Factors that are causing sharp fall in Solar Costs and home solar systems

                    

Factors that are causing sharp fall in Solar Costs and home solar systems

Introduction  

There has been a phenomenal growth in solar capacity (500 GW in 2018 forecasted to grow to 4600 GW in 2025) internationally. The drivers of this growth are: reduced cost of technology; government policy and initiatives; and innovation in solar technology. The key factor is cost, PV plant efficiencies have increased and there is ongoing innovation that is decreasing the cost of solar technology.

Solar panels, inverter costs and panel racking costs have come down at a steady pace each year, resulting in large declines over time. There are a variety of causes, including manufacturing efficiencies, a steep decline in polysilicone prices from their high levels a decade ago (a material used by the photovoltaic solar industry) and fierce competition among manufacturers.

Core equipment cost has fallen faster than any other cost element that contributed to solar pricing. PV module accounts for 40% to 45% of the total solar cost, inverter contributes 20% to 35% of the total cost, project costs have declined by 20% in 2017 alone and there is every reason to believe that significant decrease in cost will occur in the future. The cost of the solar module has dropped by 40% between 2010 and 2016. This has been driven by technology, economy of scales and increasing automation .Production costs are forecasted to decline by a further 15% to 20% between 2017 and 2025.

The   buy back metering and arrangements also will assist the increased penetration of the solar. The role of the so called “prosumer” an entity that is both a consumer and supplier of solar power will increase. It is likely that the near future it is likely that the smart building package will include a solar interface .This may include a energy management system, storage and smart appliances. Net energy metering (NEM) is essentially a billing arrangement that allows organizations generating their own electricity to deliver unused energy back to the grid—and be credited at the retail energy rate. In most cases, these credits are applied to your monthly electric utility bill or rolled over month-to-month until they’re used up. You can even be compensated for any excess energy you generate. It can be a highly effective way to reduce the overall cost of solar panels for business.

Solar and solar battery storage   may make financial sense. An ever-growing number of businesses are taking a closer look at the potential of battery storage to lower their monthly energy bills, especially when combined with a commercial solar system. These refrigerator-sized batteries can offer a highly effective way to reduce demand charges by discharging their stored energy when needed to offset spikes in demand—potentially leading to substantial savings.

Digitization has already become an important factor that has driven prices down. The inverter can become the brains of the energy management system and contribute to further efficiency in energy utilization .Digitization can also assist in reducing the O&M cost of a large solar installation. Interconnection to a main grid also offers business opportunities to both the grid and the prosumer .

Higher AC voltages allows for higher power density, lower losses, and improved reliability. Modern homes now have solar panels cover the roof and façade and generate dc which is converted into ac by invertors. In one hour the system harnesses enough Energy to power the building for a complete day with the excess stored for later use or supplied to the grid.

Home solar systems

Purchasing a solar system large enough to offset all of the electricity that an energy-intensive home uses every month is necessarily going to cost more than installing a smaller solar array that is intended to just offset some of the electrical bill. One cost-effective method of reducing the size of the solar system needed is to reduce the amount of overall electric demand in the home, before trying to price a residential solar system, as purchasing a smaller solar power setup can offset a larger percentage of the home’s energy needs, simply because the demand has been reduced. Replacing older appliances with more modern energy-efficient models can be one approach, but potential solar homeowners can also use other strategies for reducing their electrical demands, including installing or modifying their landscaping so that it helps to shade and cool the house, installing more insulation and upgrading the windows and doors, as well as tracking down vampire energy loads (electrical demand from electronics and appliances that can use quite a bit of electricity when nobody is using them – even while on standby).

Rooftop evaluation

Another factor that affects the cost of solar is the amount of space available on the roof that can be used for a solar array, and the orientation of the roof itself. A rooftop that has less available space for solar panels can limit the size of the rooftop solar array, and a smaller array will cost less than a larger one. A roof that isn’t oriented to the south or the west, or one that has too steep or too shallow of a pitch won’t be as efficient as a rooftop solar array that exposes the panels to the sun for long periods throughout the day and the course of a year, and any system inefficiencies will effectively raise the relative cost of a residential solar system because of reduced output (as compared to a system of the same size, but with optimal orientation and pitch).

