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Texas and California Have Too Much Renewable Energy

The rapid growth of wind and solar power in the states is wreaking havoc with energy prices.

Solar and wind power are coming online at rates unforeseen only a few years ago. That’s a good thing if your goal is to decarbonize the energy sector. But if you’re a utility or independent power producer and you make your money selling electricity, it can be not such a good thing.

In places with abundant wind and solar resources, like Texas and California, the price of electricity is dipping more and more frequently into negative territory. In other words, utilities that operate big fossil-fuel or nuclear plants, which are very costly to switch off and ramp up again, are running into problems when wind and solar farms are generating at their peaks. With too much energy supply to the grid, spot prices for power turn negative and utilities are forced to pay grid operators to take power off their hands.

That’s happened on about a dozen days over the past year in sunny Southern California, according to data from Bloomberg, and it’s liable to happen more often in the future. “In Texas, power at one major hub traded below zero for almost 50 hours in November and again in March,” according to the state’s grid operator. In Germany, negative energy prices have become commonplace, dramatically slashing utility revenues despite renewable energy subsidies that bolster electricity prices much more than in the United States.

The first solution to below-zero prices is to build more transmission to ship the power to places where demand is high. Germany now makes close to 2 billion euros a year off energy exports to neighboring countries, according to Berlin’s Fraunhofer Institute. But building out new long-distance, high-voltage transmission lines is expensive: Texas has spent $7 billion on transmission lines to ship power from the windy flatlands of west Texas to Dallas and Houston.

The ideal setup is for places with abundant renewable energy (many of them in remote areas) to store and ship power to energy-hungry cities on the coasts, forcing fossil-fuel plants to curtail production and, eventually, shut down. But such large-scale storage doesn’t exist yet. So in the meantime, “with more renewable power on the way in Texas, generators have been asking policy makers for incentives to keep conventional plants running,” according to the Dallas Morning News.

(Read more: Forbes, Bloomberg, Dallas Morning News)

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