February, 2014 – In last month’s post on “net zero” energy, we referred to the value of solar power this way:
“The 4.4 cents “avoided cost” value of solar power is lower than our average wholesale power cost of around 7 cents. That is due to the natural intermittency of solar and the mismatch between the solar power peak at mid-day and our early morning winter peaks and late afternoon summer peaks.”
A number of members asked for additional information on the concept of “avoided cost”. The official definition has been around since 1978: The incremental cost of alternative electric energy is commonly referred to as the avoided cost and is generally defined as the “cost to an electric utility of electric energy or capacity or both which, but for the purchase from a qualifying renewable facility, such utility would generate itself or purchase from another non-renewable source.”
Sometimes a picture or chart is worth a thousand words. While the solar power curves are not at the same scale, it’s the shape and timing of the curve that is relevant. Wake Electric’s load curve for a typical winter day is shown in blue and a typical summer day is shown in black. Actual solar power curves are shown in red (a clear sky) and green (a partly cloudy sky). In the Raleigh area, sky conditions are fairly evenly divided with one-third clear, one-third partly cloudy and one-third mostly cloudy or overcast. Unfortunately, even on a clear day shown in red, solar power doesn’t match up well against Wake Electric’s load shape.
(Click here to see the chart.)
Since solar energy is not available during our peak periods, Wake Electric has to contract for that generation capacity and energy elsewhere. When solar energy is available mid-day, the resulting savings or “avoided cost” of solar energy is the avoided fuel cost [about 3 cents per kWh] and the avoided variable operations and maintenance cost [about 1.4 cents per kWh] of a power plant (probably natural gas-fired) running at something less than full capacity.
Said another way, the value of electric energy is variable throughout the day. It’s most valuable in the early morning in winter and late afternoon both summer and winter. It’s less valuable in the middle of the day and least valuable in the middle of the night.
Do you have a question or comment about the “avoided cost” of solar? Suggestions for future topics? Please submit them to MAC@wemc.com.