Solar and wind power have faced a significant limitation when competing with established electricity sources like coal. Although renewables are now offering a lower kilowatt-hour cost than coal and natural gas, while eliminating the carbon emissions associated with fossil fuels, they depend on inputs that cannot be controlled. As a result, solar panels and wind turbines cannot supply electricity on demand unless combined with an energy storage system. Adding energy storage had removed the price advantage of renewable sources, until now.
Xcel Energy, a US-based utility company, unveiled their Electric Resource Plan on December 28, 2017. After receiving more than 350 proposals, the results were surprising: renewable generation with energy storage offered record low prices for the US market, beating the electricity price of existing coal power plants.
The Electric Resource Plan is part of a broader initiative from Xcel Energy, who plan to increase their renewable generation to over 50% of total capacity. Once the new generation projects are completed, two coal power plants will be decommissioned.
Cases like that of the Electric Resource Plan from Xcel Energy reveal a trend in the electric industry. Clean power sources are no longer about saving the planet; they are now the best business decision in many cases. Australia has the largest battery in the world as of January 2018, delivered by Tesla and officially called the Hornsdale Power Reserve. In addition, large industrial energy users in sectors such as mining and steel-working are now deploying their own renewable generation plus storage systems to reduce dependence on the local power network.
For end users, renewable generation can be very attractive, since it competes against a higher electricity price than in the wholesale market. Consider that energy companies deal with the generation cost, while end users have to assume this plus all network and retail costs, which represent over 50% of the total power bill in Australia.
Commercial solar power can be deployed at zero upfront cost through a Power Purchase Agreement (PPA), where the supplier owns and operates the system, while the clients pays for electricity. The same concept can be applied with renewable generation plus energy storage, by bundling the cost of storage into the PPA contract. Although PPAs are viable for wind power as well, it is more demanding in terms of site conditions, and more expensive to deploy at reduced scale.
The concept of solar as a service makes renewable generation available for a wider range of customers, since the upfront investment is eliminated. Combined with the price decrease in both solar arrays and energy storage systems, this will likely lead to increased use of solar power in both large-scale generation and smaller residential or commercial solar arrays.