California's Problem of Overgeneration

In our last post we identified a market opportunity of $230B in Pacific Coast states for renewable electricity capacity additions by 2030 driven primarily by Renewable Portfolio Standard requirements.  The lion's share of that market opportunity lies in the most heavily populated of those states; California.  California, and southern California in particular, is blessed with an ample solar energy resource.  Coupled with recent solar cell performance gains and cost reductions, proponents of other renewable resources should be concerned as to whether there is any market need that cannot be filled cost-effectively with solar.  Consider the following recent developments that shed light on this question.

In March and April of this year there were a number of news reports [1] [2] of wholesale spot electricity prices becoming negative in Southern California during midday.  That is, electricity producers that sell power to electric utilities, such as Southern California Edison, were being asked to pay for the right to supply that power onto the grid.  The same phenomenon has been occurring in Texas and Germany.  Given the intrinsic value of usable energy, it's reasonable to ask "Why would electricity prices ever be negative?"  To answer this question, we've put together the video below.

Next, we'll look at how these factors will likely effect the cost of future solar power as California progresses towards its RPS mandate of 50% renewables by 2030.  Stay tuned.