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How does that follow?

Diversifying the harvesting of volatile energy sources across a broader geographic range and diversifying to volatile sources with different average patterns of diurnal activity results in a portfolio with a total output more stable than the output of any individual component in the portfolio.

So if you have a that is worthwhile harvesting anyway, given the variance of its own supply, then once it is in place, the benefit of adding additional low marginal cost volatile energy harvesting are their free-standing benefit, plus the portfolio benefit of reducing the variability of the combined power supply.

If they are all harvesting "use it or lose it" volatile sources and so are dominated by fixed costs with very little low costs, they all undermine capacity utilization of the fueled power in the portfolio,and the diversification benefit only increases their effectiveness in doing so.

Flow-of-river (or drain) hydro, solar PV, CSP (Concentrated thermal Solar Power), industrial co-generation, wave, tidal ~ they would all offer diversification value benefits once there is substantial penetration of any given wind resource.

What matters to the provision of power is not the volatility of any given wind turbine, but the volatility of the entire portfolio of low to very low marginal cost production.

So, yes, the entire portfolio of low marginal cost energy harvesting shifts coal off the bottom of the merit order in coal-dependent power grids, and for a power company that has institutionalized "burning stuff to make power" into their corporate culture, that social benefit is a threat to that corporate culture.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jun 28th, 2011 at 03:48:55 PM EST
[ Parent ]
BruceMcF:
the benefit of adding additional low marginal cost volatile energy harvesting are their free-standing benefit, plus the portfolio benefit of reducing the variability of the combined power supply.

I'm not really arguing with you, just wondering if there may be some justification in legacy carbon based generators feeling used because they are expected to be available to provide base load at any time wind etc. doesn't, and yet much of their main "market" is being undermined and undercut by wind. Their capacity utilisation (and revenue) goes down, while their costs go down much less (just by their variable costs).

It comes down to whether or not legacy producers should also get paid for providing capacity, not just output, to compensate them for their fixed costs.

Of course many legacy plants paid back their investors a long time ago and should be happy for any business they can get provided it covers their fixed and variable costs. However if at some point in the future they become uneconomic and start closing wholesale, the entire entire generation portfolio may become unable to meet peak demand at valley production times even with a wider range of renewable options in place.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Jun 28th, 2011 at 04:22:43 PM EST
[ Parent ]
just wondering if there may be some justification in legacy carbon based generators feeling used because they are expected to be available to provide base load at any time wind etc. doesn't,

What ticks off the baseload coal burners is not that they don't get to provide baseload. Because they do. It is that other people get to provide baseload as well.

A newly built coal-burner has similar economics to a wind farm - high up-front costs, low(ish) variable costs (if you exclude the subsidy-by-dead-Chinese-coal-miner). Which means that insistence on marginal pricing locks out new coal almost as effectively as it locks out new wind.

... but fully amortised coal has an equity cushion to survive higher volatility. Which means it gets to benefit from the higher average prices (due to the lock-out of capital intensive low average cost producers). If you repair the market structure to allow wind farms in, you undercut that particular source of rent for old, fully amortised coal-burners.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jun 28th, 2011 at 05:11:39 PM EST
[ Parent ]
Setting aside the crying over having fought for a false model of the future and having lost, boo fricking hoo.

As to the pragmatic question of what happens if if where they end up on the merit order curve leaves them unable to cover their financial capital obligations ... someone ends up taking a financial haircut, and the asset is revalued, either internally or on sale, as back-up generating capacity.

If a sound energy policy is pursued, its not necessary to expand the capacity of the coal-fired generators in particular, so the fact that their legacy capital costs might not be covered is no threat to the real system. Its a financial loss, sure, but covering for that is just corporate welfare ~ in a more capitalist version of corporatism, we'd apply the rule that you pays your money and you takes your chances.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jun 28th, 2011 at 05:37:32 PM EST
[ Parent ]

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