How Solar Crashes Energy Prices

The energy market is kind of complicated, but it is important to us as home owners who pay an electric bill.

The laws of supply and demand still have a strong grip and hold a large influence on energy prices.

Looking at the marketplace broadly, there are multiple providers (supply) of power- traditional/legacy oil, nuclear, hydro-electric, wind, solar, etc.

Also, there are multiple users. Residential, municipal, industrial.

In both cases, there are times where there is more and less production and consumption.

For instance, solar only makes energy when the sun is up and wind only when there’s enough, well, wind. On the other side- people sleep so demand diminishes, turns out when most folks get home at around the same time and start cooking dinner- demand peaks.

The balance of supply and demand continually changes throughout the day as these things play out in real time. This causes an ever changing ‘market price’ for the power. (This is overly simplified- the article does a better job of explaining…)

The article:

“A look at Wind and Solar: Part Two”

https://thebreakthrough.org/issues/energy/a-look-at-wind-and-solar-part-2

Now, the thrust of this article is to explore the idea that utility or industrial scale solar farms might have a diminishing return that approaches some limit to how much it can produce economically.

Basically- as more solar farms come online, they will ‘flood’ the market all at the same time due to all being tied to the sunlight hours.

There really isn’t a source-fuel cost basis for solar- meaning the ‘fuel’ is free sunlight, not something that had to be mined, refined, pumped, etc.

This means, essentially, that solar energy on the grid has the pricing advantage of a zero basis (it costs much cheaper). Therefore, it can cause a situation where the the solar farms are causing a lowering of energy prices- during the time when they can make power.

Since they can’t make power outside those hours, there is no additional revenue that the solar farm generates- so it is dependent on the prices during its ‘on’ time.

The more solar farms, the lower the price during the ‘on’ time, making it harder and harder to make a return on investment. This is largely what the article is showing- there’s an economical limit to how much solar on an industrial scale to feed the grid.

Great. So what does this all mean for a garden variety homeowner like me?
Well, I think it means a few things.

1. This is great evidence that solar power is viable. It is making so much power that it is affecting the energy marketplace.
2. A rooftop solar power system will make power exactly when all the other solar farms are flooding the market- feeding power back to the grid at that time will make net metering continue to be less available (net metering is going away)
3. The excess energy during solar production hours from a home system will eventually best used by storage (batteries) for use during non-production hours rather than feed it back to the grid precisely when prices are lowest.

In a nutshell- Rooftop solar is viable, reliable, and becoming more relevant- especially with a battery.

Good news is battery prices have come down. Battery technology has improved (and is improving) as well.

The time to scope out solar power for a homeowner is now because the tax benefits, etc. but the smart ones will also be looking at this issue and considering a battery.

No doubt in my mind- a rooftop solar power system with a battery is expensive and is more of an upgrade to a home than a financial savings, but there’s still a heck of a lot of financial benefits as well.

If you are looking into rooftop solar for your home or business, I have a book coming soon that I think you might enjoy. Click here to be notified when I release Tucson Solar Insider Desk Guide for Buying Solar. 

Be Good!
Curtis