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Sat Feb 22, 2014, 08:43 PM

The Death Spiral of the Utilities Starts in Hawaii

Interesting post on the blog of someone I follow on Twitter. His take, which I haven't seen elsewhere, is that solar doesn't have to be competitive with the cheapest or even the average cost of electric generation. It only has to be competitive with the peak cost in order to be economically viable. BUT, as it's installed to answer peak demand, it causes its own costs to decline through the simple logic of spreading fixed costs over a larger and larger production run, causing a virtuous circle for solar, and a vicious one for utilities.
To quote:

Solar doesn’t have to compete with the cheapest electrical base load plants. No, Solar only has to compete with the most expensive forms of electricity to be adopted enough to push prices down to near grid parity. 8 cents per kwh is a low enough price to crush the price of “peaker” electricity.
Peaker energy can cost as much as 10 times as much as base load electricity. PPE charges companies $1.20 per kwh for peaker energy! It’s commonly accepted natural gas peaker electricity costs $.18 per kwh. It’s common for peaker to cost twice as much as regular base power, and 4 times as much is common too.
This peaker power is demanded on the hottest, sunniest days of the year – exactly when Solar is best at producing energy.
8 cents per kwh is easily cheap enough to be cost competitive with peaker electricity. If a company has a choice between installing Solar and installing a peaker natural gas plant, Solar can be an economic choice, even before incentives.


Lots more at this link. Very much worth reading:

http://monetaryrealism.com/the-solar-powered-death-spiral-for-utilities-begins-in-hawaii/

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Arrow 8 replies Author Time Post
Reply The Death Spiral of the Utilities Starts in Hawaii (Original post)
Benton D Struckcheon Feb 2014 OP
msongs Feb 2014 #1
truedelphi Feb 2014 #2
Benton D Struckcheon Feb 2014 #3
eridani Feb 2014 #4
kristopher Feb 2014 #5
eridani Feb 2014 #6
kristopher Feb 2014 #7
freshwest Feb 2014 #8

Response to Benton D Struckcheon (Original post)

Sat Feb 22, 2014, 09:01 PM

1. hawaii is captive of an obsolet and evil power monoply nt

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Response to Benton D Struckcheon (Original post)

Sat Feb 22, 2014, 09:16 PM

2. Someone had a tweet on awhile ago regrding a Calif. landlord who

Installed solar. His two dozen apartment dwelling tenants paid him rent, but no utilities.

Cost for all two dozen units after installing solar? Twenty two bucks a month! Not a piece - but for all apts combined!

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Response to truedelphi (Reply #2)

Sat Feb 22, 2014, 10:13 PM

3. That's an eye opener. n/t

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Response to Benton D Struckcheon (Original post)

Sat Feb 22, 2014, 11:49 PM

4. Do you honestly think that publicly owned utilities will mind?

They don't have to make a profit--just cover expenses.

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Response to eridani (Reply #4)

Sun Feb 23, 2014, 12:36 AM

5. You bet they mind.

Virtually all utilities are invested in large scale thermal power plants - commonly called 'base load" plants - that are designed to run 24/7. Many of them depend on selling into two different kinds of markets to meet their expenses; they throttle back at night sell their production by long term contract, and then during the day they crank it up and sell into the short term (hour or day ahead) market where the power is much more expensive. The bid they place is based on their fuel costs, with the grid operator stacking bids from lowest to highest until they hit the amount of power they solicited bids for. Whatever the value of the final bid, that is the price that all lower bidders also receive.

Since wind and solar have no fuel costs they are bidding into the same market and driving down the amount paid to the generators for the power and the large generators are finding it increasingly difficult to meet their expenses. Cheap natural gas prices are also a big factor, but where wind and solar are plentiful during the day, it is especially bad.

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Response to kristopher (Reply #5)

Sun Feb 23, 2014, 12:59 AM

6. Maybe I have that bias because Seattle City Light is dependent on hydro

Of course demand here is highest in the winter for heat, and that electricity gets sold to CA in the summer for air consitioning.

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Response to eridani (Reply #6)

Sun Feb 23, 2014, 01:20 AM

7. Google this

wind and hydro conflict northwest

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Response to kristopher (Reply #7)

Sun Feb 23, 2014, 02:35 AM

8. Seattle has hydro, but also invests in alternative sources, and encourages home solar generation:

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