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Wind's latest problem: it ... makes power too cheap

by Jerome a Paris Sun Apr 25th, 2010 at 06:25:41 AM EST

Bloomberg has a somewhat confusing article about the newest complaint about wind power, but the gist of it is that wind power is an issue for the industry because it brings their revenues down:

operators in Europe may have become their own worst enemy, reducing the total price paid for electricity in Germany, Europe’s biggest power market, by as much as 5 billion euros some years

Implicit in the article, and the headline (which focuses on lower revenues for RWE) is the worry that wind power will bring down the stock market value of the big utilities - which is what the readers of Bloomberg et al. care about.

But despite the generally negative tone of the article, it's actually a useful one, because it brings out in the open a key bit of information: wind power actually brings electricity prices down!

windmills (...) operators in Europe may have become their own worst enemy, reducing the total price paid for electricity in Germany, Europe’s biggest power market, by as much as 5 billion euros some years
The wind-energy boom in Europe and parts of Texas has begun to reduce bills for consumers.
Spanish power prices fell an annual 26 percent in the first quarter because of the surge in supplies from wind and hydroelectric production

This tidbit of information, which will hopefully begin to contradict the usual lies about the need for hefty subsidies for the wind sector, has been publicised by EWEA, the European Wind Energy Association in a report on the merit order effect (PDF). This is the name for what happens when you inject a lot of capital-intensive, low-marginal-cost supply into a marginalist price-setting market mechanism with low short term demand elasticity - or, in simpler words: when you have more wind, there is less need to pay to burn more gas to provide the requisite additional power at a given moment.

I've long argued that this was one of the strongest arguments for wind (see my article on The cost of wind, the price of wind, the value of wind from last year), and I've pushed the EWEA people to use it more - so this study (which I was not involved in) is most welcome.

The key thing here is that we are beginning to unveil what I've labelled the dirty secret of wind: utilities don't like wind not because it's not competitive, but because it brings prices down for their existing assets, thus lowering their revenues and their profits. Thus the permanent propaganda campaign against wind. But now that this "secret" is out in the open, it's hopefully going to make one of the traditional arguments against wind (the one about its supposed need subsidies) much more difficult to use... The argument remains true for solar, and to a lesser extent for offshore wind, but the utilities are going to complain much less about offshore wind given that they are investing so much capital in that sector right now. The reality is that wind power brings prices down for consumers, even taking into account the cost of feed-in tariffs or other regulatory support mechanisms, which means that these regulatory schemes are not subsidies, but rather smart corrections of market inefficiencies for the public good.

Ironically, wind provides "utility-like" returns to investors, ie low, stable single-digit returns, as befits a regulated strategic infrastructure activity required for the common good. Utilities and investors should love the sector; but they have been spoiled by market deregulation, which has allowed companies to seek higher returns by under-investing, building merchant gas-fired plants, going for M&A games, and playing on market price volatility and trading - in other words, by behaving as perfect clients for investment banks...

As I've noted many times, the energy sector is one of the best examples of how the financialisation of the economy has brought results that are bad for everybody except the investment bankers and top management; it's also, thankfully, one where reality can most objectively re-assert itself.

And the reality is that you get cheaper electricity with wind - and oh by the way, wind requires no imports of fast-depleting fuels from unstable countries, spews no carbon and provides lots more domestic jobs. And it's a perfect investment for our pension needs - safe, low risk, stable, decent long term returns...

Part of my Wind power series.
Full disclosure: I advise wind developers on their financing needs.


Display:
Indeed.

This is an 'unfair competition' argument right up there with one I saw deployed against a major 'Social Enterprise' in London which was pitching for a new bus route. The case was that it was 'unfair' that the firm didn't have to pay returns to shareholders.....

There was an interesting statistic trotted out at the launch of Renewables UK (formerly BWEA) a couple of months ago, which I attended.

