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Comment by m55au | Hacker News Reader

It has become so incredibly cheap that in some parts of the world it has started eating itself, called solar cannibalization.

https://www.aalto.fi/en/news/rapid-growth-of-solar-power-in-...

https://www.reuters.com/business/energy/plunging-solar-captu...

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It’s almost like market forces aren’t what you want for a utility.

Very few people realize that for most of the US, cheaper electricity costs for the utilities means lower profits, because most are regulated utilities that take a fixed profit on costs. Models for this vary greatly, sometimes they only take fixed profit on necessary grid investments (where necessary is determined by the utility, then stamped for approval by a Public Utility Commission, which has a board that might be elected and susceptible to bribing/election malefeasance, such as in Arizona...)

So-called "natural" monopolies are quite difficult to regulate correctly. And the solution we chose as a society a century ago might not be the right one for today.

Utilities tend to make most profit as a fixed rate of return on infrastructure built, not really based on electricity costs. Build a new substation, some poles & wires to distribute it to the new subdivisions, and bammo, regulator grants you a fixed rate of return on that from your ratebase (paying customers) over the lifetime of that infrastructure.

You get a fixed return on that infrastructure, but you need to keep pace with inflation in all other areas of the business. Storms, errant vehicles, animals, fires, all sorts of things cause that same infrastructure to require maintenance personnel and equipment, and that equipment needs its own maintenance, as do the offices for the personnel, and so on. It becomes a balancing act because you only get to adjust the rates every so often, and with regulator approval.

Regulator approval really isn’t market forces, to tie this to comment above.

>cheaper electricity costs for the utilities means lower profits

You say that like it's a bad thing. Maybe electricity generation shouldn't be a profit seeking enterprise?

I don't say it as a bad thing at all, I say it as a thing that's in contrast to the rest of the companies and proprietors and corporations we deal with. (And my last comment also hinted that I think it's time to reevaluate this social relationship with the utilities...)

Typically, if a person/corporation is clever and figures out a way to reduce costs, they are incentivized heavily to do so because they take the gains, at least for a while until others figure it out too and compete.

With utilities, they are actively incentivized to increase prices as much as possible. This is a crucial distinction for people asking why cheaper electricity generation methods are not resulting in cheaper utility bills: because the regulatory structure is not operating the way it should, and they need to get involved democratically to change the system!

Sounds like you're saying it's a bad thing.

Well I'm not. Which of my words are giving the other impression to you?

A century isn't very long. I guess things have changed somewhat since then, but age isn't a very convincing argument against these regulations imo. Having to update all of this every hundred years sounds exhausting to me.

Fortunately, we pay people who are called "legislators" who pass laws and are paid to pass legislation to fix problems like this and update laws when they become outdated.

Updating laws every 100 years to keep up with technology sounds perfectly reasonable and actually, like, super cheap.

I wouldn't expect most things from 1920 to still apply today. I can't smoke inside and I don't have to drink ethanol.

There's nothing techy about cigarettes, and you can still vape inside in lots of places, so 100 years really is either too much or not enough anyways. Maybe we shouldn't regulate things that are so flimsy?

Ah yes, the classic solution: it's slightly challenging so let's do nothing instead and hope for the best.

This usually doesn't work out.

I never said to do nothing, so this is a pretty lame strawman.

Yes you did, you said "let's not regulate things that are flimsy" and your example was smoking (???) because we have vapes now (???) and so effectively people still smoke inside (???)

Really? We can't even regulate smoking? That's too far for you? Jesus Christ.

If this isn't "we tried nothing and we're all out of ideas" then I don't know what is.

Yes, regulations are not perfect and do have to be updated. That doesn't mean theyre worthless and we shouldn't bother. Thats stupid.

Solar also offers the possibility of grid defection, as is occurring on a large scale in Pakistan. At some point (and particularly if that thermal storage thing I've been touting matures) electric utilities may see dramatic shrinkage, particularly in less populated areas with ample unused land.

Works perfectly for the electricity market. Negative prices is just an opportunity waiting to be exploited.

The transmission should of course be state owned due to being a natural monopoly.

Too bad gas and oil didn't have trillions in subsidies over the past 100 years. Maybe had we listened to Jimmy Carter we would have continued to lead the world instead of now being firmly in the back.

Couple of years with occasional negative prices and that market you so detest will cover the place with batteries, solving both the negative prices and reducing load on the grid.

And all it cost was a 6th major extinction event! I don’t believe we have the luxury of letting the market figure this out. We should have started turning the ship decades ago.

