OPINIONATED: Binary Geothermal Gives PV a Run for Its Money

17 Oct 2017

By Paul Thomsen

In 2017, for the first time, the combined energy and capacity values of geothermal energy significantly exceeded the value of solar photovoltaic resources in California.

In the first quarter of 2017, geothermal’s wholesale energy value in Southern California was $13.50/MWh greater than solar PV. At the same time, utility estimates of marginal solar PV capacity ratings for the 2018 Resource Adequacy compliance period were between nearly 0 percent and 20 percent, resulting in a capacity value difference of up to $18.50/MWh between geothermal and solar PV.

That means in California today geothermal has a combined energy and capacity value of $32/MWh higher than PV using very conservative assumptions. When you account for geothermal’s ancillary services and operational flexibility, combined values climb to more than $40/MWh higher than solar PV.  These calculations demonstrate that geothermal can compete with solar PV on a net cost basis, even as PV costs continue to decline.[1]

Wait…what? How can that be?

 

The California electric power system is undergoing many operational, reliability and market changes due to the rapid penetration of PV. Solar penetration in California has increased from 500MW in 2010 to over 14GW today[2]. At low penetration levels, (e.g., under 5 percent of annual energy) solar in California had high energy and capacity values because it generated during what were then the peak load hours.

As a result of increased solar penetration, and because solar now provides energy and capacity during times of low or even negative pricing, energy and capacity values for solar have plummeted. Geothermal can obtain higher energy and capacity values because it can produce outside the PV production hours during the new peak load hours illustrated by the famous California Independent System Operator’s “duck curve.”

 

Source:   Orenstein, R., Thomsen, P., The Increasing Comparative Value of Geothermal – New Market Findings and Research Needs, GRC Transactions, Vol. 41, 2017.

Experts have long predicted that, as solar energy production increased in California and elsewhere, the energy and capacity value of additional solar resources would decrease and eventually be significantly lower than the value of other renewable resources including geothermal.[3] Data now shows that not only did a reversal in the comparative values of geothermal and solar PV take place in California in 2017, but that geothermal’s comparative value will continue to grow with increasing solar penetration over the next decade.

Its operational flexibility further enhances geothermal’s value. For over 50 years, geothermal facilities have performed diligently to provide power 24 hours a day, seven days a week. So effective was the industry in marketing this attribute that many believe geothermal is solely a baseload resource. That is no longer the case.

Since 2010, 96 percent of all installed geothermal facilities in the U.S. utilize a binary geothermal technology that can ramp up and down faster than new “flexible” gas turbines such as the LM2500 or GELMS100[4].

A binary geothermal facility cycles geothermal fluid through a set of heat exchangers, where the heat is transferred to a motive fluid that vaporizes and spins the turbo-generator, while the geothermal fluid is returned to the underground reservoir.  Decoupling the geothermal reservoir and well field from the power generating equipment through the use of a working fluid allows binary geothermal facilities to operate in both a baseload or an operationally flexible mode that provides 100% dispatchability, at unparalleled ramp rates – up to 30% of generator nameplate per minute –  and can even be controlled by the system operator using Automatic Generation Control (AGC). Geothermal power plants offer additional benefits to grid stability like voltage support and inertia.  Ormat’s Puna geothermal facility in Hawaii has provided these services since 2011.[5]

 

Source:  Ormat Technologies

After years of solar dominating new renewable energy contracts in California, utilities, the CAISO and Community Choice Aggregators are starting to appropriately value renewable resources that provide energy and capacity value while also being operationally flexible.

 

On June 1, 2017, The Los Angeles Department of Water and Power announced it had entered into a new, 26-year power sales agreement for approximately 150 MW of power to be generated by a portfolio of new and existing binary geothermal power plants. LADWP explained in its press release: “In addition to producing fossil-free power, geothermal energy offers many desirable benefits. Because it can provide continuous energy generation, a geothermal plant is expected to produce power at 95 percent or more of its capacity year-round – a higher capacity than the wind or solar renewable energy resources. With its baseload predictability, geothermal energy also saves on transmission and other integration costs, as compared to variable renewables like wind and solar power.”[6]

CAISO now is looking for flexible resources that can perform the following functions:[7]

  • sustain upward or downward ramp;
  • respond for a defined period of time;
  • change ramp directions quickly;
  • store energy or modify use;
  • react quickly and meet expected operating levels;
  • start with short notice from a zero or low-electricity operating level;
  • start and stop multiple times per day; and
  • accurately forecast operating capability.

Geothermal stands alone in providing all of these operating capabilities while assisting in absorbing more solar and other variable energy resources and reducing greenhouse gas emissions to 1990 levels. Higher renewable penetration and greenhouse gas reductions are absolutely possible when California utilities, regulators, and system operators appropriately evaluate, procure and develop cost-effective, flexible renewable resources, such as geothermal 2.0, to meet California’s goals.

Paul A. Thomsen is the Executive Director, Government & Regulatory Affairs for Ormat.  Previously, he served as Chair and Commissioner of the Public Utilities Commission of Nevada and as Nevada Gov. Brian Sandoval’s Director of the Governor’s Office of Energy.

 

[1] Orenstein, R., Thomsen, P., The Increasing Comparative Value of Geothermal – New Market Findings and Research Needs, GRC Transactions, Vol. 41, 2017.

[2] http://www.energy.ca.gov/renewables/tracking_progress/documents/renewable.pdf

[3] Mills, A., and R. Wiser, “Changes in the economic value of variable generation at high penetration levels: pilot case study of California,” Lawrence Berkeley National Laboratory (LBNL), Tech. Rep LBNL-5445E, June 2012a. [Online]. Available: http://eetd.lbl.gov/ea/emp/reports/lbnl-5445e.pdf.

Linvill, C., J. Candelaria and C. Elder, The Value of Geothermal Energy Generation Attributes: Aspen Report to Ormat Technologies, Prepared by Aspen Environmental Group, February 2013

[4] http://www.ge.com/mining/docs/2981884_1346772682_GE_Aeroderivative_

Product_and_Services_Solutions.pdf

[5] Nordquist, J., T. Buchanan, and M. Kaleikini, Automatic Generation Control and Ancillary Services, GRC Transactions, Vol. 37, 2013.

[6] http://www.ladwpnews.com/new-geothermal-project-helps-create-clean-energy-future-for-los-angeles/

[7] https://www.caiso.com/Documents/FlexibleResourcesHelpRenewables_FastFacts.pdf

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