‘The Duck Has Landed’
By Robert Mullin
SANTA MONICA, Calif. — California’s second-largest publicly owned utility is “not buying anything other than solar right now,” said Arlen Orchard, CEO of Sacramento Municipal Utility District (SMUD).
Orchard’s comment reflected prevailing opinion at the Infocast California Energy Summit last week: Solar is the generation of choice now in California — and its role will only grow.
For SMUD, the decision to go with solar is a financial one. Despite historically low natural gas prices, California’s environmental mandates — such as emissions caps and a ban on once-through cooling — make investment in even the most efficient new gas-fired generation less attractive than solar, even in the resource-constrained Los Angeles basin.
“It sounds like for a lot of reasons, building more gas-fired generation in L.A. is not going to happen,” said Charles Adamson, principal manager with Southern California Edison, also pointing out the political unpopularity of building new gas generation in the state.
In Northern California, the alternatives to solar are other — more expensive — renewable resources. “Geothermal has benefits, but it’s coming in at twice the cost of solar,” Orchard said.
“Solar was once the most expensive — now it’s the lowest cost,” said Jan Smutny-Jones, CEO of the Independent Energy Producers Association, whose membership includes gas-fired and renewable merchant generators.
Declining solar costs are attracting the interest of more than just traditional utilities, according to Mark Fillinger, director of project development for First Solar.
California’s investor-owned utilities have effectively met the state’s 33% by 2020 renewable portfolio standard. Fillinger said his company is now seeing a “huge shift” in demand from those customers to large “direct access” commercial and industrial clients who choose to purchase power from an independent electricity supplier rather than a regulated utility.
No Thanks to ‘All of the Above’
Another growing customer segment: community-choice aggregators that sell directly to retail customers.
“I think we’re going to see an explosion of demand from community choice — and large commercial and industrial,” Fillinger said. “The thing to consider is that they’re just interested in cost,” rather than seeking a mix of resources.
“We’ve been challenged by our own success in the utility-scale business,” he said, noting that many solar manufacturers have not survived competition. “It’s been a brutal battle, but the benefits are flowing through to the customers.”
Arne Olson, a partner with Energy+Environmental Economics, said “solar saturation” will become California’s biggest challenge as the state moves toward fulfilling its 50% RPS by 2030. By then, his firm predicts, the state will have brought on a total of 15 to 20 GW of utility-scale solar — and an equivalent amount of wind and geothermal resources. Add to that another 12 to 21 GW of rooftop solar, he said.
“This is an awful lot of solar,” Olson said, given that CAISO load is projected to peak at about 52 GW. “It is such a dominant factor; it reminds me of how hydro dominates the Northwest.”
And just like the hydro-heavy, wind-rich region to the north, California will increasingly confront instances when its green power sources will produce more electricity than needed.
“Curtailment of solar is going to become commonplace,” Olson said.
Still, California does have time to prepare through efforts such as broader regional coordination and adoption of time-of-use rates.
“Part of the good news is that the curtailment story isn’t really happening today — it’s out into the future,” Olson said.
Four Years Early
That future might loom closer than expected, according to Greg Cook, director of market and infrastructure policy for CAISO.
Cook pointed to one sobering data point: CAISO reached its 2020 forecasted “net load” level (system load minus solar output) four years early on April 24. This effect is represented by the “duck curve,” a regular subject of jokes among California industry participants.
“I guess you could say the duck has landed,” Cook said.
Widespread adoption of behind-the-meter rooftop solar has accelerated the deepening of the curve. The ISO estimates that about 5,000 MW of BTM solar is already online across the state — a figure Cook said is likely an underestimate. The California Energy Commission projects that BTM generation will account for about 12.2 GW of output by 2026.
“This is coming online much faster than forecast,” Cook said.