There is a common misconception that renewables are expensive while fossil fuel generation is cheap. However, this was only true a decade ago, and now there are solar and wind energy projects that can surpass the cost of coal electricity. Despite this, renewable sources still have a fundamental challenge to overcome – their dependence on variable energy inputs.
The cost comparison between renewables and fossil fuels is often unfair, as production from new renewable projects is compared to existing production from coal or gas. Consider that new projects have the funding to cover, while older power plants are simply burdened with operation and maintenance. When renewables and fossil fuels are compared in a next generation project, renewables often emerge as the most affordable option.
Reduce energy bills and building emissions with renewable energy.
The remaining useful life of existing fossil fuel generation
As mentioned above, new renewable energy projects often compete with fossil fuel production systems that have been around for decades. As a result, the project financing has already been repaid and investors have already received most of the expected profit. These power plants may continue to provide cheap electricity for their remaining useful life, but they will eventually be decommissioned.
Many coal-fired power plants will reach the end of their useful life in the coming decades and the construction of new plants is unlikely to be an attractive investment. The new generation of fossil fuels must not only compete with cheap renewable energy; There may also be public backlash due to the environmental impact.
Fossil fuels still have an advantage over solar and wind energy: reliable electricity production that is not tied to the variability of sunlight and wind. However, variable production can be compensated with demand response and energy storage systems.
Advantages of shaping electricity demand
The traditional operation of energy companies has adjusted production according to demand, which leaves a lot of generation and transmission capacity idle during periods of low demand. However, unused capacity still has ownership costs, which are reflected in energy bills. In other words, idle capacity has a negative effect on both utility companies and consumers.
Because peak electricity demand is expensive and technically challenging, energy companies follow two main strategies: increasing kWh prices when global demand is high and applying capacity charges to individual demand peaks from large consumers.
- This system aims to penalize consumers who do not control their demand peaks, but it also represents a savings opportunity for those who manage their consumption.
- If peak kWh rates are avoided and individual demand peaks are minimized, consumers can reduce their energy bills – even if total energy consumption remains the same.
Automation can be very useful in shaping electricity demand. For example, smart thermostats can be programmed to minimize compressor run time when the local power company applies the highest kWh rates. If the concept is implemented in many buildings, its cumulative effect can drastically reduce the network load. Since transmission and distribution losses have a quadratic relationship with current, demand response can also make the electrical grid more efficient.
Demand response systems can achieve synergies with renewable production by taking the opposite approach. When there is an abundance of low-cost generation from solar panels and wind turbines, two approaches can maximize the value of that energy:
- Schedule non-urgent activities at times when cheap electricity from variable renewable sources is abundant.
- Owners of buildings with energy storage systems can fill their capacity with low-cost, emission-free electricity.
Energy Storage and Variable Renewable Generation
Energy storage has made headlines for its promising applications, even as high costs still limit its opportunities. The concept of energy storage is commonly associated with batteries, but it is important to note that there are other forms of storage. In fact, most of the world's energy storage capacity is in the form of pumped storage hydropower (PSH) facilities rather than battery packs.
Heat storage and ice storage are also viable in some applications. For example, storing electricity in battery packs to run a cooling plant is cost prohibitive, but consider that the requirement is to provide cooling. A smarter approach is to add ice storage tanks to the cooling plant, where ice can be melted to provide cooling without increasing energy demand.
Hot water storage is also viable for direct use or for space heating with fan coil units. In applications that require heat production greater than what hot water can provide, molten salt can be stored in refractory tanks.
Regardless of the energy storage method chosen, potential synergy exists with variable renewable sources. Traditionally, generation and consumption have occurred simultaneously, but demand response and energy storage can eliminate this constraint.
