For years, a few lone experts have warned that Solar Power confronts a fundamental issue that could derail the industry’s rapid expansion. Simply put, the more solar energy you add to the system, the lower its value gets. The issue is that solar panels generate a lot of electricity on bright days, often more than is required, driving costs down—sometimes even to negative territory.
Unlike natural gas plant managers, solar plant operators are unable to readily scale power up and down as needed or spread generation out during the day, night, and gloomy winter months. Instead, it’s available when the sun shines, which is most of the time. And that’s when all of the other solar plants are producing their maximum output as well. According to a new analysis, California, which has one of the highest percentages of Solar Power globally, is already experiencing solar value deflation.
According to a Breakthrough Institute research due out on July 14, the state’s average solar wholesale prices have dropped 37% since 2014 compared to the average power prices for other sources. In other words, because of their erratic generation patterns, utilities are increasingly paying solar plants less than other sources.
The amount that utilities pay power plants for the electricity they distribute to homes and businesses is known as wholesale prices. They fluctuate throughout the day and year, edging higher for solar operators in the mornings, afternoons, and other periods when there isn’t an abundance of supply. As additional solar plants come online, however, the moments of excess supply that lower costs will grow more regular and pronounced. Consumers may think lower prices are a good thing. However, it raises concerns about the world’s ability to develop solar capacity and achieve climate goals swiftly.