Renewables are, in a way, prisoners of time and geography.
[Geography]: Solar power in locations like California, Nevada and Arizona is suffering from an anti-network effect. The anti-network effect of solar occurs in a market when penetration of solar in a location reaches a market-specific tipping point, after which the addition of new solar capacity reduces the benefit (i.e., value of solar generation) for all solar plants in that market.
[Time]: The hours during which any given solar generator can produce electricity are, by definition, the same hours that every other nearby solar generator can produce electricity, which end up becoming the hours for which the market is oversupplied and prices are lower.
The industry has been using the levelized cost of energy (LCOE) metric to compare its costs to coal, natural gas and other generation sources.
Solar became the lowest LCOE form of generation in the last decade and this has been driving the incredible growth of solar capacity. But the competition with other generation sources continues within the industry itself, creating a race to the bottom which is eroding the returns for investors in solar.
Wind and solar curtailments are increasing as more intermittent renewables are deployed on the Electric Reliability Council of Texas (ERCOT) grid. The most impacted wind and solar plants saw 29% and 21% (respectively) of their total annual generation curtailed in 2021 to 2022!
In summary, increasing deflation in value and rise in competition of solar have incentivized the pairing of batteries with existing solar plants. Now there is a new incentive that will accelerate the growth of battery paired hybrid plants.
The [Inflation Reduction Act] (IRA) newly allows for a 30% investment tax credit (ITC) incentive for standalone batteries over the next ten years which will boost the redevelopment of existing solar plants to become hybrid plants.
The new incentive plus the investment in U.S.-based manufacturing of solar and batteries is poised to make the U.S. the leading nation in solar and storage power plants. Bitcoin miners have a huge opportunity to tap into one of the most rapidly growing forms of energy generation by figuring out the physics and finance of co-locating with solar and storage power plants.