California’s energy future got a little clearer a few weeks ago with the release of an important report from research firm E3. The report, Investigating a Higher Renewables Portfolio Standard in California, was commissioned by the state’s major utility companies to answer questions about the impact of adding more renewable energy, like wind and solar, to California’s power grid.
The report comes at an opportune time for the state. California utilities have largely purchased all the renewables they need to meet the state’s current 33% Renewable Portfolio Standard (RPS) by 2020. Meanwhile policymakers have come under increasing pressure to mandate higher levels of renewables as a way to further decarbonize the electric power sector. In fact to achieve the carbon goals established in law via AB32, California is clearly going to need a lot more solar, wind, and other renewables.
But policymakers have been wavering for the last couple of years on taking the steps to set higher RPS targets. What’s been holding them back is the fear that higher levels of renewables from variable sources, like wind and solar, might destabilize the grid and impose large “integration costs” on customers. In the absence of good data, regulators and elected officials have been understandably hesitant to expand the RPS out of fear of harming utilities’ customers and triggering a backlash.
E3’s report directly assesses these risks by modeling California’s electric power system to an unprecedented level of detail. It presents a very thorough analysis of the technical and economic complexities that should satisfy most energy geeks. What needs to be made clear however is that the report comes to two key conclusions for policymakers that open the door to moving forward with an expansion of the RPS:
- There are no technical barriers that prevent California achieving a 50% RPS and maintaining grid reliability; and
- By taking steps now to redirect infrastructure investment into making the electric power system more flexible, California can achieve a 50% renewable standard at low incremental cost over the status quo.
It is important to note that E3’s report does not dismiss the risks that higher renewables could pose to the grid. It starts by recognizing that by 2020 when the 33% RPS is fully implemented, California will have surpassed every other region in the world in terms of its ratio of clean electricity. Under a range of scenarios, the report evaluates the day-to-day challenges associated with moving from the 33% to a 50% renewables standard. It concludes that the most pervasive issue in a high-renewables scenario is not grid reliability but “over generation”, a situation that can occur when the total output of “must run” generation like solar, wind, nuclear, and some gas-fired plants exceeds the need for electricity.
But over generation does not pose a risk to grid stability. There’s an obvious solution: just turn off or “curtail” generators the state doesn’t need. E3 concludes that it would be fairly straightforward to put control systems in place that would allow system operators to curtail renewables in over-generation scenarios. The only problem with this approach is that it’s expensive because “must run” generators get paid even when their power isn’t needed. And those payments get lumped in to the overall costs that California customers pay for their power.
The study offers a far preferable alternative. It recommends the state redirect grid investment to add “downward flexibility” resources like energy storage, encourage flexible demand that can be increased or decreased throughout the day such as electric vehicle charging, and enhance energy export capabilities to other regions. This would enable grid operators to can soak up excess generation for use later in the day or ship it for use outside of California’s electricity grid. Given various combinations of downward flexible resources, the study concludes that over generation can be substantially reduced through this approach and system reliability remains uncompromised without extensive curtailment.
On the subject of costs, E3 expects that higher percentages of renewables would result in only slightly higher costs than the status quo. It notes that wind and solar have come down so significantly in price that their cost impact is minimal. The report points out that by 2030 California electricity prices in a status-quo scenario are expected to rise 7-cents to an average 21-cents per kilowatt-hour. Indeed, the report explains “this increase is driven largely by trends outside the scope of this study, such as the need to replace aging infrastructure, rather than by RPS policies.”
It further found that the cost of implementing a 50% renewables scenario—assuming the right flexible resources are also added to the system—imposes an incremental cost of only 1- to 3-cents per kilowatt-hour. In addition, the study highlights areas for additional research around renewables integration, which may yield solutions that further reduce the incremental cost increases associated with a higher level of renewables.
It’s hard to overstate just how important E3’s findings are for California’s energy future, especially given that it was commissioned by the state's electric utilities. It's credibility is also bolstered by an impressive review board that included Dan Arvisu, Severin Borenstein, Sue Tierney, and Stephen Wright.
It's pretty hard to ignore the conclusions that—as long as the state takes the right steps to redirect investment in the grid to integrate variable generation—achieving a 50% RPS is technically feasible, will not negatively impact grid reliability, and can be implemented cost-effectively. By addressing the primary issues that have kept policymakers from extending California’s RPS, E3’s report paves the way to responsibly decarbonize its energy system without undermining reliability and affordability.