This is your SolarWakeup for February 24th, 2020
Investigations Start. FERC is going to start looking at what happened in Texas. Meanwhile 4 members of the ERCOT board have resigned after last week’s shutoffs. However, most headlines have failed to highlight the role of the railroad commission and their oversight of the gas infrastructure which were some of the biggest cause of problems. The biggest question will come around winterization, what mandate is needed or what market signal has to be created for generators to spend the extra dollars and prepare for edge cases.
Impact To Generators. We learned quite a bit about the stress test that $9,000/MWh will cause to generators, especially with the situation that the fuel source is unavailable or the external weather event renders the generator inoperable. First, I have yet to hear the compelling reason why anyone will hedge the output going forward. Forget the leverage that the hedge opens up because the lender is going to ask about the what if scenario when you fail to deliver electrons and have to settle in the real-time market. Some generators are thinking about the revenue they lost not being able to monetize once in a lifetime energy rates.
To Retail Companies. This is going to get ugly. Most retailers sell energy to consumers with the plan to buy that commodity at a price lower than that. Sometimes they are upside down but it’s all within a risk range. When rates in the realtime market exceed the delivered price by 200x or more for several days, it’s bad news. You’re going to hear about retail companies seeking bailouts or risk going out of business. Free markets, am I right?
To Consumers. We talked about this on Monday but some consumers took the spread risk themselves. I assume that most had no idea what would possibly happen, not that any energy experts thought $9/kWh was possible. I can almost guarantee that these bills will be forgiven in some form, people aren’t going to pay $10,000 for 5 days of electricity, which means survival in some cases.
A Frozen Slinky. I can’t do this but if you want to explain Texas to your kids and live in the cold, put a slinky outside to freeze and then stretch it. Then compare the one from inside and see what happens to the resiliency and flexibility of the material. ERCOT could have avoided all of this with winterization but we’re also recognizing that the grid everywhere is going to need more mitigation capabilities. DERs, storage (on all parts of the infrastructure) and resilient generation are going to play a role to keep the lights on and business running.
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Yann
This is your SolarWakeup for February 23rd, 2020
Save California Net Metering. Sign this petition if you want to see the largest solar market continue thriving. Pass this on to your friends and colleagues, make sure to join CALSSA as well.
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Yann
This is your SolarWakeup for February 22nd, 2020
Independent Texas. On Friday I told you that ERCOT was an islanded grid, separated from the rest of the Country to avoid FERC jurisdiction. Shockingly, that was not correct but the correction will leave you shaking your head. The Blackwater DC Tie is a relatively small interconnect between ERCOT and SPP, in the eastern interconnection network. This means that supposedly, FERC could, at their discretion, argue jurisdiction to ERCOT but the counterpoint is that ERCOT could sever that tie and reestablish solitary confinement. So did this interconnection help during the winter storm? No, because the system at Blackwater was undergoing planned maintenance.
Unhedged Hedges. For the third time in this century, lack of winterization has caused generation to find itself on the wrong side of settlement trades. Building cheap in Texas is no longer the best business process, we’ll see if asset owners react differently going forward. Over the next few weeks and months, we will see hundreds of millions in losses announced as well as bankruptcies (see below about consumer impact). RWE renewables is first to identify a $300-$600million loss for its wind portfolio, of which they were part owner (meaning asset losses were even higher). While generation owners have their pricing hedged with off takers, they also have a production requirement to meet those deliveries. Since the turbines were frozen and unable to operate, RWE needed to go to the market at rates as high as $9,000/MWh to meet their contractual obligation. In short, being hedged caused a loss far exceeding any upside for being hedged in the first place since the hedge simply shift the risk from pricing to fuel availability layered on market rates. If you buy at $9/kWh and sell for $0.02/kWh, you’re underwater by 450X. If this happened for 3 days, the next 5 years will go to make up the error.
Understanding Texas Subsidies. Conservative leaders and primetime programming on Fox News are arguing that wind subsidies ruined the Texas grid. For the sake of the argument, we will ignore the fact that the lack of winterization caused the issue (regardless of fuel source), and look at where this is coming from. The root cause of the argument is that a transmission project called the Competitive Renewable Energy Zone (CREZ) was paid for by ratepayers and largely benefitted wind development. Since this cost was not paid by developers directly politicians are calling this a subsidy. CREZ caused wholesale power prices to drop by quite a bit, has plenty of gas generation connected to it and wasn’t paid by taxpayers. Here’s a 2014 review of the project by ERCOT in case you want to dunk on Tucker Carlson on Twitter.
