A Powerful Mix of Solar and Batteries Is Beating Natural Gas

(Bloomberg) -- Natural gas is getting edged out of power markets across the U.S. by two energy sources that, together, are proving to be an unbeatable mix: solar and batteries.

In just the latest example, First Solar Inc. won a power contract to supply Arizona's biggest utility when electricity demand on its system typically peaks, between 3 p.m. and 8 p.m. The panel maker beat out bids from even power plants burning cheap gas by proposing to build a 65-megawatt solar farm that will, in turn, feed a 50-megawatt battery system.

It's a powerful combination for meeting peak demand because of when the sun shines. Here's how it'll work: The panels will generate solar power when the sun's out to charge the batteries. The utility will draw on those batteries as the sun starts to set and demand starts to rise.

Just last week, NextEra Energy Inc.'s Florida utility similarly installed a battery system that'll back up a solar farm and boost generation. In California, regulators have called on PG&E Corp. to use batteries or other non-fossil fuel resources instead of supplies from gas-fired plants to meet peak demand.

And batteries may be about to get even more competitive. Federal Energy Regulatory Commission Chairman Kevin McIntyre said he expects the agency to decide Thursday on a proposed rule that could remove barriers to energy storage participating more in wholesale markets.

Arizona Public Service Co. spokeswoman Annie DeGraw said the bid the utility received from First Solar was “very competitive, and it had the added benefit of being clean.”

--With assistance from Catherine Traywick

To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net, Mark Chediak in San Francisco at mchediak@bloomberg.net.

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Stephen Cunningham