It seems to me….
“The more successful you are in increasing renewables’ penetration, the more expensive and less effective the policy becomes.” ~Rolando Fuentes, The Clean-Energy Paradox.
There are several projects attempting to develop “smart” technology that will bring the energy grid into the 21st century while delivering reliable, efficient, affordable power to homes and businesses. These would support feeding extra power from home solar collectors, for example, into the grid without throwing it out of balance and triggering potential outages. While extensive progress has been made, much more remains necessary.
Conversion has wide support: 65 percent of Americans are in favor of developing alternative energy sources compared to only 27 percent who would emphasize expanded production of fossil fuel sources. About eight-in-ten (81 percent) Democrats and independents who lean toward the Democratic Party favor developing alternative sources instead of expanding production from fossil fuel sources. Republicans and Republican-leaning independents are closely divided: 45 percent say the more important priority should be developing alternative sources while 44 percent say expanding production of oil, coal, and natural gas should be given higher priority.
Renewable energy sources, primarily from photovoltaic systems (solar) and wind turbines, are growing faster than any other energy source and their falling costs have now made them competitive in many areas with fossil fuels. It can be expected that renewables will account for half of the growth in global energy supply over the next 20 years: the world is entering an era of clean, unlimited, and cheap power.
It is imperative that we convert our existing power generation capability from carbon to one based on renewable energy and to do so relatively quickly. This is justifiable not only in response to global-warming but also from an economic perspective: it creates entirely new industries and corresponding employment opportunities. Future energy generation should primarily be distributed throughout existing structures rather than concentrated in large generating facilities as now. Unfortunately, many recommendations overly-simplify how this can be achieved failing to consider the many problems involved in its actual accomplishment.
Supplanting our current energy system infrastructure will require substantial investment over the next few decades to replace obsolete carbon-based power plants, which still produce over 80 percent of the world’s energy, and to upgrade the pylons and wires that bring electricity to consumers. The downside is that the more solar generation is deployed, the more it lowers the price of power from any source making it more difficult to manage the transition to a carbon-free future. During this transition, it is necessary that many generating technologies, clean and dirty, remain profitable if the lights are to stay on: some industry subsidies will be necessary. Without a new approach, the renewables revolution could stall.
Renewables are intermittent, which means that in systems where the infrastructure was designed before intermittency became an issue – almost all of them, in practice – fossil-fuel, hydroelectric, and nuclear plants are needed as much as ever at times when the sun does not shine or the winds do not blow. If traditional plants are shut out of the market by low-cost renewables, they will not be available when needed.
Investment in supply beyond what the market requires results in excesses and depresses prices. Renewable energy has negligible or zero marginal running costs once operational since the wind and the sun are free. In a market that prefers energy produced at the lowest short-term cost, wind and solar take business from providers that are more expensive to run, such as coal plants, depressing power prices and therefore overall revenues. The higher the penetration of renewables, the more difficult these problems become.
New technology can help remedy the problem. Digitalization, smart meters, and batteries are enabling companies and households to smooth out their demand in several ways such as by doing some energy-intensive work at night which helps cope with an intermittent supply. Small, modular power plants, which are easy to scale up or down, are becoming more popular as are high-voltage grids that can move excess power around the network more efficiently. The bigger task is to redesign power markets to reflect the new need for flexible supply and demand. Policymakers should be clear they have a problem and that the cause is not renewable energy but an out-of-date system of energy pricing.
The more renewable generators there are, the more they drag down prices. At times when renewables can meet all the demand, making fossil-fuel prices irrelevant, wholesale electricity prices collapse or sometimes even turn negative with commercial energy producers paying the grid to eliminate excess power (the power must go somewhere). The more renewables there are in the system, the more often such collapses occur.
The fall in utility revenues is not just bad news for fossil-fuel-era incumbents in generation and transmission businesses, it also is becoming a problem for the renewables themselves requiring efforts to decarbonize the electricity supply that justified their promotion in the first place.
In the long run, and with massive further investments, electrical power grids redesigned for systems with considerable renewable energy could go a long way to resolving this problem. Grids with an abundance of built in storage capacity; grids large enough to reach out to faraway renewables when those nearby are catatonic; grids sufficiently intelligent to help customers adapt demand to supply – all have their champions and their role to play but long-run solutions do not solve short-term constraints. For now, countries with an abundance of renewables need to keep older fossil-fuel capacity available as a standby if only to cover peaks in demand. This often means additional subsidies, known as capacity payments, for plants that would otherwise be uneconomical. Such measures keep the lights on but also means that fossil-fuel production capacity clings on.
When fewer people rely on the grid, there are also fewer left to share the costs. This results in a so-called “utility death spiral”. As more customers generate their own electricity, the more utilities have to raise prices to the existing customers that remain, which in turn makes them more likely to leave the grid.
How this nibbling leads to a system upon which all can rely, and who pays for its various parts that are public, rather than private, remains obscure. The process will definitely be sensitive to politics, because, although voters give little thought to electricity markets when they are working, they can get angry when prices rise to cover new investments – and they scream very loudly when the lights go out. That suggests progress may be slow and fitful and that it possibly could stall if all aspects of the problem are not considered leaving climate risks largely unabated.
Utility companies are entitled to a fair profit on what has been a substantial investment in resources and infrastructure both prior to and during this conversion. It also will be necessary for them to evolve their basic business model to continue providing an acceptable level of customer support. As energy production by customers increases, current power generation facilities will need to be decommissioned. To remain viable, energy utilities will need to change to providing three categories of service: energy generation, energy distribution (the grid), and energy storage. Each represents an opportunity for an industry struggling to enter a new era. While the opportunity is there, the question is whether an established and adverse industry is able to willingly adapt to a future not of its choice.
That’s what I think, what about you?
 Rolando Fuentes-Bracamontes is a Fellow at the King Abdullah Petroleum Studies and Research Center, KAPSARC, researching business and regulatory models for the Utilities of the Future.
 ‘Bits & Watts’: Integrating Inexpensive Energy Sources Into The Electric Grid, Kurzweil News, http://www.kurzweilai.net/bits-watts-integrating-inexpensive-energy-sources-into-the-electric-grid?utm_source=KurzweilAI+Weekly+Newsletter&utm_campaign=df83f49bab-UA-946742-1&utm_medium=email&utm_term=0_147a5a48c1-df83f49bab-282211389, 25 October 2016.
 Two-Thirds Of Americans Give Priority To Developing Alternative Energy Over Fossil Fuels, Pew Research, http://www.pewresearch.org/fact-tank/2017/01/23/two-thirds-of-americans-give-priority-to-developing-alternative-energy-over-fossil-fuels/, 23 January 2017.
 Wind And Solar Power Are Disrupting Electricity Systems, The Economist, http://www.economist.com/news/leaders/21717371-thats-no-reason-governments-stop-supporting-them-wind-and-solar-power-are-disrupting?spc=scode&spv=xm&ah=9d7f7ab945510a56fa6d37c30b6f1709, 25 February 2017.