This was, as I recall, along the lines that the Danes had invested (I think) £1.3bn in windpower, and were making a £270m per year out of it, literally by taking £50 notes out of the fresh air. Compare and contrast this outcome with a similar investment in carbon-consuming plant where there may well be a profit, but where this is made on the back of a national outflow - in all likelihood set to increase - of funds to more or less reliable and/or greedy suppliers of carbon fuels.

European Tribune - Comments - Wind's latest problem: it ... makes power too cheap

Ironically, wind provides "utility-like" returns to investors, ie low, stable single-digit returns

Here I would add that these returns are denominated in fiat currency and are subject to the inflation that it integral to fiat currency and conventional finance capital. Now that dollar interest rates are at the zero bound there are literally tens, if not hundreds, of billions of dollars available to invest directly in energy. These investors are not bothered about a return ON their capital: they merely want a return OF their capital by protecting its value against dollar inflation.

Rather than these energy funds being invested and ripped off OTC by investment banks or by traders on futures markets (as they are now), it is possible to invest them directly in the 'unitised' production of completed productive assets.

The beauty of unitising renewable energy and energy savings (as opposed to carbon fuelled energy) is that it possible to receive value now in return for Units which it will cost nothing to redeem in the future.

IMHO the best way to make the transition to renewables is to denominate and base financing in energy units. This requires a direct 'Peer to Peer' approach to market architecture whereby transaction intermediaries evolve to become service providers. The adoption of such a partnership enterprise model is actually in shareholders' interests since it enables them to make a 'one-off' exit at an optimal price.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Apr 25th, 2010 at 08:50:28 AM EST
I was wondering if there was somewhere some foolproof way to invest one's individual savings in wind energy production.

I was discussing this with a friend, and we conclude that for individuals not nurtured in finance, it is difficult to find information on how and where put money in safe and sort-of ethical investments.

We were thinking also in small business investment, after having a bio-farm nearby our place tht collected money from individuals to settle.

A free fox in a free henhouse!

by Xavier in Paris on Tue Apr 27th, 2010 at 04:27:04 AM EST
[ Parent ]
Sounds like an idea for a retail ethical investment brokerage and advisory firm...

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Tue Apr 27th, 2010 at 04:51:19 AM EST
[ Parent ]
This is an 'unfair competition' argument right up there with one I saw deployed against a major 'Social Enterprise' in London which was pitching for a new bus route. The case was that it was 'unfair' that the firm didn't have to pay returns to shareholders.....

So they are admitting that running not-for-profit is a superior business model for getting things done as oppose as to extract money out of the enterprise...

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 27th, 2010 at 04:54:14 AM EST
[ Parent ]
....of course they didn't quite put it that way....

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue Apr 27th, 2010 at 05:32:05 AM EST
[ Parent ]
Great post, and that article shows how the media has an odd, ahem, perspective. Capitalism works in odd ways, I guess.

As do local energy authorities. Our local water authority just boosted rates because of huge increasing costs do to--get this--a drastic reduction in water usage in my city. The drop in water usage over the last couple of years was over 10% (and there's a variety of speculation as to why including increased rainfall but also more efficient water fixtures and retrofitting water meters). So, less water use means everyone pays more.

Is there an emoticon for crazy on ET?

by Upstate NY on Sun Apr 25th, 2010 at 11:19:43 AM EST
Unless the bulk of the price of water is in water taxes, that actually makes a lot of sense.

You're not paying for the water - the water is, absent effective taxation schemes, essentially free. What you're paying for is the capacity - that is, you're paying for the ability to get water whenever you want it. So when actual usage drops, the per-cubic meter price goes up.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Apr 25th, 2010 at 12:56:20 PM EST
[ Parent ]
yes, but the net effect is somehow that the total price is going up because the workers (who aren't losing their jobs) are now being subsidized by citizens instead of non-existent company profits.
by Upstate NY on Sun Apr 25th, 2010 at 03:15:03 PM EST
[ Parent ]
Please crosspost this on Daily Kos.  