The Fracked Methane Spike. Supply and demand will meet price gouging when it comes to Texas. At the peak energy crisis, natural gas prices went through the roof in Texas and abroad, something I wrote about last week. None other than the Dallas Cowboys’ owner Jerry Jones was the big winner and may find his CEO in front of a Senate committee. His words may already speak for themselves, see here.
Impact To Consumers. One of the first questions I asked on Twitter was whether consumers had exposure to variable pricing of if the retailers would suffer the negative spread. Most consumers are on fixed pricing agreements which means retailers lose the difference between contract and grid price. But some consumers, probably with some level of naïveté, signed variable cost agreements which match the market cost of electricity. One such provider, Griddy, has told its 29,000 customers to find an alternative source given their expectation that consumers will not be paying the $9/kWh that it cost them to heat their home.
POLR Vortex. Provider of last resort, POLR, is the customer acquisition following the winter event. Retailers will be suffering losses, some will not be able to survive from, and the big utilities like TXU, NRG and Reliant are fighting to get their share of POLR allocation which means consumers without retailers get assigned to them. There’s a certain stickiness to consumers so a $0 customer acquisition cost is business positive.
Solar’s Role. Solar was largely left out of the headlines. With only 6.5GW of capacity on the grid, solar generated nearly 3GW most of the time. Some capacity was offline due to grid shutoffs and some plants suffered from snowfall. We have not heard from asset owners about potential hedge issues at this point or how well storage owners were able to benefit during the peak pricing events.
Goodbye MOPR. FERC ends the pricing subsidy and PJM will be able to have the next capacity auction with more market driven bids.
Save California Net Metering. Sign this petition if you want to see the largest solar market continue thriving.
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Yann
This is your SolarWakeup for February 19th, 2020
ERCOT Known Knowns. Here are some things that you may not have known before this week that are important about the Texas grid. First, ERCOT doesn’t cover all of Texas, it leaves out the El Paso and Northern rectangle. You’ll find it interesting that neither of those sections were really impacted by outages. Why? That’s a great question and leads to the next thing you’d want to know which is that ERCOT is essentially an islanded grid. This means that Texas operates it’s electricity ‘market’ with true isolationism. They do this to avoid FERC oversight, I’m told, because in Texas they like things cheap. Cheap you ask? Yes, almost none of the infrastructure is build to withstand winter events and this year is not the first time it has happened. David Crane reminds us that on two previous occasions, NRG assets lost tens of millions of potential revenue because their power plants were not able to operate during winter events. So when wind developers ordered wind turbines, they did not spring for the heating elements for ice conditions which bodes well because neither did any of the thermal power plants.
The Solution? Sunrun and Freedom Solar send in their first images of how you can mitigate infrastructure problems in grid and gas. I am on the hunt for more pictures of a house with lights on because you installed solar with batteries next to neighbors without it. We can fight lies with facts, the visual kind. Send them my way please.
Texas Gas Embargo. Texas implemented a gas export ban, focusing on exporting only their Senators to Mexico instead. This impacted power markets nationally including California where electricity prices reached over $1,000/MWh but only during non-solar times. This price volatility is going to cause major hiccups throughout the Country and hopefully result in some changes to how markets react.
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Yann
This is your SolarWakeup for February 18th, 2020
Solar Plus Storage Pictures. I am on the hunt for pictures of a house with lights on because you installed solar with batteries next to neighbors without it. We can fight lies with facts, the visual kind. Send them my way please.
Save California Net Metering. Sign this petition if you want to see the largest solar market continue thriving.
A Podcast To Listen To. I was pleased to join Freeing Energy’s Bill Nussey to talk about soft cost reduction by making solar permits instant and digital. You can listen to the discussion here.
C&I PPA Webinar. My C&I solar friends at Sustainable Capital Finance (SCF) are hosting an exciting free webinar for EPCs and Installers on Feb 24th, demonstrating how their software users were able to improve PPA project conversions by 25% or more. Learn best practices in executing C&I solar & storage PPAs, helpful strategies for a remote sales process, industry insights, and more. You can sign up here or contact the SCF team at info@scf.com for more information.
