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    Will solar+ push out natural gas? [Gas Transitions]

Summary

Solar power and batteries have become so cheap that they are starting to replace natural gas as a source of dispatchable power in the US and Europe. In the heating market, solar+storage won’t be able to make large inroads, at least not in Europe, but here natural gas is under threat from district heating networks. Some in the EU are calling for a ban on natural gas boilers by 2030.

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by: Karel Beckman

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Will solar+ push out natural gas? [Gas Transitions]

 “Is solar+ the future of energy?”, US-based industry analyst John Massey recently asked in an article on The Energy Collective website. Good question, I thought. And if the answer is yes, the next question would be: what are the consequences for gas?

The point Massey makes in his article is that “we’ll increasingly live in a solar+ world. Solar will be the preferred way to produce a kWh of energy, because nothing will be able to compete on cost. The "+" will refer to a variety of integrations that add dispatchability’ (flexibility and predictability - and hence value) to that energy.”

He gives five examples of solar+ applications.

Solar+storage. Cost reductions in both solar PV and batteries are such that “the impact on the business case for traditional sources of peaking power – gas generators – is already being felt”, writes Massey. “In the southwest US, tenders for solar+storage have come in at less than $30/MWh (and, in the long-run, costs are only going one way). That’s led analysts such as Wood Mackenzie to forecast that more than 6.4 GW of new natural gas-fired peaking capacity in the US could be at risk by 2027, with developers such as 8minutenergy Renewables claiming that they can build solar+storage “a factor of two cheaper”.

Solar+EV-charging. He notes that “the integration of solar with EV charging is already a focus for many companies. For example, on a product level, SolarEdge recently announced what they claim to be the “world’s first” integrated (2-in-1) EV charger and solar inverter, so removing the need to install separately a charger and a PV inverter and more easily and efficiently managing the smart interaction between solar generation and the car.”

Solar+other low-carbon generation. For example: solar+wind+storage. “Companies such as GE are… starting to build projects where solar panels are directly integrated with power conversion within the wind turbine, so reducing balance of plant costs too, and increasing both capacities and energy outputs,” notes Massey.

Solar+conventional fuelled generators. For example: “Resolute Mining has signed an agreement for the development of a 40-MW independent solar hybrid power plant at a gold mine in Mali, West Africa. The plant will combine solar, battery, and heavy fuel oil (HFO) technologies.”

Solar+clean fuel: hydrogen. “There are already some interesting examples emerging where solar is integrated with hydrogen production, such as this energy self-sufficient housing complex in Vårgårda, Sweden”, writes Massey. “A block of thirty flats runs entirely on solar energy and stored hydrogen.”

US exemplifies the trend 

Is there evidence of any of this actually happening, in addition to the examples mentioned by Massey? Yes. Plenty. Let me give you some examples in the US that I have come across recently in other publications.

Florida Power & Light (FPL), the state utility owned by NextEra Energy, plans to build the world’s largest solar plus battery storage project which will boast battery capacity four times larger than anything currently in operation, reported Joshua Hill recently on Reneweconomy.com. “The new project is specifically intended to accelerate the retirement and replacement of two 1970s-era natural gas generating units at the company’s neighbouring power plant.”

In California, rooftop solar PV installations will become mandatory for most new houses from 2020 on. The measure “could help set the stage for renewable energy to replace natural gas in space and water heating systems”, writes Heather O’Brian on the website Foresight. Most likely winner in California: the “heat pump-solar PV combination” – i.e. heat pumps powered with solar PV.

In the northeastern US, Sunrun won a bid for 20 MW in in ISO-NE’s 2022-2023 Forward Capacity Market, writes Massey. Their solution: aggregating residential solar+storage from about 5,000 customers. “Although this represents a tiny part of the total capacity market in New England, the significance of this announcement is how it points to the direction of travel – with the addition of storage able to turn solar into something able to provide a predictable, contractable future capacity guarantee”, notes Massey.

An article by Dennis Wamsted for the Institute for Energy Economics and Financial Analysis (IEEFA) in the US notes that “Solar-plus-storage is not a one-size-fits-all application, and it can be tailored to specific market conditions and corporate needs.” Wamsted gives five more examples (!) of what solar+storage is doing in the real world:

 1      Supply peak needs. Arizona Public Service (APS) in 2017 issued requests for proposals that resulted in a contract in early 2018 with First Solar that has the company providing electricity to APS during its peak demand period, from 3-8 p.m. The First Solar projects that will support the deal include a 65-MW solar photovoltaic unit and a 50-MW battery, enabling First Solar to fulfil its supply obligations initially with solar-generated electricity and then augment that in the evening with electricity from the battery—essentially providing firm power during the peak five-hour window.