Choice of solar panels

The type and model of solar panels used for the system is another factor in the cost of solar, although one that may be more up to the solar installer than the homeowner. Three different types of solar panels are available on the market: those made with monocrystalline solar cells or polycrystalline cells, and thin film solar. For home solar systems, the two types of panels used most often are those made from monocrystalline or polycrystalline cells. As a rule of thumb, mono- type cells tend to be more efficient than poly- cells, but they also command a slightly higher price. Solar panels made from polycrystalline cells are said to have an advantage in hot climates, as some of the monocrystalline units may lose some efficiency as the panels heat up on hot days, although these specs can vary by model and manufacturer. Due to higher efficiency, a monocrystalline panel can be sized smaller than a polycrystalline panel with the same generating capacity, which means that the overall array can be smaller. However, for a home-sized solar array, being able to save 10% of the space with higher efficiency solar panels may not be nearly as important as getting the best overall price. Advances in solar technology, and the current trend of dropping costs for solar panels, is gradually equalizing these differences in solar cost and solar efficiencies.

Because solar panels are manufactured by many different companies, each with slightly variations in configuration, materials, and technology, the costs of the panels can vary quite a bit when it comes to quality and efficiency. Choosing the lowest price you can find on solar panels may seem like the way to go at first, but bargain-priced solar panels may end up saving less money (or costing more, depending on how you see it) over the years, because if those panels aren’t as efficient, or are a lower quality, the cost per watt generated over time won’t be as good of a deal as originally thought. On the other hand, higher priced solar panels may not always offer the best value, either. In order to consider the overall cost of a solar system, it’s important to calculate a cost per watt for the whole array, and to figure in the power tolerance ratings for the specified solar panels, which will give you an idea of the range of variation you might see in their performance.

Solar panel mounting hardware

Another factor that goes in to the price of a residential solar system is the kind of racking (mounting hardware), and the amount of racking required for a system. The racking is used to fasten the panels to the roof itself, and to connect each panel with the ones adjacent to it. Each solar installer has their own favorite mounting system they use for each different type of situation (the local weather conditions, the pitch of roof, the size of the solar array, and so forth), so the choice and cost of the mounting hardware will probably be up to the solar installer, unless you install your own system.

Power inverter

The brand and model of the power inverter unit, which converts the direct current (DC) electricity produced by the solar panels into the alternating current (AC) used inside the home, and which connects the solar system to the utility grid, also affects the total cost of a solar power installation. Just like solar panels, there are a variety of different manufacturers and models of solar inverters available, and all of them feature slightly different efficiencies and ratings, and are made for different installation situations. The solar installer will probably be choosing the appropriate model for your solar array, which they will determine by their working knowledge and personal experience with installing inverters for different situations.

Labor costs

The cost of the labor to transport and install the solar array is another factor that can affect the cost of residential solar power, and is something that the installer generally includes into the cost of the solar project. Labor costs for solar installation can vary widely by geographic location, by individual installers, and by the size of the array. The labor costs aren’t something that can be individually reduced, unless the homeowner installs their own system, so getting several quotes for the cost of similar solar power systems, as well as the specifications, from different installers is one way to be sure you’re getting the best overall value for the cost of a solar system.

These variables are all part of the residential solar power equation that determines the cost of solar power, and while some of them, such as size of the solar array or where it gets installed, can vary by the customer, other costs might not be nearly as simple to compare. Because of this, it’s important to ask a lot of questions of the solar installer, which can help you to make the most informed choice and get the most solar value for your money.

Solar panel efficiency, or conversion rate, refers to how much of the incoming solar energy is converted into electrical power. Typically, the efficiency of commercial solar panels operates in the range 11-15%. The most efficient solar cell to this date is based on a multi-junction concentrator and converts 44.0% of incoming solar energy into electricity.^[1] The highest performing solar panels has a module efficiency of 20.1%. 

