Charging With the Sun
You aren’t getting “green electrons”, but charging at the right times still lowers GHG emissions.
I spent a fascinating few days at the California Independent System Operator (CAISO) last month, following my appointment in January to the CAISO’s Board of Governors. The most exciting part was getting to visit the CAISO grid control room late on a Thursday afternoon as the sun was setting across much of California.
It had been a fairly clear and cool day in the Golden State, lots of solar power production and fairly moderate demand. That meant that as the sun set, operators had to ramp up non-solar supply very rapidly. The personnel in the control room were relaxed and professional, but they were also busy keeping the system in balance as about 8 GW of supply from solar farms — about a third of the total demand CAISO was serving that afternoon — disappeared over the course of a couple hours.
The scene got me wondering again why California isn’t doing more to coordinate end-use demand with electricity production from intermittent renewable sources. In fact, watching the efforts of the CAISO grid operators prompted me to take action to make their lives a tiny bit easier: I reprogrammed our hot tub to run its filter cycle in the middle of the day — the so-called belly of the duck — instead of later in the afternoon. If we had a programmable electric water heater, I could have also set it to heat during the duck’s belly, but we are sadly still combusting natural gas for our hot water and space heating.
In discussing the value of such coordination of demand and renewable generation, I’ve found that there are three types of views among the few people who think about such things: naïve, glib, and correct (uh, that is, the one I agree with).
Naïve: “I will shift my electricity use towards hours when there is a lot of renewable electricity on the grid. That way a larger share of the electricity I use comes from renewables.” This may sound right and feel right, but that’s not how an electricity grid works. The immediate impact of your consumption on the amount of renewable power generation, or on the level of GHG emissions, depends on how generation changes incrementally (what economists call “on the margin”) as demand changes.
So, to know whether your consumption is “green” you need to know how the grid operator is adjusting generation in the system for incremental increases or decreases in demand. Catherine blogged a few years ago about software (created by former Berkeley PhD student in environmental economics, Gavin McCormick) that can make a really well-informed estimate of how the grid is adjusting to marginal demand changes, and the emissions effect of those adjustments.
Unfortunately, production on the margin is typically dirtier than the overall average and much dirtier than 100% wind or solar. That leads us to Glib.
Glib: “When you increase or decrease your consumption, the grid operator adjusts production from a controllable power plant, which is almost never wind or solar. Most of the time, it is from burning natural gas or, occasionally, coal. So, your consumption is almost never green, regardless of the time or how much renewable power is on the grid.” This response is partially right, but it misses two important points.
The first point is that California is so deep in intermittent renewables these days that there are times we are just throwing it away, that is, curtailing production from wind and solar plants. More demand in those hours means less curtailment; in other words, wind and solar are occasionally on the margin.
The second important point is what gets us from Glib to Correct.
Correct: Shifting your demand from one hour to another causes prices to rise in hours that get more demand and fall in hours that get less. So, moving your electricity consumption to correspond with production from wind and solar means that those intermittent renewable generators get a larger share of the total revenues paid to producers without changing their production.
That makes investment in a wind or solar plant more profitable, and that leads to more investment in these technologies. “Shifting my demand is raising profits for wind and solar plants” just doesn’t have the same warm and fuzzy feel as “my electricity comes from a wind or solar plant”, but it has more basis in reality.
In fact, recent work by Jim Bushnell and Kevin Novan (which they will present at the Energy Institute’s 2019 POWER research conference next week, a few seats are still available) shows the importance of changes in the supply/demand balance over the day. They find that increasing California grid-scale solar capacity from 2GW (about where we were in 2013) to 10 GW (about the 2017 figure) has added so much mid-day supply that it has reduced wholesale average prices in those hours from around $40/MWh to about $15/MWh. When you run a solar plant with virtually zero marginal cost, that $25 drop is almost all lost profits.
