Curtailments are a growing problem for solar projects in California.
Wind farms in west Texas are also affected.
An internal memo by the California Independent System Operator CEO to the CAISO board in early February said heavy rainfall this winter in California and significant additional solar installations are expected to lead to curtailments — or cutbacks — of up to 6,000 to 8,000 megawatts of capacity this spring. The extra rainfall is contributing to bumper amounts of hydroelectricity.
Excess electricity leads to periods when merchant generators must effectively pay the grid to take their electricity. There have been three periods of negative pricing in California since 2012: April to June 2015, March to April 2016 and January and February 2017. California on-peak prices fell as low as minus $37.73 a MWh on February 23 this year.
California curtailments in January and February this year affected about 4% of electricity from solar projects. New solar projects in California are increasingly displacing other solar projects. In February, 80% of California curtailments were solar. In February, 13% of all five-minute interval marginal energy prices were $0 or below. The figure for early March was 17%.
Curtailment issues are playing out in new power purchase agreement negotiations. Bob Shapiro, a power contracts expert in the Chadbourne Washington office, said curtailment risk is usually handled by excusing payments by offtakers during curtailment periods where curtailment is due to system operating problems, but requiring payment for curtailment for economic reasons. Recently in regions like California and west Texas with higher curtailment risk, there has been a trend toward excusing payments by offtakers for periods of negative market prices up to a capped level or for a specified number of hours that can be curtailed for any reason without compensation. (For a more detailed discussion, see “Renewables Face Daytime Curtailments in California” in the November 2014 Project Finance NewsWire.)