 Another factor likely to impact the overall cost of installing a solar system in your home is the type and model of solar panels you decide to use, although this might be up to the installer and not you. There are three types of solar panels on the market:

·         Monocrystalline cells solar

·         Polycrystalline cells solar

·         Thin film solar

The solar panel mounting hardware and the amount of racking required will also impact your final price. Racking is for fastening the panels to your roof and connecting each panel to the next. Each installer has a favorite mounting system depending on the situation, local weather patterns, size of your solar array, the pitch of your roof and others. Other solar panel factors that have a direct bearing on the estimate you receive include the power inverter unit you use and labor costs.

Solar Panel Type

• Monocrystalline solar panels are based on the highest-purity silicon available. This makes them the most efficient solar panel type available for homeowners.
• Solar panels based on polycrystalline silicon are usually not quite as efficient as monocrystalline, but there is not that much of a difference.
• Today`s thin-film solar panels are relatively inefficient, but they also cost less. Thin-film solar panels take up a lot more space than mono- or polycrystalline solar panels, which is why they are unsuited for most households.

 Shade

Shade will obviously affect the output of solar panels. Depending on your setup, a little shade can even bring down an entire solar system. Micro-inverters offer a possible solution to shading issues. Professional solar panel installers will do a thorough analysis of shading in your specific situation.

Orientation

For best efficiency, solar panels should be positioned to maximize the input of sunlight.  Solar trackers were invented in order to adjust the orientation of solar panels to follow the sun`s trajectory throughout the day. For most homeowners, solar trackers do not pass a cost-benefit analysis – they are simply too expensive.The pitch of your roof can be altered with racks. In many cases this will allow your solar panels to stay longer in the sun.

 Temperature

Temperature is not something you have to consider unless you live in very hot areas  As the temperatures increase, the efficiency of solar panels usually decreases a little bit.Professional installers will make sure that the solar panels are positioned to receive sufficient amounts of airflow. This induces natural cooling, which help keep the efficiency rates up.

 Lifetime

The efficiency of solar panels does degrade a little bit over time. The general rule of thumb is that the power output drops by 0.5% every year. Solar panel manufacturers often offer a warranty that guarantees the power output stays above 80% after 25 years.

 Maintenance

A solar system generally requires very little maintenance – especially if the system is grid-tied. However, cleaning the solar panels on a regular basis is recommended. Dust and dirt will affect the efficiency of solar panels if not taken care of. In most places, wiping off the dust with soapy water is sufficient. In some places, the rainfall will do the job for you. Use cleaning services if you`re too anxious to get up on the roof. Best practices would be to monitor the power output of the solar panels to get an idea of how often cleaning them is necessary.

 Solar Panel Efficiency

Efficiency ratings of solar panels are only one of many different factors that have to be taken into account when considering going solar. Solar panels with conversion rates of 8% will need twice the area as solar panels with conversion rates of 16%. This is why most homeowners end up choosing mono- or poly-crystalline solar panels – these have great efficiency rates and are also space-efficient.  Greater the efficiency of the solar panel (and other equipment) greater the overall energy production of the system. Although the most efficient solar panels available on the market have an efficiency of 22.5 percent, most panels are in the 14 to 16 percent range. This difference in efficiency means that one system can have a solar energy output that is 50 percent greater than a less efficient system. Some other associated costs are reduced by greater efficiency, such as racking system equipment, installation and transportation costs. Efficiency in turn fuels greater opportunities to sell more solar generation capacity, as many residential systems are limited by the space available for mounting panels.

Demand

One of the most important factors, and one that the homeowner has the most control over, is the amount of electricity that gets used every month. In a house that has predominantly electric appliances (water heater, stove, central air conditioning and heat, washing machine and clothes dryer, electronics such gaming systems, computers, and home entertainment systems), then the amount of electricity used every month is going to be quite a bit higher than for those whose homes have gas appliances, a solar or gas hot water system, or an intelligent home energy management system (which can help to radically reduce ‘vampire’ energy use and to automate appliance and lighting use for optimal energy efficiency).

