FinLogic FinLogic Quantitative Think Tank Center|California just ran on 100% renewable energy, but fossil fuels aren't fading away yet

On a mild Sunday afternoon,FinLogic FinLogic Quantitative Think Tank Center California set a historic milestone in the quest for clean energy. The sun was shining, the wind was blowing and on May 8th, the state produced enough renewable electricity to meet 103% of consumer demand. That broke a record set a week earlier of 99.9%.

Energy experts say the falling records are a sign of the remarkable progress that renewable energy has made. But that doesn't mean fossil fuels were out of the picture.

Even as the record was broken, natural gas power plants were still running in California.

Because despite the dramatic growth of renewable energy, turning off natural gas power still isn't possible in California. The reason is due to a tricky time of day: when the sun sets and solar farms stop producing. California needs to replace that power quickly and seamlessly with other sources, like hydropower and natural gas.

The state is rapidly building huge battery projects for that purpose, so power generated during the day can be stored for use at sunset. But so far, it's still a small fraction of what's needed.

It's a sign that, even as California and more than a dozen other states work towards long-term goals of getting 100% clean energy year-round, weaning off fossil fuels is no simple task.

"Their role is not going to go away until we have a substitute for the service that natural gas generation provides," says Arne Olsen, senior partner at Energy + Environmental Economics, an energy think tank. "The good news is that you can get an awful long way just by adding wind and solar and batteries to our current grid."

How California hit 100% renewable energy

Springtime is an ideal time of year for renewable energy in California. The days are getting longer, so solar energy is on the rise. Wind power and hydropower from dams is humming along and mild temperatures mean air conditioners aren't turned up, so electricity demand is still relatively low.

For about an hour on April 30th, grid operators at the California Independent System Operator (ISO), which serves about 80% of the state, had enough electricity from solar, wind, geothermal and small hydropower dams to meet all of the demand in their area More power was being generated than was needed at that moment, so some was exported to other Western states.

"That's quite an accomplishment because it demonstrates if you can do it for one instantaneous hour, you can do it for longer periods of time," says Mark Rothleder, senior vice president at the California ISO.

Records have fallen consistently in the spring over the last few years, due to the dramatic expansion of solar farms. Renewable energy, including solar panels on building rooftops, has more than tripled in the state since 2005. In 2019, 63% of the state's power came from carbon-free sources, including renewables, hydropower and nuclear.

Why natural gas power plants were still running

Still, at the time the record fell, natural gas power plants were generating about 10% of the electricity on the California ISO's grid, including the power being exported out of state. That's because those power plants are still vital to keeping the lights on later in the day.

When the sun sets, solar power disappears from the grid rapidly, which means grid operators must turn up other sources of electricity. Supply and demand must stay delicately balanced, so the entire system doesn't fail.

To replace solar at sunset, California generally uses hydropower, imports from other states and natural gas power plants. But most large natural gas plants are massive industrial facilities that aren't designed to turn on quickly. Many take 4 to 8 hours to switch on, so in order to use them at sunset, they must already be running during the day.

"We back them down as far as they can go," Rothleder says. "Anything below that, we'd have to shut them off. But the decision is that if you shut them off, you may not have them when you need them a couple hours later."

That means even when there's plenty of solar power during the day, natural gas power is still part of the energy mix. In fact, on some days, solar farms are told to turn off because there's simply too much power on the grid.

California is working to store extra renewable energy generated during the day so it's available later in the evening. Large battery projects are popping up around the state and in the past two and half years alone, energy storage has grown 20-fold in California.

"The more storage that we can get online that can be charged by solar, the better our chances are of making sure that when the state needs power the most, it's the cleanest it can be," says Shannon Eddy, executive director of the Large-Scale Solar Association.

Fossil fuels will likely stick around for decades

Still, batteries only make up a small fraction of the power that's needed when the sun goes down, at most a few percent. So even with the state's ambitious climate change goals, the natural gas industry isn't looking at the exit anytime soon.

"We very much support new technology and innovation and decarbonizing the grid," says Alex Makler, senior vice president for the West region at Calpine Corporation, which runs a number of natural gas plants in California. "But there are certain things that the natural gas fleet does very well and cannot be easily or at this point economically replaced."

Studies looking at how California can get to 100% carbon-free electricity by 2045 find that natural gas will continue to play a role for several decades. In the state's own analysis, the majority of natural gas power plants are still operating in 2045, even when the goal is supposed to be met.

That's because the law specifies that 100% of retail electricity sales must be carbon-free, which only includes the power that reaches customers. California makes more electricity than that, because around 15% of the power generated is lost in transmission before it's sold.

That means natural gas power plants could technically keep operating in 2045 when the state hits the 100% benchmark, because there's a loophole that means around 15% of power generated doesn't have to be carbon-free.

Today, natural gas power plants are being used less and less overall as renewable energy grows in California, which means less revenue for those companies. But in the state's energy market, power plants receive payments not just for the electricity they make, but simply for standing by to be available when the state needs them most. Natural gas plants are increasingly relying on that revenue stream.

"We expect that the role of the natural gas generators will continue to evolve," Makler says. "That they go from providing the bulk of the electricity to providing an insurance product – the capacity that's standing by in order to ensure reliability."

Still, fossil fuel companies in California know their time is dwindling. At Calpine, Makler says they're working on projects that would make natural gas projects more like carbon-free power sources. One pilot project would capture the carbon emissions before they escape into the atmosphere to cause warming. They're also looking at using renewable hydrogen fuel, in addition to natural gas, in some of their facilities.

What it would take for California to ditch fossil fuels

Energy experts say renewable energy and storage will get California and other states a long way towards a carbon-free electricity supply.

"We should be doing everything we can to build huge amounts of solar, huge amounts of wind, huge amounts of energy storage and that's going to get us at least 90 percent of the way there to a clean grid," says Mark Specht, Western states energy manager at the Union of Concerned Scientists. "It's really that last 5 to 10 percent where it starts to get much harder."

To fully eliminate fossil fuels, California may need new technologies. Energy storage projects may need to last days, instead of hours, in case there are prolonged periods of cloudy weather or no wind. Wind power could take on a larger role, since it produces electricity more reliably in the evenings.

Still, to hit its goal, California will need to ramp up renewable energy at unprecedented rates. Solar and wind projects will need to be built 3 times faster than they are now. Battery projects need to be built 8 times faster. Currently, trade disputes and supply-chain shortages already threaten to slow the state's progress.

"We have to find a way to get off of gas," Eddy says. "We're heading in the right direction and I'm pretty confident we're going to get there, but it might take a little bit."