Solar + batteries prepping to take over 10GW of US natural gas peaker power plant market

Solar power and energy storage (batteries) have fallen in price enough that they’re now competing with the cost of natural gas peaker plants in specific markets. New analysis is suggesting 10GW of natural gas peaker plants are at risk through 2027 in the USA specifically.

Other, more aggressive suggestions don’t see a place for gas peaker plants after 2020 in the USA. It seems the age of the renewable energy plus energy storage power plant is upon us.

Part of the use of Tesla’s 100MW/129MWh project is an example of this in the real world. So is the collection of projects in California that partially replaced the natural gas plant at Aliso Canyon (which Tesla also participated in). Elsewhere in California there are discussions to replace two additional peaker plants in the near future, and one large gas power plant, that regulators say are systemically important to the grid with batteries.

The two Tesla battery power plants – and peaker plants in general – are participating in an electricity market that pays for filling gaps with fast response time electricity during times when electricity demand changes (like in California as the sun goes down and everyone goes home).

A report in Minnesota suggested that right now, the net cost of a solar power plus storage power plant is cheaper than a natural gas peaker power plant – as seen in the right two columns in the graph below. In fact, energy storage alone – without the cheap electricity coming from a renewable plant – is almost the same cost as a peaker plant.

Major CEOs of power companies have also suggested, in a much more aggressive time frame, that peaker plants will go away entirely by 2020 in the USA.

When NextERA CEO Jim Robo said back in 2015 that there wouldn’t be another peaker plant built after 2020, he was taking a risk when energy storage was more than double today’s current price – and solar was 30-50% higher. Now Mr. Robo looks wise.

In yesterday’s presentation, @shaylekann said that of the 20GW of gas peaker plants that are projected to be built between 2018-2027, 10GW of that market might be consumed by energy storage. Mr. Kahn suggested there’s the possibility that no new peaker plants are built after 2025.

This pricing reality is directly related to GE laying off 12,000 people in the power generation department. The world’s largest manufacturer of gas turbines stated that customers are turning away from fossil fuel based energy sources and that GE Power needed to evolve. This evolution occurred with German energy giant Siemens as well.

This is a blossoming reality though, not a fully in bloom price war yet. For instance the Tesla Australia power plant isn’t yet a repeatable economic experiment until the legal structure around selling electricity changes.

Across the USA, outside of peaker plants, we’re still expecting huge amounts of natural gas to be built. This expertise will fight tooth and nail to keep their peaker plant market financially competitive.

What matters though is that energy storage is going to become a big player in the utility-scale peaker plant market – and we’ve already crossed a tipping point. A tipping point where the energy storage projects that are already planned are enough to build factories that will deliver to us the learning curves that will lower the pricing even further, allowing energy storage to take over bigger markets.

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