Prospective solar homeowners can get an idea of how much their own electrical demand is by looking at their utility bills over the course of a year, and can then calculate how much their average monthly electricity usage in kilowatt hours (kWh) is. This number can give homeowners a good idea about how much solar capacity will be needed, if their desire is to offset all of their home’s electricity use. A home solar system doesn’t have to always be able to generate the full amount, or an excess, of electricity used in the home every month (assuming it’s not an off-grid solar system, which will have to be sized to fit the electric demands of the home, as well as integrate a battery bank for energy storage). Many homeowners looking to go solar may seek to only reduce the amount of electricity they buy from the grid, which can reduce their electricity costs, and a smaller system might work better in their situation and with their budget.

Update:

Possible reduction in solar panel cost:

Chinese researchers have developed a new technique that could boost the efficiency and reduce the costs of making solar cells

The study of scientists from the Lanzhou University, the Ningbo Institute of Material Technology and Engineering, and the Functional Thin Films Research Center at the Shenzhen Institutes of Advanced Technology, was published in the December 2018 issue of the journal Nano Energy.The Chinese researchers say that they have developed a newly emerging technique that could meet the long-time dream of photovoltaic researchers to have high-performance silicon solar cells with low-temperature and solution-based processes only.

The new technique used by the Chinese scientists includes high performance hole- and electron-selective layers (HSL and ESL) for both polarities on silicon substrate. The contact resistivity was dramatically decreased, while a remarkable efficiency of 15.1 percent was achieved, according to the scientists. The new technique to make solar cells could allow solar cells to avoid high-temperature processes, thus making those solar cells lower-cost and more efficient, Peng Shanglong, the head of a research team at Lanzhou University, told Xinhua.“Because of high equipment costs and complex techniques, traditional solar cells have long been limited in use on a large scale,” Peng told the Chinese news agency.

Researchers from Helmholtz-Zentrum Berlin (HZB) said earlier this month that they had experimented with increasing the efficiency of silicon solar cells by incorporating layers of organic molecules into the solar cell. This could potentially abolish the 29.3 percent theoretical efficiency limit for silicon solar cells due to their physical material properties, they say. Researchers at Penn State have been searching for less expensive alternatives to solar cells and found that the properties of an inexpensive and quick-to-produce class of materials known as halide perovskites could lead to more efficient PV materials to replace traditional silicon solar cells.

Experience of some countries related to Variable Renewable Energy (VRE) and Lessons to be learned

Experience of some countries related to Variable Renewable Energy (VRE) and Lessons to be learned

Transmission and Interconnection requirements

Indifferent and faulty planning has resulted in waste of VRE in many countries. India is facing a curious problem: too much solar and wind power in some parts of the country. In July, 2016 for the first time, the southern Indian state of Tamil Nadu was unable to use all the solar power it generated.  Tamil Nadu,   urging  to speed up the construction of an inter-state green energy corridor that would allow renewable power to be transmitted and used in other states instead of being wasted. From India to China to Chile, a significant portion of future renewable energy could go to waste without careful planning.

Solar and wind only accounted for 3.5 percent of the power generated in India in 2015. But if the government achieves its ambitious targets for renewable energy deployment, the amount of solar and wind power on the grid could quadruple by 2022. Yet there are already signs that the grid’s ability to absorb these new power sources could be a major bottleneck for renewable energy growth in India, jeopardizing the country’s energy and climate goals.  .The problem is, in part, a technical one. Solar and wind power are not as easy to control as traditional fossil fuel plants, so power grids need to become flexible enough to handle last-minute changes in power generation.

Distance is also an issue. In India, six states in the western and southern regions account for 80 percent of all of the country’s currently installed solar capacity, but only 38 percent of power demand. For grid operators used to being able to turn fossil fuel plants on and off at will, these changes can take some getting used to. If new measures are not put into place to accommodate variable renewable energy sources, a situation can arise when the physical grid or the grid operator is unable to use solar and wind power when it becomes available.

Other countries have already dealt with this problem with varying degrees of success. Germany and the U.S. have relatively high levels of solar and wind penetration and low curtailment rates, while China has had major issues with curtailment as the share of wind and solar in the energy mix increases.