Merit order effects matter, because they turn the argument that wind is to expensive to be practical on its head.

It's ironic, but one of the industries that would likely benefit the most from the expansion of wind power is steel.

Because most modern steel is made with electric arc furnaces, meaning the price of electricity is important.  And second because each 1.5 MW turbine with a hub height of 100 m is going to require ~250 tons of steel.   That means that the steel industry gets reduced input costs and increased demand for their end product.  You can't ask for much better.

Leo Gerard, former president of the United Steelworkers in the US, (though he's Canadian, and no VP of the US AFL-CIO labor federation is a huge supporter of wind power.  The steelworkers have this working relationship with Gamesa, because they represent workers there and Gamesa hasn't tried to fight the union tooth and nail.

Putting the light on the merit order effect makes the political case for windpower that much easier.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Apr 25th, 2010 at 12:50:51 PM EST
Thanx for the article and for directing me to the EWEA article on the Merit Order Effect.

Figure 3 of the article notes that it does not include hydro since "bids from hydro tend to be strategic and depend on precipitation and level of water in reservoirs."

Bids from solar and wind also depend on externalities such as wind speed and insolation, and I wonder if anyone has done an analysis that includes hydropower and solar PV contributions to the merit order surve.

sidd

by sidd on Sun Apr 25th, 2010 at 12:57:34 PM EST
Jerome - this conflates many issues and the 'cheapness' is misleading in my opinion. some comments, in no particular order:

  1. it is difficult to compare subsidized production (via govt transfers) versus at the margin 'cheapness'. its not apples and apples.

  2. What you're really inferring is that nuclear and coal plants get less $ for their nighttime production of electricity than before wind. But in reality, for each kWh not produced from coal, 10-12 cents are paid to wind operators - this is guaranteed in most places.

  3. Wind is a stochastic source. At some times it overproduces, at some times under.  If you imagine a demand curve for electricity and superimpose wind generation on the top of it, it will look like a series of sine curves winding above and below demand. The area above demand (surplus power) has to be subtracted from nominal EROI as this energy is proformad but never realized. The area below the curve has to be subsidized by a fossil stock and aggregate energy gain in the total system declines.  If you take the nominal EROI of 19 these 2 factors cut EROI of wind roughly in half (9-10 still good however).

  4. During times of low demand, flow based sources with guarantees will outprice other steady sources (coal, nuclear, run-of-river hydro)... and damage the willingness to invest there. This is not necessarily a good thing. But I agree with Jerome that the sunk cost of fossil fuel plants will cause utilities (during those situations of excess power) to complain about lack of profits.

  5. from the article: "Electricity-network managers have even ordered windmills offline at times to trim supplies. "  This is a serious cost that comes with stochastic systems that pair up with fixed demand that I am just beginning to understand. If the energy generated from wind went directly to work (grinding mill or pumping water from ground etc) then it would be different story, as during times of no wind the users could just go and do something else. However wind generates electricity, which in our system if we have either 1% too much or 1% too little, can damage or even take down the grid that holds it.

  6. A new analysis from some of charlie hall's students (and Hannes Kunz) for East and West Denmark shows that in aggregate, the entire country of Denmarks wind farms in their lowest 20% of generation time of the year produce 1% of the annual total in electricity - meaning that for those 2.5 months of year, full fossil back up is required.  How many places in world (other than special situations like islands like Aruba)  are building wind right now WITHOUT subsidies?  I don't know of any. The problem is that in NEW areas without existing nat gas/hydro/nuclear back up, its cheaper to just build gas over baseline than to build wind WITH gas and baseline. Please show me any area(s) that this is not the case  (areas building just wind and not needing fossil back up where wind gets pricing based on spot electric mkt without guaranteed rate). Anywhere?

