After any large-scale buildout of intermittent generation, a mismatch between when power is generated and when it’s needed may prove problematic. For solar generation, this occurs most often at midday, when the sun is shining, system load hasn’t yet peaked, and long-distance transmission lines are congested. The result is curtailment, a process where solar power is lost rather than dispatched to the grid. In today’s Energy Market Insight, we’ll examine solar curtailments in California and how the development of battery energy storage systems (BESS) may impact future curtailment dynamics.
At just under 17 GW of installed capacity, California ISO (CAISO) leads the way among US Independent System Operators for utility-scale solar development. As detailed in a previous Insight, solar curtailments were observed in other regions, like ERCOT, but nothing near the magnitude of those in CAISO, which peak at over 20% of systemwide solar capacity. Spring typically sees the highest levels of curtailment, as weather conditions become favorable to solar generation before peak summer temperatures and load arrive. With curtailments recently reaching a record monthly high of 565 GWh in April 2022, abundant midday solar generation is increasingly facing obstacles to getting on the grid.
Based on BTU Analytics’ outlook for solar and storage projects in the development pipeline over the coming years, there’s a departure from the historical practice of developing predominantly standalone solar facilities in CAISO. Instead, most growth now focuses on battery storage, whether standalone or co-located with solar. While several reasons may exist for this shift in development priorities, developers may use stored energy that would otherwise be curtailed to realize intraday arbitrage opportunities.
We have already witnessed how intraday battery performance in CAISO has evolved as additional storage resources have come into service since 2021. Instead of merely participating in ancillary services markets, batteries are increasingly embracing a role in intraday energy price arbitrage: charging during the midday solar peak, when prices are low, and then discharging during the evening load peak, when prices are high. With a rapid buildout of additional storage in CAISO expected over the next few years, how might this new capacity serve to reduce solar curtailments?
Using April 2022 as a reference case for intraday solar and storage capacity factors, then projecting forward the expected buildout in solar and storage resources to April 2025, batteries engaged in intraday arbitrage may deliver a sizable punch to total curtailments. This projection is simplified in that it assumes all incremental storage development will mitigate solar curtailments and that future battery activity will mirror the average historical activity profile from April 2022. Under these assumptions, batteries could provide a reduction in solar curtailments of up to 11.8 GWh per day. The curtailed solar energy could then be dispatched into the peak evening hours, in turn reducing the call on natural gas-fired generation needed to meet load as solar generation diminishes.
Several mechanisms may be suitable to blunt the impact of curtailments, including increased storage buildout, upgraded transmission infrastructure, or improved inter-regional coordination. However, as renewables development continues across the US, elevated curtailments raise important questions about the wholesale value of lost generation and the resulting consequences to systemwide carbon intensity when significant quantities of carbon-free power are curtailed.