Indeed, China currently has more wind and solar power capacity than any other country in the world after scaling up very quickly. In the five years between 2010 and 2015, the share of solar and wind power generated in China quadrupled. Yet in 2015, the U.S. still produced more electricity from wind than China, despite having only 58 percent of China’s installed wind capacity. A large reason for this discrepancy is that much of China’s solar and wind power is wasted: 21 percent of wind power was curtailed in the first half of 2016 (with Gansu province reaching a 47 percent curtailment rate), and solar curtailment reached 11 percent in the first three quarters of 2015.

Although China has been able to build out renewable energy capacity quickly over the past decade, it has taken much longer to develop the transmission infrastructure and make the institutional changes required to utilize all of this new power.

India has undertaken to build the green energy corridor, a series of transmission lines that will connect states with excess renewable energy to areas where there is unmet demand. And similar to China, solar and wind already have “must run” status, meaning that any power they generate should always be accepted by the grid.

Yet even these steps may not be enough. A recent survey found that 31 percent of senior corporate leaders in Indian solar companies think that grid integration will be the biggest challenge for expanding solar in India going forward.  

The first priority for India, when addressing this issue, is to finish the green energy corridor and other new transmission lines so that renewable power can be transmitted where it is needed. There are significant power surpluses in some states and power deficits in others.

For instance, Uttar Pradesh has a peak power deficit of 9.7 percent (meaning 9.7 percent of demand at peak times cannot be met with the power available in the state), whereas the bordering state of Madhya Pradesh has a peak power surplus of 8.3 percent. Yet the power connection between the two states was at full capacity 73 percent of the time in May 2016, meaning some surplus power in Madhya Pradesh may not have made it to Uttar Pradesh. Nationally, 10 percent of the power supply available on the short-term markets last year could not be used because of transmission constraints.

New investment in inter-state power lines will help balance out such disparities. It is particularly important for India to attract private investment in these projects. The green energy corridor will cost an astounding USD $3.4 billion, and is funded in part by government funds and partially by a $1 billion loan from the Asian Development Bank and €1 billion loan from GiZ. But the public sector can only fund so many multibillion-dollar projects, and many state utilities are already in poor financial conditions.

Private capital is projected to be required for 47 percent of infrastructure investment in India between 2012 and 2017. India’s planning commission has created a framework for public-private partnerships for transmission investment, but land acquisition and permitting are still major roadblocks for private developers hoping to complete a project on schedule. Reducing the time and cost of land acquisition will be essential to making infrastructure projects attractive to developers and unlocking the private capital needed to finance transmission lines.

Second, focusing on deploying distributed energy technologies like rooftop solar can help increase the amount of renewable energy in use where new transmission lines are infeasible or too expensive.

India hopes to get 40 percent of its solar capacity from rooftop solar by 2022, but the market has been slow to take off despite a 30 percent capital subsidy from the government. The barriers to rooftop solar deployment are often more institutional than technical. In China, slow subsidy disbursement and a lack of financing have caused rooftop solar deployment to fall short of government targets. In India, a recent survey found that 93 percent of senior corporate leaders in the Indian solar sector did not think the country would even reach half of its rooftop solar target by 2022, citing ineffective net metering policy, unavailable and expensive financing, and consumer awareness as top issues.

Solutions

There are a number of potential solutions: Training for distribution utilities unaccustomed to having customers generate their own electricity; streamlining the application and approval process; creating certifications to ensure installer quality; and even allowing rooftop solar systems to serve as backup power when the grid goes down. Quickly implementing such solutions can allow renewable to grow without worsening curtailment.

Energy storage can also play an important role in reducing curtailment. The cost of storage is still a major barrier to mass adoption, but prices are dropping quickly.

Moreover, Germany and Texas have achieved low curtailment rates with minimal energy storage and high renewable energy penetrations through improved grid planning and changes to the power market structure. Still, India is planning on installing 10 gigawatts of pumped hydro energy storage across the country to accommodate increased renewable energy penetration (China is taking similar measures to reduce curtailment). As the price of energy storage drops, it will become an increasingly compelling complement to variable renewable energy.