  7. As long as no new capacity needs to be built, the higher costs of wind don't become apparent, and as you point out - for a few years this might be the case (though if you look at areas with large wind (Denmark) there was large scaling of NG plants as well) while other things were mothballed (coal)

  8. If energy prices triple, then the 'duration' of wind would make it much more attractive than for a life cycle energy option like nat gas that needs a large % of costs year to year instead of up front. However this culture will crumble well before energy triples.  Personally I think we've seen the all time highs in energy prices due to money/credit overshoot. But I digress...

  9. Finally, IF externalities are included (mainly carbon, but other fossil related negatives) then wind may truly be cheaper (but again, unaffordable to the current system of claims/wealth)

I have been a wind advocate for sometime, but I have based my favorable opinion primarily because the EROI is very high and in the end we MUST live more in balance with solar flows. However, research finishing up my dissertation on risk and timing has caused me to understand that nominal EROI is (way) overrated as an indicator.   Im sure that just like ethanol, wind makes sense to individuals and certain regions, but when looking at an aggregate energy gain for society, the costs of intermittency (not to mention discounting) are going to be too high to afford. Now, if we reduce consumption by 50-80% and change our system away from 'on demand', then wind paired with nat gas, from an energy perspective will make a lot of sense.

@Jerome - my thoughts above are based on science. E.g. I don't 'want' to be 'for' or 'against' wind - the facts, at this juncture, tell me the stochastic nature of renewables vis a vis on demand stocks change the game more than I thought (or rather, not enough).  The elephant in the room isn't EROI, its that the human electricity system is 'on demand'. In sum, of course renewables can provide us with energy/electricity - but not at the price/on demand (stock vs flow) way that fossil fuels built THIS system...

Nate

by Nate on Sun Apr 25th, 2010 at 01:06:39 PM EST
As promised, here are my replies:


this conflates many issues and the 'cheapness' is misleading in my opinion. some comments, in no particular order:

1. how much of the '5 billion euros saved' was actually a transfer from govt (via guarantees?)

the 5 billion is the difference between prices actually paid by buyers of electricity and what they would have paid if there had been no wind in the system (for each time period, you take out wind production out of the dispatch curve, see what the price would have been, and multiply by demand at that time).

Given that feed-in tariffs are paid for by consumers, it is the exact same pool of money so the comparison is valid


2. Wind is a stochastic source. At some times it overproduces, at some times under.  If you imagine a demand curve for electricity and superimpose wind generation on the top of it, it will look like a series of sine curves winding above and below demand. The area above demand (surplus power) has to be subtracted from nominal EROI as this energy is proformad but never realized. The area below the curve has to be subsidized by a fossil stock and aggregate energy gain in the total system declines.  If you take the nominal EROI of 19 these 2 factors cut EROI of wind roughly in half (9-10 still good however).

The "above the curve" point is true only if wind provides more than 100% of demand at any time. This is a largely theoretical issue in all systems today (Denmark has touched that threshold on a few occasions - typically at 5am on winter nights). It may become an issue as penetration increases; we'll have to see then how much of production has to be curtailed in practice, and this will indeed reduce EROEI

I fundamentally reject the notion that the area below the curve has to be "subsidized." Wind production is largely predictable within system requirements (ie day ahead and an hour ahead) - as much as demand, and the systems as they are today are perfectly able to cope with the variability of wind at no additional cost. That systems would be less able to cope in the future is something that the opponent of wind have to prove, not to claim. Experience (such as the case last winter went wind went from 50% to 0% in a few hours in Spain because winds were strong and went above the cut-off speed of turbines, and the system coped without a hitch) is on the side of wind proponents.


3. During times of low demand, flow based sources with guarantees will outprice other steady sources (coal, nuclear, run-of-river hydro)... and damage the willingness to invest there. This is not necessarily a good thing. But I agree with Jerome that the sunk cost of fossil fuel plants will cause utilities (during those situations of excess power) to complain about lack of profits.

