Bonaire, I think you are getting lost in too much complexity. Let's be clear. Peaking plants do not exist to produce energy, MWh. Rather they exist to provide marginal power, MW. They are utilized only about 5% of the time, while baseload fossil plants utilized 50% to 70% of the time. Batteries provide power regulation more efficiently than peakers, both +MW and -MW, but they do not produce any energy, only store energy produced elsewhere. So if you base sufficient battery capacity, any shortfall in energy is easily met by increasing baseload utilization just a few percent. Baseload fossil plants are sufficiently dispatchable to assure that batteries maintain an adequate reserve of energy to fulfill whatever grid stabilization they are needed for. Why would you fire up a gas peaker at 18 c/kWh to recharge batteries when there is sufficient capacity in combined cycle gas plant at 6 c/kWh to do the job.
So even if we ignore all the complexities of intermittent renewables and EVs, we see that just managing thermal electric sources when batteries become cheap enough they make peaking plants obsolete. Baseload+batteries will have better economics than baseload+peakers. Batteries are declining in price and increasing in performance. So eventually batteries will cross that threshold where they are cheap enough to halt all new construction of peaking plants. The question is when. Consideration of renewables, aggregation of DERs, EVs, smart load devices, etc. factor into the timing of this disruption, but not its underlying inevitability.
For example, wind is at a levelized range of 2 to 4 c/kWh, utility solar at 3 to 5 c/kWh, and CCNG at 6 to 8 c/kWh. So opportunity to firm up wind and solar with batteries is greater than for CCNG or coal. Thus renewables get batteries to economic tipping points a little sooner than thermal baseload alone.
Given Tesla's price for Powerpacks, my view is that the only barrier that remains is simply manufacturing capacity. In 2018 the Gigafactory should be able to put out 5 to 10 GWh of Powerpacks. Moreover, other battery makers will be racing to beat those prices and production levels. Since the new peaker plant market is only about 6GW, total grid battery production in 2018 will come damn close to saturating this market and the new economics will make it very hard to pencil out any plans for new gas peakers. So there will still be a few plants built after 2018, but they will have been projects planned and financed prior to 2018. So that's my personal speculation. Remember that utilities will basically be looking for ways to increase baseload utilization while decreasing the cost of providing peak power. Batteries fit the bill, while gas peakers do nothing to improve baseload utilization. This makes batteries the new default choice, so that gas peakers are only considered in rare situations where there is a shortage of thermal baseload capacity.
How does a company like SolarCity factor into this scenario. First, rooftop solar with net metering is putting surplus power onto the grid at midday. This is contribution to a situation that is undermining the utilization of both thermal baseload and peaking plants. Even so, the utilization of both are highest in July and August. Thus, solar still has much more potential to drive down fossil generation in those peak summer months. But in the fall and spring, thermal utilization is at its lowest while solar production is pretty high. So close to equinoxes is when spot markets are most likely to see negative spot prices. At such times thermal baseload is literally paying for utilization. The grids most need batteries when they risk oversupply that take spot prices below variable operating costs. Batteries are able to absorb this surplus power and provide price support to the spot market (something peaking plants cannot do). But the question becomes who is willing to invest in these batteries and provide this valuable service to the grid. This opens up a second business opportunity for SolarCity. SolarCity and their customers are willing to invest and site grid tied batteries. This enables distributed solar to retain it's midday surplus, easing the risk of oversupply in the spot market. Moreover this stored solar can be used in the evening to ease the risk of overdemand at that time. Thus, adding batteries to distributed solar will help stabilize the grid in a way that is beneficial to baseload thermal capacity , but is disruptive to peaking capacity. The stabilizing impact of distributed batteries can be harness to even greater economic efficiency is players like SolarCity are allowed to aggregate thesee resources and sell service to utilities or if time varying pricing plans allow DER owners to essentially trade in real time. Whether through aggregation or micromarket trading, SolarCity can leverage distributed assets to create additional revenue streams for their customers and the company itself while improving the economic efficiency of the entire grid.
The upshot for other grid participants is that SolarCity and its customers are providing services to enhance grid asset utilization at a price lower than financing and installing these batteries directly. This is not so much a statement about where it is most efficient to place batteries in the grid as it is a necessary condition of of an efficient market. Essentially, suppose a nuclear power plant found it was more economical to finance an build out their own battery array to improve the dispatchability of the plant. If it were more economical to do so, they would. This option for all utility players to add their own batteries places an upper bound on a market price for aggregated distributed storage services. Batteries in distribution also create value to their owners that the grid cannot provide, such as back up power when the utility connection is lost. So distributed battery owners do not require participation in grid services to fully compensate for the cost of the asset, but they are willing to offer surplus capacity in trade. Thus, there are opportunities for storage services to be offered to the grid at lower cost than for utilities to build out this capacity on their own. So this too impacts how quickly batteries can put peaking plants out of business. It the situation was merely replacing gas peakers with battery peakers that would imply a certain critical cost threshold for battery prices. But if the alternative is gas peakers versus aggregated distributed storage, that very well could imply reaching a battery tipping point much sooner. But this depends heavily on the regulatory framework to allow such competion. Regulators should be concerned, however, that blocking aggregated batteries runs the risk of pushing the grid to pay too much for storage or alternatives such as peaking capacity. The very serious risk is that these economic inefficiencies will be pushed onto ratepayers, which is unfair to all and actually induces a death spiral scenario. In my opinion the only way PUCs can be sure that ratepayers are not being charged too much for grid stabilization is too allow distributed battery owners to participate in competitive markets for these grid services. So while utilities have argued that distributed solar pushes certain grid costs on to other ratepayers, an even stronger argument that barring distributed battery owners from participating in and benefiting from grid service markets imposes higher grid costs on ratepayers. Essentially, the argument against NEM has been that it allows solar owners to use the grid for free storage services. That may well be, but the tables turn once solar owners are in a position to offer cheap storage services to the grid. A refusal of utilities to make economic use of cheap distributed storage would amount to an imposition of above market costs onto all ratepayers. Regulators should not allow utilities to get away with that, nor would that even be in the long run interest of the utility. The utilities have an excellent opportunity to negotiate arrangements that would eneble them to secure cheap storage, improve baseload utilization, virtually eliminate net energy metering, and provide lower rates to all their customers. In the long run, utilities have to figure out how to offer lower rates at a profit, and striking the right sort of deals with companies like SolarCity and customers with DERs can do that. Unfortunately, utilities that expect to keep turning a profit from their peaking fleets are going to find this a bitter pill to swallow. The sooner that utilities come to see that peaking plants are now obsolete, the better it will go for them. They may still be able to find willing buyers for these plants, independent power producers willing to bet against battery disruption, but each year delay will fetch lower prices.
So I think SolarCity is right in the center of this transormation. They are certainly working to find innovative ways to bring this value to the grid. The question remains to what degree are utilities and regulators willing to embrace these new models. In the long run, this will get sorted out, but certain grid players could dig their heels in and make this more costly for everyone.