Finally, India can look to other countries to find grid planning and operational solutions to help manage curtailment as renewable power scales up. One such change, highlighted in a recent Paulson Institute report on curtailment, is to create financial incentives against curtailing renewable energy.

Currently, Indian solar and wind generators are not compensated for curtailment, and compensation should not be necessary because renewable have “must run” status. However, financial incentives can help reinforce such regulations when mandates alone are insufficient. China has had a similar experience with “must run” mandates: multiple policies have stated that solar and wind should always receive priority on the grid, but curtailment continues to be an issue because there are few penalties for ignoring this regulation.

A recent regulation released by China’s National Development and Reform Commission requires that coal plant owners pay wind or solar plant owners whose energy is curtailed, creating a stronger incentive for grid operators to fully utilize renewable. An even simpler solution would be to compensate solar and wind projects for any curtailed energy at a fixed rate. This not only penalizes grid operators that choose to curtail renewable, but also provides more certainty for power producers when trying to forecast revenue.  

Even smaller changes to how the grid is operated can make a difference. In Texas, grid operator ERCOT shifted from 15-minute dispatch intervals on the intra-day market to 5-minute intervals, allowing for more granular planning around variable wind and solar power plants. (India currently uses 15-minute dispatch intervals.) ERCOT also shifted from targeting 0 percent curtailment to a maximum acceptable curtailment rate of 3 percent of annual renewable energy production -- a more cost-effective solution than trying to utilize every unit of electricity generated at peak times.

Such institutional changes can provide flexibility to the grid without the high risk and cost of major new transmission and storage projects. Yet a successful energy transition will require a broader change in the infrastructure and institutions that support renewable -- not just targets themselves.

INDIA SMART GRID PROJECT

GE Power’s Grid Solutions business has commissioned the first leg of a huge grid-stabilization project in India. The company says the project for Power Grid Corporation of India Ltd (PGCIL) is the world’s largest Wide Area Monitoring System (WAMS) solution. Sunil Wadhwa, Leader of GE Power’s Grid Solutions business in South Asia said, “The commissioning of the Wide Area Monitoring System technology of this scale and size is unparalleled in the history of power transmission in India. This will prove to be an important milestone in ensuring supply of uninterrupted, 24/7 high-quality power supply and integration of renewable energy with the country’s electrical grid.”

The project is part of the Unified Real Time Dynamic State Measurement (URTDSM) initiative that entails monitoring and controlling of the electricity supply across the country and has been executed by GE T&D India, part of GE Power's Grid Solutions business in India. The commissioned first stage will enable PGCIL to monitor power flow across 110 substations in the Northern Grid and respond to fluctuations within a fraction of a second. The northern grid covers nine control centers: Punjab, Haryana, Rajasthan, Delhi, Uttar Pradesh, Uttarakhand, Himachal Pradesh, Jammu & Kashmir and Chandigarh.

GE says “this will be critical in addressing power demand-supply imbalances and ensuring grid stability benefitting from the integration of renewable energy with the grid” When fully commissioned, this new WAMS solution will be the world’s largest comprised of 1,184 Phasor Measurement Units (PMUs) and 34 control centers across India, 350 substations in the national grid.

GE said the solution obtains input data 25 times per second from all the PMUs installed, whereas conventional SCADA sampling occurs once in nearly five seconds.It also offers real time views on geographic displays, analytical applications and the capacity to store 500 TB of data.

Moreover, it will also fully secure the grid from any cyber security threat, incorporating the latest firewall policies. The development and testing of the new software and substation devices was undertaken by GE teams from India, the UK and USA supported by PGCIL teams for duration of two years. 

GE Power Chief Digital Officer Steven Martin added: “The digital transformation of the energy sector is one of the globe’s greatest imperatives today. It’s exciting to see PGCIL harnessing the benefits of real-time data monitoring, improved decision making, and stronger cyber protection in order to ensure a steady, resilient power supply.”  