Solar didn't get this cheap magically. It’s in big part a consequence of public policy.

of course they are. market forces are what you want for everything. granted, you may want to internalize a negative externality like the climate change induced by greenhouse gas emissions, but that's literally correcting market forces.

I kind of agree in the sense that utilities at least need regulation. You can't leave it all up to the market. (I've lived through the winter storm days-long blackout that lies down that path.)

But, I don't think this particular thing proves that point. What we have here is a chaotic shift to a new equilibrium. Technology has changed and needs/priorities have changed.

People wouldn't overbuild solar if they could forecast that it wouldn't be profitable. The issue is they can't forecast.

The reason we aren't allocating resources optimally is not about who is in control or what their motives are. It's that we don't have the information we would need in order to be able to.

TLDR: growing pains, not misaligned incentives.

This seems good for investors in utility-scale batteries, since they can charge them very cheaply and sell at night.

(Although, that might not work well in Finland in the summer.)

You can view this as a natural or even beneficial feedback mechanism that keeps solar generation and battery storage on par with each other.

Too much solar leads to crashing prices which leads to more battery investment. Once the batteries are built, solar prices recover somewhat and solar investment starts to make sense again.

Ideally you wouldn't overshoot too much on the solar and have big price crashes. But if you do overshoot dramatically, the incentive to build batteries increases, so maybe you recover faster.

This was one of the actual problems highlighted by the people who coined the term "duck curve" over a decade ago.

One of the main ways we've avoided this problem so far is that solar kept getting cheaper.

So it's not really a problem caused by cheap solar, it's just basic market competition, lots of supply with no barrier to entry drives prices down towards the long term marginal cost.

Right, but would not marginal cost approaching zero amplify this problem under the current market system (and without any other mitigations)? So not exactly causal, but making it from a small to a bigger issue.

The issue was that the decarbonisation of electricity (and therefore society) would slow or stop before we'd decarbonise if expensive solar lost any of its market. Not cheap energy, that is a good thing.

Between batteries, wind, demand response, EVs etc. that slowdown doesn't seem likely to happen.

And the lure of cheaper energy expands solar out horizontally to new markets, speeding up global decarbonisation.

I don't think it will happen either, but I do think there is a bit of imbalance developing in the whole system right now.

For example a decade ago electricity prices in Nord Pool were relatively stable (and reasonable/lowish). Now it is quite common to either have 0 or even negative prices during summer and artificially set maximums in the autumn/winter. IIRC, the rules were that if the price hit 60% of the maximum, it had to be raised by 1000 €/MWh. It got to 4000 €/MWh (which is 4 € or $4.7/kWh) in 2022 and was supposed to be raised by another 1000, but it was decided not to do it, so I think it stands there right now. But in any case, this is a ridiculous price. As are the negative ones.

This is really a non-problem. Curtailment is easy and doesn't cost anything, it just needs a slightly better feedback mechanism than the current grid supplies, but honestly even a 24hr timer and ammeter would do it.

This is not about grid balance, so I'm not sure what you mean here by curtailment.

It's about nobody making any money, so there will be no incentive to continue building solar.

Today storage is enabling renewables to fill the gap during wind lulls and nights.

Yes, but storage has been lagging behind and when it catches up is to be seen.

https://www.energy-storage.news/global-bess-deployments-in-h...

https://about.bnef.com/insights/clean-transport/china-alread...

https://www.iea.org/commentaries/the-battery-industry-has-en...

https://elements.visualcapitalist.com/visualizing-chinas-bat...

It is surprisingly hard to find reliable figures. Best I could do was a global solar installation of 2-3 TW and global BESS of around 200 GW/500 GWh right now.

China is leading in both, but I'm more interested in local BESS and other storage deployments locally in northern Europe. I think for example Spain started getting more heavily involved only after their massive blackout. According to those links there is a very large overcapacity in battery production, but I don't see it reflected here. I'm sure it will happen at some point though.

https://ses.jrc.ec.europa.eu/storage-inventory provides European battery storage inventory, but to your point, it will take time for manufactured BESS to be deployed. Spain, only after the recent blackout, has moved towards mandating storage paired with renewables for grid services to improve reliability and health.

It's lagging behind because energy developers operate on the economic margin. At the margin, solar is more profitable, up until the point that the grid is saturated with solar, then it flips. But only a small proportion of geographical locations are saturated, hence the marginal investment is still primarily in solar. This is not concerning, it is the market working as it should. The demand for storage will come and then the supply will follow only after the demand shows up.

We already have this in Denmark as we have a lot of wind mills: when the wind is blowing a lot, the electricity prices goes negative!

5th October was one such day. From midnight to 17:00 the spot price was negative or zero.

Taxes and distribution costs make the consumer price a lot higher than zero.

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