Rising Curtailments Pose a Threat to U.S. Clean Energy Market, with Energy Storage Emerging as a Key Solution
As the deployment of renewable energy surpasses the development of transmission capacity and energy storage in the United States, curtailments of wind and solar farms are expected to increase, impacting the revenue of generators. The U.S. Energy Information Administration (EIA) warns that without upgrades to the state power grid, wind power curtailments in Texas could rise to 13% of total available generation by 2035, up from 5% in 2022. Similarly, solar curtailments are projected to increase from 9% to 19% under the same grid scenario.
Texas, being the fastest-growing U.S. solar market and operating the largest wind power fleet, faces the greatest impact. It accounted for 26% of national wind generation last year and is projected to double wind and solar capacity to over 100 GW by 2035. To tackle these challenges, energy storage, particularly battery storage, is emerging as a crucial solution.
Curtailments occur when the supply of wind and solar energy exceeds demand, and the power cannot be transported to other regions, resulting in reduced revenues for operators. This not only affects their generation income but also hampers federal production tax credits (PTCs) tied to output.
Curtailment is more prevalent in western Texas, where most wind and solar farms are located, especially older wind assets that lack the flexibility to adapt to changing market conditions. Wind farms installed over a decade ago no longer receive PTCs, discouraging them from offering output at competitive prices in the wholesale market. On the other hand, developers of new wind projects under the 2022 Inflation Reduction Act can choose between PTCs and investment tax credits (ITCs) based on project costs. RWE Clean Energy, for example, has strategically positioned its wind farms in central and southern Texas to minimize curtailment risks.
To address the rising issue of curtailments and the lack of transmission capacity to major cities like Houston and San Antonio, wind and solar developers are shifting their focus to the east and investing in utility-scale energy storage. Expanding transmission infrastructure and upgrading grid systems are crucial steps that Texas must prioritize to alleviate congestion and address the intermittency of wind and solar generation.
Energy storage, particularly battery storage, is expected to play a major role in mitigating curtailment risks. By charging batteries during periods of low demand or excess supply and dispatching power during peak demand, operators can balance the intermittent nature of renewable energy. According to the EIA, battery storage capacity in Texas is predicted to reach 7.9 GW by 2025, a twenty-fold increase from the current 400 MW. Nationwide, 20.8 GW of battery capacity is planned. Solar installations, which affect revenue potential during peak solar hours, are increasingly being paired with battery storage to optimize revenue generation throughout the day.
While batteries are widely utilized in conjunction with solar farms, wind-storage hybrid facilities are less common. In 2022, only one new hybrid wind-storage facility was commissioned in the U.S., compared to 59 PV plus storage plants, according to the Department of Energy (DOE). Additionally, wind and solar developers could explore alternative options such as directing excess production towards clean hydrogen production or incentivizing power consumption during periods of lower demand.
The growth of clean energy in Texas and across the United States necessitates addressing grid barriers and maximizing the use of energy storage to ensure the continued growth and stability of the clean energy market. By embracing innovative solutions and prioritizing investments in transmission infrastructure and energy storage, the challenges of rising curtailments can be effectively mitigated, allowing renewable energy to play a key role in the nation’s clean energy transition.