 Scaling Up Together

In 2015, India joined with France to launch the International Solar Alliance (ISA), a cooperative endeavor to facilitate the spread and adoption of solar energy. The ISA, the first international organization headquartered India, is open to 121 countries lying in the sunshine-rich area between the Tropic of Cancer and the Tropic of Capricorn. Together, these countries — of which 68 have joined the ISA so far — account for nearly three-quarters of the world's population but only 23 percent of global solar capacity, and most are poor or middle-income states. The organization, which held its first summit in March of this year, will afford India an opportunity not only to demonstrate its knowledge of scaling up solar power, but also to assert its leadership in the developing world.  

The ISA doesn't require binding commitments of its members, nor does it aim to disburse large volumes of funding. Instead, it recognizes the challenges countries, particularly poorer countries, still face in adopting renewable energy. Financing the construction of solar infrastructure, for example, remains a major obstacle for developing countries, accounting for up to 75 percent of total project costs in some cases. The costs of some of the technology required generating and use solar power, such as storage technology, also is prohibitive for up-and-coming states, despite a steady decline in prices. On top of that, the market for solar energy in smaller states may be too limited to attract investors, and governments may struggle to differentiate among the array of technologies and policies to find the best fit for their domestic energy needs. Designs and certification standards for solar appliances relevant to rural living — like water pumps and street lights — have significant room for improvement as well.

To overcome these obstacles, the ISA proposes to pool resources such as technical expertise and policy know-how, along with demand for solar power itself, among its members. The organization hopes that the resulting integrated market will draw $1 trillion in investment and additional solar capacity of 1,000 gigawatts across member states by 2030. In answer to the financing problem, the ISA is launching a new initiative called the Common Risk Reduction Mechanism, expected to come online in December. The mechanism will, as its name suggests, reduce investor risk — from fluctuating local currency exchange rates, political change or nonpayment from a new solar utility's customers — by pooling and securing finance across multiple projects in multiple countries. Banks, private investors and the Green Climate Fund are pledging $1 billion to the initiative, and the ISA expects the investments to leverage an additional $15 billion of private sector funding. All told, the organization estimates that the Common Risk Reduction Mechanism will lower costs for solar projects in its poorer member’s states by about half. Other initiatives include training 10,000 solar technicians and setting up centers in member countries to focus on innovation, research and development, testing, quality control, and certification.

 Negative Prices

Negative prices are a price signal on the power wholesale market that occurs when a high inflexible power generation meets low demand. Inflexible power sources can’t be shut down and restarted in a quick and cost-efficient manner. Renewable do count in, as they are dependent from external factors (wind, sun). On wholesale markets, electricity prices are driven by supply and demand which in turn is determined by several factors such as climate conditions, seasonal factors or consumption behavior. This helps to maintain the required balance. Prices fall with low demand, signaling generators to reduce output to avoid overloading the grid. On the French and German/Austrian Day-Ahead market and all Intra-day markets of EPEX SPOT, they can thus fall below zero. In some circumstances, one may rely on these negative prices to deal with a sudden oversupply of energy and to send appropriate market signals to reduce production. In this case, producers have to compare their costs of stopping and restarting their plants with the costs of selling their energy at a negative price (which means paying instead of receiving money). If their production means are flexible enough, they will stop producing for this period of time which will prevent or buffer the negative price on the wholesale market and ease the tension on the grid. Negative prices are a signal, an indicator for market participants. If producers decide to keep their production up, they have calculated that this is the best, most cost-efficient way for them considering the costs of shutting down and restarting their plants. In addition, negative prices are an incentive for producers to invest in the development of more flexible means of production that can react more efficiently to fluctuating energy supply in order to increase security of supply and prevent

the integration of large amounts of wind and solar power is a big challenge for RTOs and electric utilities, since they must keep the power grid stable (balancing supply and demand) even as highly variable power sources like wind and solar connect themselves to the grid . Large-scale wind and solar also pose challenges for electricity markets. Because wind and solar have basically zero marginal cost (remember that once the plants are built, fuel from the wind and sun are free at the margin), enough wind and solar power can drive down prices in the day-ahead and real-time energy markets. The frequency of LMPs that are at zero or even at negative levels has been increasing in markets with high levels of market participation by wind and solar energy producers. The figure below shows the frequency of negative prices in the California ISO during different hours of the day over the past few years (remember that a negative price means that a power plant is paying to produce electricity, and consumers are paid to use electricity). Note that during the daytime (hours 8 through 18 in the figure, which is 8:00 am to 6:00 pm) the price in the California market was negative more than 10 percent of the time in 2016, compared to a few percent of the time in 2012 and 2014.