There's two things here: profits from existing assets, and expected profits from future assets. The utilities today are unhappy with the loss of revenue on existing assets.
As to investing in new assets, there is a bigger problem than wind: it is market deregulation. If you look at what has been built in Western Europe and the US in the past 15 years, it is EXCLUSIVELY gas-fired power, ie something which is actually quite good at dealing with wind power (even baseload CCGTs can sell spinning capacity). No coal or nuke plants have been built, because there are oher, bigger, obstacles to do so. If they get to be built, it'll be through market-distorting rules or outright subsidies. That may be a good thing, but it kind of negates the argument against wind.

Gas-fired plants get built because they are market-makers, not price-takers, and thus so much less risky as investments (and they offer traders so much more opportunity to make profits)


4. from the article: "Electricity-network managers have even ordered windmills offline at times to trim supplies. "  This is a serious cost that comes with stochastic systems that pair up with fixed demand that I am just beginning to understand. If the energy generated from wind went directly to work (grinding mill or pumping water from ground etc) then it would be different story, as during times of no wind the users could just go and do something else. However wind generates electricity, which in our system if we have either 1% too much or 1% too little, can damage or even take down the grid that holds it.

Wind is very easy to cut off. Vestas is now even selling reserve capacity as one of the argument of its new V112 (ie, they offer to produce less than maximum capacity at times of wind, with the option to ramp up or down; the ramp up speed, in MW/minute, is better than for gas peakers). So the argument here is one of cost and EROAI, not of grid stability. Note that additionally; wind turbines, being scattered around the grid actually strnegthen its stability with the ability to provide voltage stabilisation and reactive power.


5. A new analysis from some of charlie hall's students (and Hannes Kunz) for East and West Denmark shows that in aggregate, the entire country of Denmarks wind farms in their lowest 20% of generation days of the year  produce 1% of the annual total in electricity - meaning that for those 2.5 months of year, full fossil back up is required.  How many places in world (other than special situations like islands like Aruba)  are building wind right now WITHOUT subsidies?  I don't know of any. The problem is that in NEW areas without existing nat gas/hydro/nuclear back up, its cheaper to just build gas over baseline than to build wind WITH gas and baseline. Please show me any area(s) that this is not the case  (areas building just wind and not needing fossil back up).

Did you not read the article? Germany, Spain and Denmark end up with cheaper electricity with wind than without, including the price of the support mechanism.

Your argument is like saying that city traffic is slower because of red lights and having to stop there. Sure, you stop, but you gain because traffic is more orderly at intersections. But people keep on saying "it has to be slower, you stop at red lights!" Imagine feed-in tariffs as redlights, ie rules that allow for more sensible behavior by all.

As to your point that wind needs backup: again: so what? The MWs are already here today; you don't need to mothball gas-fired plants when you build wind; you just use them differently, as peakers instead of base or midload providers. And again, gas capacity (MW) is cheap; it's the MWh that are expensive. Building a MW of gas-fired power plant for each MW of wind (a silly proposal, because you can cope with much less than that, even at high wind penetrations) would only increase the cost of wind by roughly 30%.


I have been a wind advocate for sometime, but I have based my favorable opinion primarily because the EROI is very high and in the end we MUST live more in balance with solar flows. However, research finishing up my dissertation on risk and timing has caused me to understand that nominal EROI is (way) overrated as an indicator.   Im sure that just like ethanol, wind makes sense to individuals and certain regions, but when looking at an aggregate energy gain for society, the costs of intermittency (not to mention discounting) are going to be too high to afford. Now, if we reduce consumption by 50-80% and change our system away from 'on demand', then wind paired with nat gas, from an energy perspective will make a lot of sense.

No, the cost of intermittency is low. I don't know where you get it from that it's going to be high. Again, the worst case cost scenario (backing up each MW of wind by a MW of gas) only means a 30% increase on the cost of wind.


@Jerome - my thoughts above are based on science. E.g. I don't 'want' to be 'for' or 'against' wind - the facts, at this juncture, tell me the stochastic nature of renewables vis a vis on demand stocks change the game more than I thought (or rather, not enough).  The elephant in the room isn't EROI, its that the human electricity system is 'on demand'.

