of 39

Karl-Friedrich Lenz

February 15, 2012

A couple of points:

For one, the article gives 18 GWh as solar production for 2011, which is wrong by a factor of about 1,000 (correct is about 18.52 TWh).

The article also overstates the effect on the price differential between peak and base. That has been about cut in half, not 'almost completely eliminated'.

Next, while the merit order effect does make electricity cheaper at the wholesale level, that actually leads to higher surcharges, since those are calculated by substracting spot market prices from feed-in tariff costs. When the former come down from the merit order effect, there is less to substract, leading to a higher result.

Prices go down for end consumers if they have the market power to force utilities to pass on the savings from the merit order effect. There does not seem to be much evidence of that happening for small household consumers.

The German government assumes that surcharges will peak in a couple of years at about 12 billion per year and then go steadily down, see the May 2011 'Erfahrungsbericht' on page 143 for details.

Comment
19 of 39

Anonymous

February 15, 2012

@Bob regarding 16,
I don't think electricity prices correlate well with the income level of the ratepayers. They are more a function of generation type and distribution costs (urban environments seem more expensive for this). New England relies on a lot of natural gas generation and seems to have higher natural gas prices than much of the country. Why Conn. pays more than the rest of New England is a mystery to me though....

As for your question: My Ph.D. is in Chemical Physics, so I know well that such a degree does not suffice to make a wise chancellor :-)

Comment
20 of 39

Anonymous

February 15, 2012

@Dimitar regarding comment #17:

I am not unaware of the support for renewables in Germany nor I am I unaware of the current sentiment against nuclear power. I do question the wisdom and effectiveness of the German renewable program however. Representative governments exist so that policies are made by informed decision makers rather than a madding crowd. Renewables are being lavishly funded but the return on this investment is very poor--one day the German public will wake up to the realization that their government has not served them well regarding their energy policy. As for the decision to close down the nuclear power stations, there does not seem to be any plan in place to replace this generation except largely through imports--no one should believe that wind and solar are going to be able to easily replace ~18% of the 2011 generation mix. Watching the German energy policy unfold is like watching a chess game in which one player is only thinking one more ahead. Closing down paid for power plants before their rated lifetime is sure to significantly boost energy prices. It will also guarantee a continued reliance of coal generation--I imagine the German voters are not big fans of coal either.

You write '...but in medium to long term the FITs contracts will end and PV will cost virtually nothing thanks to the FITs.'

Here I will point out that no form of electricity generation is going to cost 'virtually nothing' and that PV prices are not going to decline to the point you hope for. Furthermore, there is little evidence to suggest that FIT policies are strongly correlated with PV price drops. All new technologies drop in price over time as technological improvements occur. The ability to accelerate this development curve by increasing production of inefficient product is greatly overstated. Only a very small percentage of revenue ends up going to R&D in the PV market (which operates at very low margins)...
Steven

Comment
21 of 39

Anonymous

February 15, 2012

Karl writes in comment #18:
"The German government assumes that surcharges will peak in a couple of years at about 12 billion per year and then go steadily down, see the May 2011 'Erfahrungsbericht' on page 143 for details."

This may be true, but the governments track record at predicting the cost of the EEG is very poor--it is already more than the maximum previously anticipated and is continuing to raise. Doubtless there will also be new proposals for renewable support in the coming years that are not now included in the projections. There will be a need to stabilize intermittent resources and eventually to replace the coal fired generation (or at least sequester the CO2) in the coming years. This is all going to cost money.

The surcharges are not the only source of raising electricity prices. Removing cheap nuclear generation is going to increase costs especially as it will lead to the need for expensive imports and decrease the opportunity for profitable exports. A greater reliance on intermittent renewables will also require expensive transmission upgrades. Adding the first few percent of renewables is the easy part of the transition to a CO2-free generating mix. Prices are clearly headed up....
Steven

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22 of 39

fsc

February 15, 2012

Simpleenergy: I doubt that the peak times will move to winter since solar heat is so much more efficient than solar electricity. As subsidies begin trim down over the next decade, people will make a shift. Someone thinking of putting up 12 PV panels will probably do a little math and put eight PV panels and four solar heat panels instead.

Solar heat gives you much more bang for the buck.

Comment
23 of 39

Anonymous

February 15, 2012

fsc writes in comment #22:
"I doubt that the peak times will move to winter since solar heat is so much more efficient than solar electricity."

After a significant amount of solar PV is installed incremental generation needs will shift to winter months and away from midday independent of what the actual peak demand is. Even at 3% of total generation the data in the study cited above saw the time of highest spots prices move from midday to ~7PM.