2      Cut transmission charges. Vermont-based Green Mountain Power recently won regulatory approval for three solar-plus-storage projects designed to help cut demand during peak periods in order to reduce charges levied by ISO-New England, the region’s transmission system operator.

3      Enable coal plant retirements. In Nevada, NV Energy has big plans for its recently approved solar-plus-storage investments, including the related early retirement of a 254-MW coal-fired unit at the North Valmy Generating Station in the north-central part of the state. All told, the company will be building 1,001 MW of new solar PV at six sites, three of which will include 100 MW of storage capacity. Those solar-plus-storage projects, all situated close to North Valmy, will play a key role in maintaining the system’s reliability when the plant is shuttered in 2021.

4      Provide new capacity. Announcing late last year that it would turn to solar-plus-storage and natural gas to meet its near-term electricity supply needs, El Paso Electric said it would procure 200 MW of solar and 100 MW of battery storage to help meet summer supply needs beginning in 2022-2023.

5.      Improve core economics. Elsewhere in West Texas, Vistra last year partnered with FlexGen to add a 10-MW/42MHh battery to its existing 180MW Upton 2 solar project, a notable decision given the cutthroat nature of the Texas electricity market.

“Every new project like these that comes online highlights the broad potential of solar-plus-storage and chips away at the fossil industry narrative that renewable energy isn’t reliable or cost-effective”, writes Wamsted.

Cost reductions galore

Once upon a time of course solar+storage was expensive. But those days are over. Bloomberg New Energy Finance (BNEF) in a recent market analysis reports continued striking cost reductions in solar PV, offshore and onshore wind and most of all in battery storage.

In fact, notes BNEF, battery storage costs have dropped so much that “batteries co-located with solar or wind projects are starting to compete, in many markets and without subsidy, with coal- and gas-fired generation for the provision of ‘dispatchable power’ that can be delivered whenever the grid needs it (as opposed to only when the wind is blowing, or the sun is shining).”

In just one year, lithium-ion battery storage has become 35% cheaper, with prices falling to $187/MWh, notes BNEF. Wind and solar prices fell 10% and 18% since the first half of 2018. The result is that not only have solar and onshore wind “won the race to be the cheapest sources of new ‘bulk generation’ in most countries”, but the “encroachment of clean technologies is now going well beyond that, threatening the balancing role that gas-fired plant operators, in particular, have been hoping to play.”

Navigant, another major consultancy, also reported recently that “solar+storage” projects are increasingly replacing gas-based power solutions. Navigant found that:

  • Storage-plus power purchase agreements (PPAs) are less expensive than the levelised cost of energy for combined-cycle natural gas plants in the US.
  • Lithium-ion batteries are one of the main drivers in the growth of the utility-scale energy storage market.
  • There is a growing expectation that electricity utilities will increase their investment in storage-plus renewable energy projects as power purchase agreement prices continue to fall and adoption expands.

And Navigant expects advances in lithium-ion battery technology means that “PPA prices for projects combining energy storage and renewable resources are expected to continue declining as their adoption expands.” 

Grid integration

But, you may ask, what about grid integration? Don’t we all know that with intermittent renewables alone, we can’t have a stable grid? Perhaps, but solar+storage is of course one way of dealing with grid instability. And don’t underestimate the progress that is being made in this area.

Here are some examples of how the grid stability problem is being tackled – without natural gas as back-up:

In the UK Statkraft is building a 1-GW solar+wind+storage+gas  “virtual power plant”, reports Reneweconomy.com, with which the company will be able to integrate intermittent power generation into the British electricity system. The VPP – which is not a physical installation, but a form of systems integration – will be able to “match renewable power production with market demand within seconds.” The know-how for the VPP will be supplied by German company Energy & Meteo Systems. The software in the system “will connect, coordinate and monitor decentralised power-generating sites, storage facilities and controllable loads, via a common intelligent control centre.” For Statkraft the British VPP is not a first: the company “is already involved in Europe’s largest VPP, interconnecting more than 1,400 wind and solar installations with an installed capacity of approximately 12GW” from all across Germany.

