God Parity
GOD Parity - The End of Utilities using Centralized Generation - YouTube
Here's a simple video explaining the concept of God-parity solar prices. This is the point at which on site solar is cheaper than grid transmission and distribution costs. At this point even if central power producers could generate power a no cost (harnessing the god particle suppose), it would still not be cost competitive to send over the grid with solar onsite. This clip does not cover the issues of storage, but the same cost decline issue applies here as well.
The implication of this theory is that even remote solar and remote wind will not be worth transmitting. Denmark, for example, may need to consider its strategy of having enough wind to cover 150% of domestic demand. Overgenration makes sense now while the surplus power can be exported and fetch a good price. But that price will fall over time as solar and batteries continue down the cost curve. Of course, this need not be such a bad thing for Denmark, since falling battery prices mean that it will be more economical to store surplus wind energy for later domestic use than to export it. The vulnerable link in the supply chain are the transmission operators more so than wind farmers. But localities with too much wind concentration may have excesses that even storage cannot resolve.
Within the US some of our ISOs may be too large geographically. They may need to split into smaller markets over time.
The basic problem with all this is that the grid has up until recently evolved to serve the need of connecting large remote generators with distant populations. The value of this infrastructure depends on the cost differential of remote power and local power. As the cost of local power declines, the value of the long distance transmission infrastructure declines. Eventually it become very burdensome and contentious for society to keep paying for unneeded infrastructure.
I suspect this may already be happening with natural gas. Conventional gas turbines do not require massive water supplies as other thermal energy based on boiling water do, and they do not polute heavily like coal. So they can be located fairly close to population centers. They may not be as efficient as combined cycle natural gas, but not needing massive water resources is a big plus. I would expect you could design a pretty nice small grid with say one gas turbine plant, wind, and lots of distributed solar and batteries, and it would be pretty efficient and not need a whole lot of transmission resources. Essentially the gas plant would just be there to recharge batteries should wind and solar not suffice on certain days. This would suffice for a city of about 50,000 homes. It could function in island mode pretty much indefinitely. It this is true then we don't need massive grid infrastructure. Not that in the US transmission costs are about 3 times the distribution costs. So you can still have small grids with distribution capacity, but save 65% or more on the transmission costs. Really you just need a little transmission capacity to connect to the nearest three or four small grids, where the point is mostly for backup and a little trading of surplus power to stabilize local market prices for power.
So bringing this back to the God-parity idea. The lower the price of onsite power the less comptitive any remote source becomes. The value of transmission lines is largely a matter of arbitrage opportunity between two otherwise isolated power markets. If both local markets connected by a transmission line have pretty much the same price of local power, there is little arbitrage value. Suppose one town has a lot of solar power and another town about 50 miles away has a lot of solar too for about the same price. The two towns would have few occasions to trade power. But if one town has wind and the other town has solar, the transmission line creates value by trading power back and forth thoughout the day with the cycles of wind and sun. So we see that the value of the transmission line depends on the arbitrage opportunities, which depend on differences in how power is produced and consumed. So as onsite solar become cheap and ubiquitous, it affords little arbitrage opportunity from one community to another. Moreover as batteries become cheap and ubiquitous, then daily variation is production and consumption smooth out. If our towns with wind and solar both had sufficient battery storage to smooth out intradaily price fluctuations. So here there is little need to trade back and forth throughout the day, but this also depends on the cost to store. The solar town would need to decide if it is cheaper to use stored solar energy or to use imported wind energy, meanwhile the wind towe has to decide if it is worth more to store the extra wind energy or export it. So the transmission arbitrage is between the value of storing wind energy and the cost of stored solar energy. The cost of storage decreases the value of stored wind and increases the cost of stored solar. Thus, the arbitrage value of transmission increases with the cost of storage. So as the price of batteries decline we should expect that the value of transmission will also decline. I think if we follow this line of reasoning, we get to a place the differential in the cost of wind and solar determines the the arbitrage value of transmission. That is the cost of batteries is identical and increasingly cheep in both towns. So the predominant arbitrage opportunity is simply to use more wind if it is cheaper. Suppose incremental wind was 1 cent cheaper per kWh than incremental solar. Then the value of the transmission line is about 1 c/kWh. That is, the cost of importing incremental wind power (wind plus 1c transmission) to solar town is equal to the cost of incremental solar in solar town. Remember that storage is so cheap that there are no more issues around intermittency so that the levelized cost difference is all that matters to chosing to install more solar or more wind. So if the value of transmission comes down to 1 c/kWh, the critical question is whether the cost of the transmission line is less than its value. Only while value exceeds cost is it economical to add transmission capacity. Now wind town can probably add onsite solar for the same cost as solar town, so if solar becomes cheaper than wind, then there really is no arbitrage left between wind town and solar town, except in extreme conditions as backup. So if solar becomes cheaper than wind, there is practically no value left for transmission. This is the kind of microeconomic reasoning that gets to the place where all power is local. There is no sustainable market for transmission grids.