As for solar heating, I'm skeptical. After a foot of snow covers the roof, what do you do for heat? One trend that would change seasonal electricity demand would be an uptick in ground sourced heat pumps. This decreases A/C energy costs but increases winter electricity demand if converting from a fossil fuel heating source.
Steven

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24 of 39

Bob Clemintime

February 15, 2012

@ Steven Many of the wealthiest states are in the Northeast. Ct also has comparatively expensive land. And while the sources may have a stronger effect I don't think that is the only variable in the cost of the electricity.

Comment
25 of 39

thomas-mayrand-14505

February 16, 2012

I think the only way distributed pv can lower electrical rates is to distribute pv to homeowners to install in their own homes thus lowering their dependancy on the ultility companies. This would in turn make them need to compete with each other for customers by offering lower rates.

Comment
26 of 39

dederick

February 16, 2012

Steven I believe you have found some faulty information in regard to energy production per month. In upstate NY the highest producing month normally has an output that is about twice the lowest producing month. The reason of course is electrons flow better at lower temperatures and helps offset the lower amount of light. Production can be further shifted from summer to winter by increasing the tilt of the panels. If anyone would like to see the actual energy production of many individual PV systems through out the world go to: http://www.sunnyportal.com/Templates/PublicPagesPlantList.aspx
Also you can see the monthly projected #'s for your area by going to: http://rredc.nrel.gov/solar/calculators/PVWATTS/version1/US/code/pvwattsv1.cgi
PV watts is relatively accurate.

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27 of 39

Anonymous

February 16, 2012

@dederick, regarding comment #26:
My data comes right from the EIA, which is the definitive source for data on electricity generation, prices, etc. in the US market. The generation data from the last month's update is here:
http://205.254.135.7/totalenergy/data/monthly/pdf/sec7_5.pdf

Note the solar output in the US is predominately from CA and would be expected to have better seasonal variability than more northernly regions. This is actual generation rather than some theoretical estimates based on best facing and tilt angles. I agree that the solar seasonal variability could be deceased from what is being experienced for current US production, perhaps to a 3 to 1 ratio. Even this value leaves you with a considerable seasonal variability to deal with in addition to the short time variability issues.
Steven

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28 of 39

renewables100PI

February 16, 2012

Stephen writes: "I am not unaware of the support for renewables in Germany nor I am I unaware of the current sentiment against nuclear power. I do question the wisdom and effectiveness of the German renewable program however. Representative governments exist so that policies are made by informed decision makers rather than a madding crowd. Renewables are being lavishly funded but the return on this investment is very poor--one day the German public will wake up to the realization that their government has not served them well regarding their energy policy."

What you call lavish funding for renewables is modest compared to the many decades of funding for fossil and nuclear technologies. Suggesting that German policies were crafted by uninformed decision makers is not fact-based. I suggest you read up on the PhD's who were the architects of the German feed-in tariff policies, the numerous academic and government institutions that have scientifically analyzed the issues involved over decades.

" As for the decision to close down the nuclear power stations, there does not seem to be any plan in place to replace this generation except largely through imports--no one should believe that wind and solar are going to be able to easily replace ~18% of the 2011 generation mix."

There are extensive plans in place. You may want to look at UBA's plan for Germany by 2050, for example.

Regarding your concerns about Germany setting itself up to rely on imports, take a look at this month's cold snap. Despite permanently shutting down 8 of its 17 nuclear power plants in 2011, Germany rescued nuclear dependent France with electricity exports that came in part from their renewables mix.

Also, the German decision to shut down its nuclear reactors was not so sudden. It was decided by the Administration that preceded Merkel after decades of discussion. Merkel reversed course when elected, then reversed again after Fukushima.

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john-farrell-ilsr

February 16, 2012

Foiled by the European convention with using periods as a thousands separator. I fixed that glaring error in Germany's solar output. Apologies!