National Grid, the UK transmission system operator, is also taking measures to allow maximum penetration of renewables. The company recently reported that it “is preparing to change its systems so it can operate the electricity grid with 100% renewable energy by 2025,” reports Giles Parkinson on Reneweconomy.com. “Great Britain needs to decarbonise its energy system to help address the ever-increasing threat of climate change,” National Grid said in a policy statement. “…. there is a need now to make a step change in how we plan and operate the electricity system to enable ever higher levels of renewable and sustainable energy in our national energy mix … This is very different to the traditional model of power system operation and, to enable all of this low-carbon generation operate unconstrained, requires us to address and solve some critical engineering challenges. Our ambition is that, by 2025, we will have transformed the operation of the electricity system such that we can operate it safely and securely at zero carbon whenever there is sufficient renewable generation on-line and available to meet the total national load.”

Massey in his article points to the future use of electric cars to help balance the grid. He notes that “there will certainly be growth of systems which combine solar with both “mobile batteries” (EVs) and stationary ones. In particular, stationary batteries will provide an important buffering mechanism between constrained grid connections and fast chargers. Integrating these systems with solar canopies like this one will further reduce grid loads, as well as ensure that charging of the cars is kept as 'clean' as possible.”

Giles Parkinson of Reneweconomy.com reported back in February that “the future of gas generation in Australia, and in South Australia particularly, dimmed further after local transmission company ElectraNet said using synchronous condensers – a relatively old technology – would offer a much cheaper solution to the state’s energy security issues in a high renewable grid.” ElectraNet, in a submission to the Australian Energy Regulator, said using the existing gas fleet for “system security” was “no longer economically viable”, writes Parkinson. “Synchronous condensers offered the cheapest intermediate option – before a newer technology came along – and four units could be installed by the end of next year. This is up from the three units canvassed last year, when it first identified the Syncons as a cheaper alternative to gas.” The development of synchronous condensers, which are also used in a solar project in Victoria, “will mean that gas generators will lose yet another revenue stream”, concludes Parkinson.

What about heating?

Let’s face it: all of this is not good news for natural gas. It implies that gas-fired power will increasingly not be needed in electricity generation. However, the observant reader will have noted that most of the above examples are about the electricity system. What about heating? Could solar+ applications also heat our buildings and industries in future?

In some places, where there is a lot of sunshine, and the weather does not get too cold, yes, solar will be able to make a significant contribution. “In sun-rich Italy, falling costs and efficiency improvements of solar PV modules has meant that solar PV for heating makes increasing sense”, Gianni Silvestrini, scientific director of the Kyoto Club, an Italian non-profit, told Heather O’Brian of Foresight.

But, Silvestrini added, “the contribution solar can make to decarbonising heating will be extremely limited without a sharp reduction in energy consumption through efficiency improvements to buildings.”

Mike Henchen, manager on the electricity team of the Rocky Mountain Institute, a clean energy think tank, likewise said that “if we are proposing electrification as a solution for heating buildings in colder climates, we will see a lot more peak demand for electricity and it certainly will not be possible to satisfy this with solar alone. In fact, the contribution from solar PV in these places is likely to be slim.”

Similarly, Christian Holter, CEO of Solid, an Austrian manufacturer of large-scale solar thermal energy plants, told Euractiv recently that “It makes no sense to bring electric power into heating, because winter demand for heat is 5 to 10 times bigger than the entire electricity system, which won’t be able to cope”. According to Holter, “Heating electrification is one of the biggest mistakes of the energy transition”.

He explained that “In most European countries, electricity covers only about 20% of total energy consumption whereas heating and cooling takes up about 50% of total final energy use. That means we have a demand factor for heating and cooling which is about 2.5 times higher than the current rate of electrification.  And in winter, the demand for heating and electricity is five to ten times higher, at least in central and northern Europe. And I don’t see any sustainable electricity source which could balance the heating needs we have in those places.” 

A ban on gas boilers? 

This may all sound like good news for gas, but, unfortunately, the fact that solar can’t supply most of our heating needs, does not necessarily mean that natural gas will be needed to plug the gap. Holter, in fact, mentions four non-fossil alternatives: bioenergy, geothermal, biogas and solar thermal heating combined with seasonal storage. And he forgets the alternative with probably the most potential, at least in Europe: district heating networks.

