When looking at U.S. renewable energy markets, Texas and California are the leaders in wind and solar, respectively. There are more than 27 gigawatts of wind in Texas, according to the American Wind Energy Association, and 25 gigawatts of solar in California, according to the Solar Energy Industries Association.
But as we’ve seen wind and solar grow in many markets, we’ve also seen grid integration challenges arise, including record-high penetration levels of individual technologies.
Stories of solar curtailment by the California Independent System Operator (CAISO) are well known throughout the industry. When 26 gigawatts of solar are peaking at 4 p.m. on the California grid, project owners’ returns can plummet due to low power prices and potential curtailment.
Texas faces its own set of issues. Anyone who has ever stepped foot in Houston in the middle of July knows that Texas summer weather is hot and stagnant. This type of environment translates to decreased wind output when demand for power is at its highest. This discrepancy raised some concerns last summer when Texas wholesale electricity prices reached their market cap at $9,000 per megawatt-hour.
These scenarios should make us pause and consider how better integrating renewable energy can avoid dramatic price valleys and peaks. One way we can evaluate technology integration is to look at the value of wind projects in wind-heavy markets and the value of solar projects in solar-heavy markets.
But how do we define value? One way is to look at simply how much of the average market power price a wind or solar project can capture in a given year. A high percentage means the project is more valuable, while a low percentage means the project is less valuable.
The charts below, created by members of the Vestas Americas Market Intelligence Team, show how the value of wind and solar to the grid has changed over time in Texas and California. What’s most interesting is how the value of wind and solar changes with increasing penetration of their individual resource in the market.
Using wind data from our Vestas parks in CAISO and solar data from the National Renewable Energy Laboratory's PVWatts tool, we see that at the same location in California, the value of solar has dramatically decreased even as penetration simultaneously increased. Specifically, utility-scale solar penetration scaled from less than 1 percent in 2010 to nearly 15 percent in 2018 and distributed solar penetration hit 5 percent that same year, according to data from S&P Global and the U.S. Energy Information Administration, respectively.
In Texas, the story is a little different, with wind maintaining a steadier value even as penetration grew from 7 percent in 2010 to 17 percent in 2018. But solar is set to boom in Texas. My team thinks upward of 15 gigawatts could be installed between today and 2023, showing that others see the great value solar will provide Texas in the near future.
So how do we move forward? There are certainly different ways to deal with high penetrations of renewables, including transmission improvements and storage, but an alternate solution readily available today is to build wind in solar-heavy markets and solar in wind-heavy markets. These charts indicate that on a large scale, wind can be made more valuable to the grid when paired with solar and vice versa. Solar and wind are complementary resources, together providing a relatively flat supply curve.
In California, wind's levelized cost of energy is still higher than the LCOE of solar. But its greater value means the revenue from wind will be stronger and the long-term returns will be better, prompting more development. We should start looking at high levels of renewables penetration not as a problem but as an opportunity to show the strength and flexibility of these technologies.
There are some indications that this integration transition is already happening. And I predict we will see wind-heavy states like Texas become new leaders in solar development, along with the Midwest. Wind power will grow in solar-dominated markets in the Southwest, go deeper into New England and see a resurgence in California.
What about transmission and storage? In places such as Texas, transmission could go a long way toward abating challenges stemming from high penetration. But the likelihood is frustratingly small that a significant transmission build-out will be carried out in time to solve these challenges in the short term. The barriers with quickly siting transmission not just in Texas, but across the U.S., are still too significant.
Storage is also hailed as a remedy for high renewables penetration; however, we need to be realistic about storage in its current market state. The economics are not there yet to solve the problems we’re talking about, and even when they get there, storage might not be the best way for load profiles to economically meet demand in many markets.
When solar and wind are deployed at high penetrations in a single market, it will be a major success story. It will prove that renewable market forces are incredibly efficient and can provide a self-fixing remedy for the relationship between value and penetration. Few other industries can claim such capabilities, and the U.S. renewable industry, our economy and the climate will be better off for it.
Chris Brown is the president of Vestas' sales and service division in the U.S. and Canada.