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30 of 39

Anonymous

February 16, 2012

renewables100PI writes in comment #28:
"What you call lavish funding for renewables is modest compared to the many decades of funding for fossil and nuclear technologies. Suggesting that German policies were crafted by uninformed decision makers is not fact-based. I suggest you read up on the PhD's who were the architects of the German feed-in tariff policies, the numerous academic and government institutions that have scientifically analyzed the issues involved over decades. "

and

"There are extensive plans in place. You may want to look at UBA's plan for Germany by 2050, for example. "

My measure of lavish considers return on investment and whether or not resources were well utilized. Comparisons to what was spent on other technologies are an attempt to deflect attention from the muddle the German's have made of the solar market. Also note carefully that I never suggested the FIT policy makers were uninformed; doubtless that had all the information they needed available to them. I did suggest that their policies were ill considered and ineffectual. The early FIT rates were way too high and caused the market to rapidly overheat. The only thing containing the situation was a transient constraint on the supply of processed silicon. Once that limitation was resolved a huge glut of PV developed leading to a death spiral in the industry. As I have a charitable nature, I will assume that this was unplanned. The policy maker's goal was to spur a roughly constant installation rate in the ballpark of 3000 MW/year and EEG surcharges were never supposed to raise above 3 euro cents. Neither of those plans worked out. When even the projections made a few years into the future are wildly off base I think a plan for 2050 has to viewed very skeptically.

Continued....

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31 of 39

Anonymous

February 16, 2012

continuation of comment #30:

renewables100PI also writes in comment #28
'Regarding your concerns about Germany setting itself up to rely on imports, take a look at this month's cold snap. Despite permanently shutting down 8 of its 17 nuclear power plants in 2011, Germany rescued nuclear dependent France with electricity exports that came in part from their renewables mix.'

Prior to shutting down the first 8 nuclear reactors Germany was a significant exporter of electricity--that is no longer true. The amount of electricity exported or imported on any given day varies markedly because the European market is quite interconnected. If one wants to understand the import/export situation you need to consider aggregate rather than anecdotal data. In the data published through Nov. 2011 German imports and exports where roughly in balance as compared to the year before when they were significant exporters. This was in a year when nuclear power still contributed 18% of total generation. Once the remaining reactors are closed (if this is even possible on the announced schedule) imports will be the only way this lost production can be replaced.

Saying Germany 'rescued' France with electricity imports is putting quite a bit of spin on the situation. In aggregate France exports more electricity to Germany than it imports from them. Furthermore, one should only use the term 'rescued' if France had no other option to meet demand. Typically a country will import electricity if it is cheaper than firing up expensive peaking plants. France probably had some of this expensive capacity in reserve.

continued

Comment
32 of 39

Anonymous

February 16, 2012

continuation of comments 30&31

renewables100PI also writes in comment #28:
"Also, the German decision to shut down its nuclear reactors was not so sudden. It was decided by the Administration that preceded Merkel after decades of discussion. Merkel reversed course when elected, then reversed again after Fukushima."

Indeed, Merkel was wisely reticent to close down cheap and stable generation capacity before its rated lifetime was exceeded. If a rational assessment of risk was used to make such decisions one would opt to phase out coal generation before relatively clean nuclear generation. Alas, public opinion isn't always rational and Merkel was forced by a sharp swing in sentiment against nuclear power to alter her policy. So much for the German plans for reducing CO2 emissions. Coal and imports are all that will stand between Germany and blackouts.
Steven

Comment
33 of 39

philhoey

February 20, 2012

I see a lot of discussion, to me, a person with a graduate degree in business, is trying to separate fly feces from pepper. If I am wrong please comment, but the discussion appears to be focused on large scale commercial solar development.
The theme of the article is that solar generates most of the power during bright sunny days which tends to occur during high energy demands in the summer.
If everyone were to put an even a small 5KW solar system on their roof the demand on the grid would be drastically reduced at PEAK times in the summer.
This would allow power generating companies to take older, less efficient (and therefore costly) plants off line, cutting costs and reducing environmental impact.
I think emphasis on mega solar sites is laudable, but not always practical.
Another comment that is sure to generate some flack. If the French can have a highly successful nuclear program how come the Americans and Germans can't?
Just an observation.