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Yann
This is your SolarWakeup for February 17th, 2020
Texas Power Struggle. With cold weather continuing to increase demand and reduce supply in the ERCOT energy markets, Texans are left struggling with power outages and rolling blackouts. This has been going on for several days now, in some ways similar to Hurricane Harvey that parked itself over the Houston area and never seemed to want to move on. Everyone is talking about this and the blame game. Not all of it, or really any of it, based on the truth, facts or data. Twitter accounts from Senator Cornyn, Congressman Crenshaw were amongst the highlights blaming Congresswoman Ocasio-Cortez for the Texan power issues.
The PR Game. When it comes to the press game, count on natural gas communications executives to bring their A-game and in this case they did indeed. Even before the crisis, before I realized what was happening, the PR game was in full effect. On Monday, New York Times ran a headline blaming frozen wind turbines for the energy generation shortage. They did this because the natural gas industry knew that their power plants were going to fail in a massive and systemic fashion. Gas was being prioritized for heating consumption and wells were frozen, the irony of the day. That didn’t stop the WSJ editorial board to go all in on blaming renewables for the troubles.
All Others, Bring Data. Grid operations data show the better story. Jesse Jenkins, highlighted by Twitter’s corporate account, broke down how each generation source was executing against the plan. Wind was not relied on going into the crisis, only 6GW was planned for which created a shortfall of 4.4GW when only 1.6GW was able to get online. On the other hand, only about half of the Texas natural gas fleet was able to operate with over 25GW of capacity failing to operate. For the breakdown on the tweet thread, here’s Jesse’s twitter explanation.
Extreme Pressures. The reality is that engineering and operations is hard when you account for major anomalies. A multi day, deep freeze is almost all of Texas isn’t part of the design process. California doesn’t design for hurricanes and Florida doesn’t look at earthquake risk. The new climate has deeper pressure points that occur more often and we, as consumers, can either plan for the worst or be satisfied to hope for the best. What we need is more flexibility and ability to be resilient, and while wind and solar are comfortable in the variable nature of the energy production, we must also be truthful that natural gas can also be variable if fuel is not available because for Texans, the sun didn’t shine on their natural gas fleet.
Save California Net Metering. Sign this petition if you want to see the largest solar market continue thriving.
Hawaii RPS Signal. The RPS in Hawaii is going well and one of my favorite Senators, Brian Schatz, noticed.
Don’t Hallucinate. Strategy without execution is hallucination and corporate ESG goals without policy focus to back it up are just that. GreenBiz’s Heather Clancy highlights this in her column.
A Podcast To Listen To. I was pleased to join Freeing Energy’s Bill Nussey to talk about soft cost reduction by making solar permits instant and digital. You can listen to the discussion here.
C&I PPA Webinar. My C&I solar friends at Sustainable Capital Finance (SCF) are hosting an exciting free webinar for EPCs and Installers on Feb 24th, demonstrating how their software users were able to improve PPA project conversions by 25% or more. Learn best practices in executing C&I solar & storage PPAs, helpful strategies for a remote sales process, industry insights, and more. You can sign up here or contact the SCF team at info@scf.com for more information.
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Yann
This is your SolarWakeup for February 16th, 2020
It’s Cold Out There. Unless you were within a few miles of me in South Florida, you were wearing a sweater this weekend. I won’t rub it in but we had a cozy 85 degrees for the long weekend. Cold weather, especially where it is normally not expected, causes major pain in grid operations. You saw that Texas, with power plants coming off line and wind turbines needing to be deiced to continue turning, reached its peak power price of $9,000/MWh. Demand not only exceeded forecasts many times over but also happened simultaneously across major metro areas. Grid geeks debated the pros and cons of capacity markets, like PJM versus ERCOT, and I spent a lot of time thinking about the arbitrage opportunity between peaks for energy storage asset owners that were not contracted ahead of time.
