Negative Prices Due to Rooftop Solar Generation
California's sunny skies have sparked a surge in solar panel installations, with the state now boasting approximately 47 gigawatts of installed solar capacity, enough to power 13.9 million households and account for over a quarter of the state's electricity. However, the state's government and grid operators are facing an unusual dilemma: on particularly sunny days where demand is low, electricity prices have plummeted into negative territory, according to The Washington Post.
Mitigation Efforts and Reduced Incentives
In response, California has implemented measures to discourage the installation of rooftop solar panels and slow the pace of development. However, the reduced financial incentives may hinder the growth of solar energy in a state that aims to transition to renewable energy sources. As other states expand solar power generation, they may soon face similar challenges.
The "Duck Curve" and Intermittent Solar Power
Solar energy offers significant benefits, including low operating costs, zero air pollution, and fuel-free power generation. However, one major drawback is that sunlight is not always available.
Over a decade ago, researchers at the National Renewable Energy Laboratory modeled the projected rise of solar power and identified an unusual phenomenon. As increasing amounts of solar power enter the grid, the demand curve for electricity forms a U-shape. Soaring demand in the morning is met by near-zero demand at midday, when solar power can supply all the electricity needed. As the sun sets, demand rises again.
California's grid operator, CAISO, refers to this effect as the "duck curve." The effect is most pronounced during spring months, when solar panels receive ample sunlight but there is less demand for heating and cooling. In recent years in California, the duck curve has transformed into a massive dip, with excess solar energy going unused. In 2022, the state wasted 2.4 million megawatt-hours of electricity, 95% of which came from solar power. The previous year, the state experienced such levels of waste in just the first 8 months.
Regulation and Compensation
Clyde Loutan, CAISO's director of renewable integration, acknowledges that California prepared for more solar power on the grid but underestimated the pace of residential solar panel installations.
Curtailing solar power is technically feasible, according to Paul Denholm, a researcher at the National Renewable Energy Laboratory. However, reducing self-generated electricity increases retail prices while also diminishing the financial benefits of installing rooftop solar panels. Since the 1990s, California has compensated rooftop solar owners when they send power to the grid, typically earning them $0.20 to $0.30 for every kilowatt-hour they produce.
A year ago, however, the state overhauled its system and now reimburses new solar owners only for the value their electricity brings to the grid. During the spring, when the duck curve is at its deepest, that value can drop close to zero. Customers can earn more if they install batteries and deliver electricity to the grid in the morning or evening. The change has been met with significant opposition from Californians and rooftop solar companies. According to Wood Mackenzie, residential solar installations in California are projected to decline by approximately 40% in 2024.
Lessons for Other States and Mitigation Strategies
Other states that have been slower to adopt solar power are beginning to experience similar challenges. Nevada, which generates 23% of its electricity from solar power, is also seeing a deepening duck curve. Hawaii, where thousands of homes rely on rooftop solar panels, has cut compensation to those households.
California's grid operators hope that their experiences will serve as a lesson for other states. CAISO is selling excess electricity to neighboring states. California also plans to install more batteries and other solar storage systems that can be used in the evening hours. Transmission lines can also help distribute electricity more evenly, as some blackouts have occurred in areas where there are not enough power lines to handle sudden surges in solar power.
Conclusion
California's struggle with negative electricity prices highlights the challenges associated with the rapid growth of solar power generation. While solar energy offers significant environmental and economic benefits, the intermittent nature of sunlight can create imbalances in the grid. States and grid operators must develop innovative solutions, such as energy storage, transmission upgrades, and pricing mechanisms, to manage the challenges and maximize the benefits of solar power.