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Exploding Duck Curve

Sector & Sovereign Research

May 18, 2019

The Cost to Achieve 100% Renewable Energy: A Comparative Analysis of Texas and California

In this research report, we compare the cost to transition the power grids of California and Texas to 80%, 90% and 100% renewable energy, while preserving a standard of reliability comparable to that of these grids today. We reach several conclusions. First, transitioning to an all-renewable energy system (100% renewable penetration) requires the supply of highly reliable power with intermittent wind and solar resources, and is thus inherently wasteful and prohibitively expensive. Therefore, even in states with ample renewable resources such as Texas and California, we believe it unlikely to be achieved for the foreseeable. Second, to achieve renewable penetration of up to 80% is far less costly, and may be feasible for certain states, such as California, that have access to abundant hydroelectric power. Third, even in these cases, the scale of the renewable resources required will be vast, and their output will far exceed power demand during many hours of the year – creating an economic impetus to connect high renewable energy regions with population centers whose longitude and latitude create complementary patterns of renewable generation and electricity demand. Fourth, renewable penetration of 80% or less is materially cheaper because its allows continued use of conventional, dispatchable power plants that can backstop the supply of energy to the grid at any time, including during hours of low wind and solar generation. However, given the scale of renewable generation, the capacity factors of these backstop power plants will likely fall to very low levels. Keeping these plants on line will require capacity payments, while adding to the backstop generation fleet over time will likely be contingent upon the use of power purchase agreements or the inclusion of these assets in a regulated rate base. Fifth, the high cost of transitioning to renewable penetration above 80% defeats the purpose of these programs, which is to capitalize on low cost renewable energy to reduce the CO2 emissions of the generation fleet. The cost of achieving renewable penetration above 80% exceeds the current price of emissions allowances in the United States and Europe, most estimates of the social cost of CO2 emissions, and the cost of available alternatives, such as the electrification of the vehicle fleet.

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