  Negative prices in electricity markets can arise for two different reasons. The first is operational inflexibility, as a signal that supply is greater than demand. Suppose that a base-load gas plant with a very slow ramp rate was running at full capacity to meet electricity demand. At some point, wind energy production increases rapidly, so that there is more supply on the grid than there is demand to absorb that supply. The grid operator has two options – production from the wind can be curtailed (which has happened, as discussed in the Vermont article) or production from the base-load power plant could be curtailed, which comes at the risk of damaging the power plant. If the grid operator chooses neither action, then the price becomes negative. In this case while a negative price seems strange, there are perfectly good economic reasons for the price to become negative.

The second reason that negative prices arise is because of subsidies to wind and solar technologies. Many wind power plants, for example, receive a subsidy known as a Production Tax Credit for every MWh that they produce. This subsidy, currently equal to $23 per MWh, gives wind projects an economic incentive to produce as much electricity as possible. It is even possible that a wind project would accept a negative price in order to get the $23 subsidy for each MWh generated. If the plant gets paid $23/MWh and the price is -$5/MWh, the net revenue for the plant is still $18/MWh. Thus, some renewable energy market participants submit supply offers into the day-ahead or real-time market at negative prices, all but ensuring that their offers will be the cheapest.

RTOs whose territories cover areas with a lot of wind and solar production (most notably the California ISO, the Midcontinent ISO and ERCOT in Texas) have had to adjust their market protocols to handle large quantities of wind and solar power.

The Midcontinent ISO (MISO) began a program called Dispatchable Intermittent Resources (DIR) to avoid having to manually shut down large quantities of wind energy. The DIR program allows wind energy resources to participate like every other generator in the MISO real-time energy market as long as a binding production forecast is provided to MISO. 

The California ISO faced a very different problem, as their footprint has seen more rapid growth in solar energy than in wind energy. High levels of solar PV (without accompanying energy storage) pose a peculiar problem for grid operators in that it inverts the traditional daily demand pattern. Grid operators are used to seeing high demand for electricity in the middle of the day and lower demand at night, with the shift between high demand periods and low demand periods being rather gradual. With high levels of solar PV (which produce a lot of electricity during the day), the needs of the grid flip – fewer other power plants are needed during the day and more are needed at night. Moreover, the shift between the daytime and night-time load pattern becomes very sudden.

This is captured in a graphic known as the “duck curve,” shown above. The duck curve shows the demand for electricity (net of solar PV production) on California’s grid during each hour of the day as more solar PV comes on-line. Not only is the electricity demand in the middle of the day (again, net of solar production) pushed very very low, but the increase in electricity demand between 6 pm and 8 pm is rapid and very large in magnitude. The three-hour increase in demand of 10 GW shown in the figure above is roughly like powering up the entire state of Wisconsin in three hours.

California’s needs in integrating solar power into its markets are thus different from MISO’s needs. MISO needed a way to reduce the frequency with which it had to manually turn off wind energy production. California needed a way to pay for power plants with short start times and very high ramp rates, to handle the afternoon increase in non-solar electricity demand. California’s response was to develop a kind of real-time market that clears every five minutes, not every hour. This market, known as the Energy Imbalance Market was designed primarily to attract fast-ramping power plants, energy storage installations or any other resource that could response quickly enough to the five-minute market signal.

Conclusions

Induction of VRE energy into a power grid requires detailed planning. The central issue is the capacity of the transmission system to transfer large blocks of powers and to be able to retain integrity with sudden loss of power or sudden availability of power. Wind and solar do present a challenge to the intergraded grid systems and this needs to be expensively modeled and  plans needs to be prepared and implemented in time to fully unitize the benefits of VRE .