At the same time, Bushnell and Novan show that California’s increased solar generation has raised prices in the evening when the sun sets and other (mostly fossil) plants have to rapidly fill in. When you time your consumption to coincide with solar production you are helping to reverse that redistribution, making solar investments more attractive and reducing the need to keep as much fossil fuel capacity standing by to ramp up in the evening.
Of course, if customers had the option to pay retail prices that reflect those wholesale fluctuations, just responding to those prices would steer their consumption to the hours of abundant renewable generation. As we put more intermittent renewables on the grid, dynamic retail pricing will be ever more critical for achieving a sustainable energy system.
So, no, you’re not getting green electrons by charging your EV or heating water when the sun is shining. You are doing something more important: creating financial incentives for more renewable generation investment. And also making sunset a little bit less exciting at the CAISO.
I’m still tweeting energy news stories/research/blogs most days @BorensteinS
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Suggested citation: Borenstein, Severin. “Charging With the Sun.” Energy Institute Blog, UC Berkeley, March 11, 2019, https://energyathaas.wordpress.com/2019/03/11/charging-with-the-sun/
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Severin Borenstein View All
Severin Borenstein is Professor of the Graduate School in the Economic Analysis and Policy Group at the Haas School of Business and Faculty Director of the Energy Institute at Haas. He received his A.B. from U.C. Berkeley and Ph.D. in Economics from M.I.T. His research focuses on the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. Borenstein is also a research associate of the National Bureau of Economic Research in Cambridge, MA. He served on the Board of Governors of the California Power Exchange from 1997 to 2003. During 1999-2000, he was a member of the California Attorney General's Gasoline Price Task Force. In 2012-13, he served on the Emissions Market Assessment Committee, which advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. In 2014, he was appointed to the California Energy Commission’s Petroleum Market Advisory Committee, which he chaired from 2015 until the Committee was dissolved in 2017. From 2015-2020, he served on the Advisory Council of the Bay Area Air Quality Management District. Since 2019, he has been a member of the Governing Board of the California Independent System Operator.
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Great article Severin! While solar panel prices globally have dropped drastically over the last 3 decades, the 2018 IRS guidance could lead to a shortage in solar panels by the end of 2019. Developers trying to satisfy the 5 percent safe harbor threshold might begin stockpiling solar panels. Net cost for small scale residential solar projects might go up as a result.
This latest data shows that CA received about 75% or more solar power (59% in CAISO territory with utility-scale solar alone, plus POUs plus BTM solar) on a recent afternoon: https://pv-magazine-usa.com/2019/03/18/california-sets-a-new-solar-output-record-and-it-isnt-even-spring-yet/. So I ask again: where are the electrons coming from for daytime load if not from solar and other renewables? These electrons aren’t magically appearing from other sources. They’re green electrons. The “naive” view is correct…
Tam,
I also would point out that size of the load being served for a particular purpose almost affects this calculation. The marginalist approach looks atomistically at each consumer as the last entrant into the market, so they consume the last unit supplied to the market. But this a false picture of how the market, particularly ones driven by government policy, performs. Consumers truly enter markets in large increments and supply is added in large increments. (Unfortunately, this can screw up the elegant math.) So when a large block of consumers are using electricity at one time, the applicable representative supply mix is the blend of the incremental, not marginal, energy sources meeting that demand. It’s probably not 100% solar, but its also not 100% gas.
Severin describes the ‘Naive’, ‘Glib’, and ‘Correct’ views on attribution of emission for EVs. Despite what is reported in popular/government outlets (looking at you Union of Concerned Scientists and afdc.energy.gov), I think that we can all agree that the ‘Naive’ perspective is incompatible with any serious analysis.
To me, the “Correct” view seems to be a bolt-on refinement to the ‘Glib’ view, and that the two are actually the same in many markets at present. If a renewable powered duck curve (or analog) does not exist — either because renewable penetration is too low or because some other time-shifting demand can more easily fill the valley — the “Glib” and “Correct” views should be the same. Further, if consumers are unwilling or unable to delay EV charging, the “Glib” and “Correct” are the same. Lastly, if renewable generation is insulated from real time pricing, “Glib” and “Correct” should also be the same.