A Central Grid, Decentralized. Two former state regulators including Sunrun’s VP of Policy, Anne Hoskins, write that it is shortsighted for regulators and grid planners to not proceed with major enhancements to the way distributed energy resources are dispatched and monetized. Look at the situation in Texas, if DERs had been included in the analysis and grid operations, the peak demand could have been shaved to some degree even though Texas is just getting started. California on the other hand, with over 1 million solar roofs plus a plan to get to a million solar with storage roofs can dramatically impact grid peaks. The dispatch ability for planners doesn’t come without a cost, it competes with other peaking or near peaking capacity but isn’t looked at by regulators as a solid asset just yet. California regulators are letting monopolies double down on peaking generation capacity contracts and more fossil fuel generators as a way to manage peak. But the CAISO CEO said it best once, we cannot simply manage peaks, we must also shape demand.
Gates Writes Book. Bill Gates has a new book about the energy transition, “How to avoid a climate disaster?” The CEO of Rocky Mountain Institute reviews the book and politico publishes an interview with Gates.
C&I PPA Webinar. My C&I solar friends at Sustainable Capital Finance (SCF) are hosting an exciting free webinar for EPCs and Installers on Feb 24th, demonstrating how their software users were able to improve PPA project conversions by 25% or more. Learn best practices in executing C&I solar & storage PPAs, helpful strategies for a remote sales process, industry insights, and more. You can sign up here or contact the SCF team at info@scf.com for more information.
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Yann
This is your SolarWakeup for February 12th, 2020
The News Business. Former GTM Editor in Chief, Eric Wesoff, reports that Wood Mackenzie is shutting down greentechmedia.com and the GTM squared subscription portal. WoodMac acquired GTM for $40million in 2016 which also included the strong research and event business units which are going to continue. The decision to shutter the site has caused many to recount how GTM shaped the news in solar over the past decade plus but I am more concerned about what this means to the industry from a news coverage standpoint. We need strong and amplified coverage of the industry, not just for outsiders but for each and everyone of you to keep track on who’s doing what and what comes next. There are a few sites still operating and they need to be supported but we need to find ways to expand coverage and reporting in a sustainable and profitable way. SolarWakeup exists because I have a day job, I have published over 2,700 newsletters over the past 8 years and most of that time I had a job that paid my bills so I know how hard it is to actually do the news for a living. I’m rooting for the remaining journalists at GTM and I’m open to ideas that help and support them or the expansion of journalists in the space. GTM has been a staple for all of us in getting the story out, I’ll be sad to see it go away.
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Yann
This is your SolarWakeup for February 11th, 2020
A 2010 Build. In 2010, CPS built a new coal plant and now they want customers to decide whether that plant should be shut down. I assume that during the public hearings pre-construction, someone said that coal wasn’t a good idea and the 30 year life expectancy is a fallacy. Now CPS wants to CYA by their customers.
Instant Permitting. Santa Barbara understands that when you want more solar on roofs, you cut the proverbial red tape. On demand permitting is now coming to a building department near you. You recall, as we’ve stated many times before on SolarWakeup, that permitting cost reductions are the best way to lower the cost of solar for homeowners. Listen to OpenSolar’s Andrew Birch talk about it on the Freeing Energy podcast.
Unlimited Money, Limited Pipeline. Macquarie adds another $2billion in announced capital for renewable energy infrastructure investment. The key is more around the types of projects that infra groups are willing to fund and how they gain their pipelines. Every good project gets funded, at least that was possible in a world where we didn’t have to do deals via zoom. On the other hand Macquarie has a history in doing deals that others won’t, like a storage aggregation in Walmarts 5 years ago early.
Margin Focused, Always. Enphase released Q4 earnings on Tuesday and they beat on revenue and margin. While the company is growing their services to installers through acquisition they are also investing in major R&D on their product roadmap. Both of those, if executed, will likely grow the margin for the company even better than the 40% they are at now.
Demand Grows, Then Grows Again. What happens when every home has an EV in the driveway or two? And every bus on the road goes electric as well? Fleet conversion is also going to happen much faster than anyone expects. All of that extra demand, at the end of the distribution lines, is going be a major added variable for grid operators.
Find A Vehicle. Congress needs a vehicle to pass items in their environmental agenda, like the ITC expansion and extension or environmental justice laws. COVID or infrastructure vehicles are pending this year and could be tagged as a possible vehicle.
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Yann
This is your SolarWakeup for February 10th, 2020
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Yann