The least costly power from combustion of fossil fuels comes from combined-cycle natural gas plants. These plants have produced power so inexpensively that they have been driving coal-burning plants out of business. The situation, however, is changing rapidly. Combined-cycle natural gas plants are themselves in danger of being shut down by renewable energy backed up by batteries of sufficient size to keep up with changing conditions and demand.
A power plant in California provides a good example. It is a combined-cycle plant, of the type that produces the least expensive fossil fuel power. It was first put online in 2005, so it is not old and should have at least another 25 or 30 years of productive life ahead of it. According to Wikipedia, the Metcalf Energy Center (MEC) has a capacity of 605 megawatts (MW), which is roughly the capacity of the old Vermont Yankee nuclear plant. (bit.ly/GET-MEC)
Given that description, we might expect MEC to be a valuable asset. That, however, is not the situation. MEC’s owner, Calpine Corporation, wants to close the plant down, because it is losing money.
To understand what is going on, we should consider a combination of two trends. One is the continuously declining cost of electric power from wind and solar power plants. The other is the buildup of renewable power in California, which has been going on for years. The result of this combination has been that an energy glut has been created in the California market. This glut has come to a point where combined-cycle natural gas plants, including MEC, are having trouble making money.
In 2017, when MEC was about twelve years old, Calpine requested that it be given a license to run on a “reliability-must-run” (RMR) basis, which would give it sufficient extra income for it to keep running when it would otherwise lose money. As the term suggests, RMR is only given to plants that are absolutely necessary for grid reliability. The extra revenue for such operation is charged to ratepayers, and a plant must have approval from the Federal Energy Regulatory Commission for it.
However, the California Public Utilities Commission (CPUC) had its own ideas about MEC. Late last year, it ordered Pacific Gas and Electric (PG&E) to seek alternative sources of power to save customers money. In the early summer of this year, PG&E requested approval of the plan it had developed from CPUC, and that approval was granted in November.
The plan is stunning. Because power from wind and solar systems is so inexpensive, and battery storage costs have dropped greatly, PG&E decided to replace the MEC plant with batteries. Energy from the combination of renewable energy generation with batteries is expected to cost less than that produced by the combined-cycle natural gas plant. But using batteries to replace a 605 MW natural gas plant, roughly equal in size to the old Vermont Yankee nuclear plant, requires storage capacity that is a multiple of those of the Hornsdale Power Reserve (HPR), the largest battery on Earth.
The capacity of HPR is 100 MW / 127 MWh. That is dwarfed by the second largest of the four batteries to replace MEC, an 182.5 MW / 730 MWh system to be built by Tesla. And the largest of the four, which is to be built and owned by Vistra Energy Systems, is much larger than that, at 300 MW / 1,200 MWh. The four batteries will have combined capacities that total about 580 MW / 2,270 MWh, and they are expected to be fully installed in less than two years.
What this means is that a combination of solar photovoltaics, wind power, and batteries is expected to produce power, both baseload and backup, at costs below those of the least expensive fossil fuels. And this is starting to put the natural gas industry at risk. We have a lot of natural gas power plants coming online right now. They may already be doomed to be stranded assets.