I’m guilty of being “naive,” so I’m curious where you think the naive view is wrong. If the grid is, for example, receiving 75% solar and other renewables from 10 AM to 4 PM, of course it’s greener to charge during those hours than in the evening. Where else are the electrons coming from? I’ve been in the energy policy field for over 15 years but it’s always possible, I guess, to be naively wrong even after 15 years…. Keep in mind in your response that curtailment of renewables will be reduced in proportion to higher demand on the grid during times when power would otherwise be curtailed.
Do any startups or companies exist that are helping to perform the load shift? Either for consumers or businesses? I suppose AMS could be considered one helping businesses.
Excellent article. I will echo what others have mentioned already about storage. I would also cite that the intelligent dispatch projects have started in some areas using a combination of incentivized EV charge/discharge but nothing at scale to smooth the duck curves. I’m not aware of any progressive changes either in tariffs or DER policies to incentivize investment in behind the meter storage. Please inform me if I’m mistaken.
Great work Severin
Very grateful this blog exists.
Severin describes the ‘Naive’, ‘Glib’, and ‘Correct’ views on attribution of emission for EVs. Despite what is reported in popular/government outlets (looking at you Union of Concerned Scientists and afdc.energy.gov), I think that we can all agree that the ‘Naive’ perspective is incompatible with any serious analysis.
To me, the “Correct” view seems to be merely a bolt-on refinement to the ‘Glib’ view, and only necessary in certain cases. If a renewable powered duck curve (or similar) does not exist — either because renewable penetration is too low or because some other time-shifting demand can more easily soak it up — the “Glib” and “Correct” views are the same. Further, if consumers are unwilling or unable to delay EV charging, the “Glib” and “Correct” are the same. Lastly, if renewable generation is insulated from real time pricing, “Glib” and “Correct” should also be the same.
As with many arguments that look quite cohesive, it is based on key unstated premises that if called into question undermine the conclusions. I would relabel the “correct” perspective as the “conventional” which assumes that the resources at the margin are defined by short-run operational decisions. This is the basic premise of the FERC-designed power market framework–somehow all of those small marginal energy increases eventually add up into one large new powerplant. This is the standard economic assumption that a series of “putty” transactions in the short term will evolve into a long term “clay” investment. (It’s all of those calculus assumptions about continuity that drive this.) This was questionable in 1998 as it became apparent that the capacity market would have to run separately from the energy market, and is now even more questionable as we replace fossil fuel with renewables.
I would call the fourth perspective as “dynamic”. From this perspective these short run marginal purchases on the CAISO are for balancing to meet current demand. As Marc Joseph pointed out, all of the new incremental demand is being met in a completely separate market that only uses the CAISO as a form of a day to day clearinghouse–the bilateral PPAs. No load serving entity is looking to the CAISO as their backstop resource source. Those long term PPAs are almost universally renewables–even in states without RPS standards. In addition, fossil fueled plants–coal and gas–are being retired and replaced by solar and wind, and that is an additional marginal resource not captured in the CAISO market.
So when a consumer buys a new EV, that added load is being met with renewables added to either meet new load or replace retired fossil. Because these renewables have zero operating costs, they don’t show up in the CAISO’s “marginal” resources for simple accounting reasons, not for fundamental economic reasons. And when that consumer also adds solar panels at the same time, those panels don’t show up at all in the CAISO transactions and are ignored under the conventional view.
There is an issue of resource balancing costs in the CAISO incurred by one type of resource versus another, but that cost is only a subcomponent of the overall true marginal cost from a dynamic perspective.
So how we view the difference between “putty” and “clay” increments is key to assessing whether a consumer is charging their EV with renewables or not.