Indeed, according to Brian vad Mathiesen, an energy researcher at Aalborg University in Denmark and lead coordinator of the Heat Roadmap Europe, we should phase out the use of natural gas in the built environment in Europe as quickly as possible. Mathiesen wants to see a ban on the sales of new natural gas boilers by 2030. Instead, Europe should roll out a massive district heating programme, he says.Interestingly, Mathiesen agrees with Holter that solar PV and heat pumps are not in most cases the best solution for heating our buildings. “Solar PV systems and heat pumps are like clean energy limousines that most people can’t afford”, he told Euractiv in a recent interview. Instead, he believes half and three quarters of EU households “could be served more cheaply by thermal infrastructure or district heating networks.” 

In the interview with Euractiv, Mathiesen does not pull any punches. He says he finds it “extremely frustrating to see how we seem to be content waiting for a solution to one of the largest environmental problems in Europe – to heat our houses – when we know the solutions at hand: an acceleration of deep renovation and looking at shared solutions like thermal grids to avoid having to balance the electricity grid at the building level.”

He says that “in some European countries, they are so mentally and physically addicted to gas that they are talking about producing hydrogen, synthetic or green gases to keep on heating individual households with gas, which will require a very costly expansion of renewables to produce low-temperature heat.”

Mathiesen is not an enemy of gas. “I completely agree that we will need gas in the future”, he says. “But we need it for completely different purposes than to heat our houses… Gas is not a viable option to supply hot water if we want renewables resources to expand in the entire energy system, have cheap heating and avoid energy poverty.”

According to Mathiesen, district heating or smart thermal grids can be fed with “waste heat directly from industry, and indirectly with large-scale heat pumps, waste heat from incineration, solar thermal, geothermal, combined heat and power, etc. There are a lot of options that become available once you have smart thermal grids in place because thermal infrastructure is an energy carrier.”

Mathiesen is sceptical about the European gas industry’s notion that the gas sector will continue to have an important role to play in a decarbonised energy system of the future: “Every strategy I’ve seen coming from the gas sector says that we are able to use the same amount of gas in the future, or more. And that gas can meet this demand while going green or becoming renewable. I don’t think this is possible.” There is just not enough “renewable gas” (i.e. biogas) available, says Mathiesen. And as to using “green hydrogen”,  “we will need to produce a lot of electricity to do that [heat our houses with hydrogen]. And this is not a viable option.”

In short, gas, in Mathiesen’s view, may have a role to play in industrial heating processes, in the built environment, it’s not the best choice.

The conclusion? Solar+ could increasingly start to push gas out of electricity generation and – in combination with renewable district heating – out of the built environment. This applies in particular to markets with “advanced” climate policies and/or favourable weather, i.e. Northwest and Southern Europe, Australia and American states like California, Hawaii, Texas, Florida and the North Eastern states.

European solar power market shows strong growth

The European solar power market is “undergoing a resurgence”, Greentech Media reported recently. “More than 10 gigawatts were installed in 2018 for the first time in five years, and the market should break through the 20-gigawatt barrier by 2021, according to Wood Mackenzie’s latest research.”

The reason for this positive market development? “Countries are rushing to meet their 2020 climate-energy obligations, while targets for 2030 are currently under review. During this time frame, European power markets will see deep levels of decarbonisation, with solar PV playing a key role. Several countries have ambitious goals for solar: the Italian government is targeting 50 gigawatts by 2030, and France has a 20-GW target for 2023.”

GTM notes that in addition to subsidised solar, “subsidy-free deployment in Europe continues to gather pace. Spain has a pipeline of almost 10 gigawatts of subsidy-free projects under development, on top of the 3.9 gigawatts of projects awarded during 2017’s auctions which should be delivered in 2019. Most developers are looking for corporate or utility PPAs, while some are going down the merchant route. Other subsidy-free projects are under development in the UK, Italy, Portugal, Germany and Denmark.”

  


Gas Transitions

How will the gas industry evolve in the low-carbon world of the future? Will natural gas be a bridge or a destination? Could it become the foundation of a global hydrogen economy, in combination with CCS? How big will “green” hydrogen and biogas become? What will be the role of LNG and bio-LNG in transport?

From his home country The Netherlands, a long-time gas exporting country that has recently embarked on an unprecedented transition away from gas, independent energy journalist, analyst and moderator Karel Beckman reports on the climate and technological challenges facing the gas industry. 

As former editor-in-chief and founder of two international energy websites (Energy Post and European Energy Review) and former journalist at the premier Dutch financial newspaper Financieele Dagblad, Karel has earned a great reputation as being amongst the first to focus on energy transition trends and the connections between markets, policies and technologies. For Natural Gas World he will be reporting on the Dutch and wider International gas transition on a weekly basis.  

Send your comments to karel.beckman@naturalgasworld.com