Comment
34 of 39

dederick

February 20, 2012

Steven, Sorry for the delay in replying I lost the thread. I looked at the EIA data and I will admit I was perplexed when I first looked at their numbers . I knew they could not accurately show monthly PV energy production but I will get back to that in a moment. Hopefully you have gone to the Enphase site or the SMA site and looked at the actual monthly production [not theoretical]of PV installations all over the world. I have chosen one in PA because it is in the northeast and the panels are mounted horizontally. Both of these favor a large summer production and a lower winter production.
http://www.sunnyportal.com/Templates/PublicPageOverview.aspx?page=15632af4-2025-40eb-81bd-177d764b359b&plant=0d783935-481e-477f-b6ba-1aa39c847bd3&splang=en-US
In the last 12 months, July had the highest production,5872 Kwhrs.The lowest production was December, 1493 kwhrs. A ratio of just under 4 to 1. If these panels were mounted with a more standard 30 degree tilt you would see a ratio of about 2:1, which you will find at many other sites.
Now for the EIA data. I believe you will find that the EIA data is the net energy exported to the grid, not the actual energy produced by the system. How does this distort the data ? Most residential or commercial systems are designed to produce a maximum of 100% of electrical usage. Ex. Let's say a system is designed to produce 12,000 kwhrs annually, 100% of usage and the load is a constant 1000 kwhrs per month.In our example let's say in July we produced 1300 kwhrs and in December we produced 650 kwhrs. The EIA data would indicate zero production in December and 300 kwhrs in July. When in reality the load on the grid is being reduced by 650 kwhrs in December and 1300 kwhrs in July.

Comment
35 of 39

Anonymous

February 20, 2012

@Philhoey regarding comment #33:

You write: "If everyone were to put an even a small 5KW solar system on their roof the demand on the grid would be drastically reduced at PEAK times in the summer.
This would allow power generating companies to take older, less efficient (and therefore costly) plants off line, cutting costs and reducing environmental impact."

The study cited in the article shows that even at 3% solar generation peak spot prices have moved to evenings. Consider a plots of Demand and Demand - solar generation vs. time of day. The first will have a sharp peak at midday in summer, the second has its peak moved to early evening. This is due to what people are somewhat ostentatiously calling the "merit-order effect." But the effect is already played out at a 3% market penetration. Any new solar generation isn't matched well with peak demand anymore. Of late there has been much talk of how the Europeans have had difficulty meeting peak demand during cold days in winter, solar isn't a great help there either.

My primary contention with the article is that is claims too much (that overall prices rather than spot prices are reduced) and that it cherry-picks data to suggest a greater benefit than really exists (as Karl points out in comment #18, it does not reduce spot prices to base load prices as claimed, and the article does not explore the issue of how further increases in solar supply will alter the situation). I think full time analysts should be capable of presenting a more accurate picture of the demand situation. Many of the reports we see are lawyerly reports of advocates rather than careful unbiased analysis.
Steven

Comment
36 of 39

Anonymous

February 20, 2012

@dederick regarding comment #34:
It is a good point that EIA is likely reporting only solar energy exported to the grid and that point-of-use demand slightly skews the numbers. I say slightly here because most solar installation--if we weight by energy production-- are actually fairly large and export most of their production. The picture of a homeowner meeting his own demand from his rooftop is not really where the solar industry is these days--utility and large commercial arrays supply the vast majority of generation. There is a also a significant solar thermal electricity component to the EIA data because CA has several large solar thermal plants, the production profile for this generation will be similar, but not identical, to PV.

If we could dig up the monthly data for Germany it would presumably show full production due to the differences between the way their metering is set up. Alas, my skill at reading German is not good, so if these data are even reported I would still find it hard to get to them.

I agree that a 10-to-1 peak-to-low monthly generation is not what one will get in a well designed system, although in Northern climates such as Germany you would get this from using flat rather than tilted panels. I'd guess that 3 or 4 to 1 would not be out of line for much of the European generation. There is going to be a significant seasonal variation even with optimization of facing and tilt. For solar penetration beyond a few percent, this needs to be taken into account in any analysis of the effect of solar generation on the demand profile and prices.
Steven

Comment
37 of 39

dederick

February 20, 2012

Steven, I agree that utility scale systems will make up most of the PV electrical energy produced in the future and I am sure EIA data will show a dramatic decline in the summer/winter energy ratio. Hopefully distributed solar, both residential and small commercial are not forgotten. Installers need to get the installation costs down on these systems. Possibly their current profits are a bit excessive in some states.
On the SMA site I believe you can view the actual production #'s of various sites in Germany, maybe in English. It has been a pleasure discussing solar on a blog where the discussion is civil.

Comment
38 of 39

Anonymous

February 20, 2012

Dederick,
I've seen sites where one can view the daily German solar PV generation. What I don't know where to find is the monthly generation figures as, for example, EIA provides. In principle once could integrate all the hourly data from what is provided on these other sites, but that would be tedious....
Steven

Comment
39 of 39

philhoey

February 20, 2012

@ Anonymous your post 36
Thanks for the update. Three percent is not much. However, in checking, Maryland has a 20% renewable energy goal, of which only 2% is designated for solar.

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About: John Farrell directs the Energy Self-Reliant States and Communities program at ILSR and he focuses on energy policy developments that best expand the benefits o... more »