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A few lonely academics they warned for years that solar energy is facing a fundamental challenge that could halt the industry’s fastest growth. Simply put: the more sun you add to the grid, it becomes less valuable.

The problem is that solar panels generate a lot of electricity in the middle of sunny days, often more than needed, pushing prices down, sometimes even into negative territory.

Unlike a natural gas power plant, solar power plant operators cannot easily turn down electricity as needed or easily maintain field generation during the day, night, and dark winter. It is available when appropriate, that is, when the sun is shining. And then all the other solar power plants run the electricity at maximum levels.

one new report He found that California, which produces one of the world’s largest shares of solar energy, is already experiencing this phenomenon severely known as solar deflation.

The state’s average solar wholesale prices have dropped 37% since 2014, relative to average electricity prices for other sources, according to a Breakthrough Institute analysis to be released July 14. In other words, utilities are paying solar power plants less and less. welds in general due to fluctuating production patterns.

Wholesale prices are basically the amount that utilities pay power plants for the electricity they provide to households and businesses. They switch places throughout the day and year, returning to solar operators in the morning, afternoon and other times when there is not much supply. But as more solar power plants come into operation, periods of oversupply that drive these costs down will become more frequent and more pronounced.

Low prices may sound great to consumers. But it presents troubling implications for the world’s rapidly growing solar capacity and hopes of meeting climate goals.

It may be difficult to persuade developers and investors to continue building more solar power plants if they continue to make or even lose less money. In fact, California construction has already been flat as of 2018, study notes. But if the state hopes to meet its ambitious clean energy goals, the industry will need to significantly accelerate development.

This, too, could soon become a broader issue.

“California is a small peak of what awaits the rest of the world as we dramatically increase solar power,” says Zeke Hausfather, climate and energy director at the Breakthrough Institute and author of the report.

This is because solar energy accounts for about 19% of California’s electricity, while other regions are quickly installing photovoltaic panels. The study found that the share of solar power generation in Nevada and Hawaii, for example, was around 13% in 2019. In Italy, Greece and Germany, they were 8.6%, 7.9% and 7.8%, respectively.

Race

So far, heavy solar subsidies and the rapidly falling cost of solar have offset the falling value of solar in California. As solar power plants become cheaper than ever to build and operate, value deflation is less of an issue.

But as the government’s share of solar power generation continues to grow, it’s getting harder and harder to hit that number. According to the report, if cost reductions to build and install solar panels decline, California’s solar deflation could take the lead in the race against falling costs in 2022 and climb up from there. At this point, Hausfather notes, wholesale prices will be below the cost of subsidized solar power in California, undermining the pure economic rationale for building more plants.

States SB 100 live, passed in 2018requires that all of California’s electricity come from “renewable and zero-carbon sources” by 2045. At this point, about 60% of the state’s electricity is California Energy Commission model.

The breakthrough study estimates that the value of solar power — or its wholesale average price relative to other sources — will drop by 85% at this point, drastically reducing the economy of solar farms, at least because California’s grid is what it is today.

How do we fix this?

There are various ways to mitigate this effect, but none is probably a panacea.

The solar industry can continue to find ways to cut solar costs, but some researchers have argued Reaching the dirt-cheap levels needed to surpass value deflation may require a switch to new materials and technologies.

Grid operators can add more energy storage – but this approach becomes extremely expensive when renewable energies provide the vast majority of electricity on the grid. study Then study finds. States or nations may also increase subsidies for solar energy; add longer-distance transmission lines to allow regions to switch clean electricity as needed; or encourage customers to move energy use to times of day that better match high production periods.

The good news is that each of these will help ease the transition to clean sources of electricity in other ways, but they will all take significant time and money to implement.

The California solar market is a reminder that the climate clock is ticking.