Yes, and wind is just as predictable than demand, which means that we already know how to cope with it.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Apr 25th, 2010 at 01:22:00 PM EST
[ Parent ]
(sorry - this was an email exchange. I copied my earlier answers, but did not see that Nate had elaborated on a couple points. So here are my additional comments:


it is difficult to compare subsidized production (via govt transfers) versus at the margin 'cheapness'. its not apples and apples.

Actually, in most European countries, there are no government transfers - the cost of the fixed price (being the difference between market prices and the fixed price guaranteed to renewable energy producers) is spread over ratepayers' bills and not supported by government funds in any way. So the fact that wind injected in the system has an effect on what the same ratepayers have to pay is directly relevant.

A more specific argument against this is that at some point, there will be so much wind in the system that prices will be too low for any technology to be profitable - and all producers (other that tariff-supported wind producers) would go bankrupt. At that point, something will need to be changed: either a minimum price for electricity for all producers, or some other form of production planification...


What you're really inferring is that nuclear and coal plants get less $ for their nighttime production of electricity than before wind. But in reality, for each kWh not produced from coal, 10-12 cents are paid to wind operators - this is guaranteed in most places.

Actually, nighttime prices are not really touched by wind - they are already low. Wind has the biggest impact at times of high demand, when the price is set by more expensive marginal producers like peakers. It is at peak times that nukes and coal make the most money, as they sell at high marginal prices electricity which costs the no more than at night. At peak times, you replace 15c/kWh peaking gas kWh by low-marginal cost wind. You don't replace the base load producers (they are cheaper), you reduce the marginal plants. When wind penetration gets high enough, it will reduce demand from baseload plants, but not the price at that time (unless some of the more expensive baseload plants are completely taken out of the supply side at that point).

So consumers are forced to buy 8c/kWh at night, but they also have to pay only 10c/kWh at peak times, instead of 15c/kWh, at the more expensive peaker plant is no longer needed and prices are set by the next most expensive plant (or the next, or the next, depending on how much wind you insert).

The difficulty is that market prices are set by marginal cost, and not by levelised average cost, and the different technologies have such different rankings when you use different cost concepts. Maybe to take wind out of the equation, you should just think about nues versus gas, because the problem is the same: the more nukes you have in the system, the lower prices are for everybody, and they end up being too low for ANY technology to be profitable (thus investment in nukes would not, and will not, happen under market mechanisms).


7. As long as no new capacity needs to be built, the higher costs of wind don't become apparent, and as you point out - for a few years this might be the case (though if you look at areas with large wind (Denmark) there was large scaling of NG plants as well) while other things were mothballed (coal)

Well, yes. Wind does not eliminate the need to invest in replacement capacity. But investment in that capacity will be needed only when existing capacity needs to be taken out (which is a big carve out); and it needs to be priced as capacity and not as MWh generation source.


If energy prices triple, then the 'duration' of wind would make it much more attractive than for a life cycle energy option like nat gas that needs a large % of costs year to year instead of up front. However this culture will crumble well before energy triples.  Personally I think we've seen the all time highs in energy prices due to money/credit overshoot. But I digress...

Investment in wind does not require high prices, it requires prices systematically higher than a given (moderately high) threshold for a very long time. A short period of low prices is enough to make a wind project go bankrupt and thus for investors not to make the initial investment decision, even if the average price is competitive. Remember my image about the guy standing on the beach, with his feet stuck to the ground, and the kid with a buoy. Whe nthe tide comes, the guy dies, and not the kid, even if on average the kid is lower than the man. "Cheap" and "competitive" are not the same thing in a marginalist market setting.


Finally, IF externalities are included (mainly carbon, but other fossil related negatives) then wind may truly be cheaper (but again, unaffordable to the current system of claims/wealth)

Externalities don't exist. Otherwise, we wouldn't even be having this conversation.

Just think about this: ALL generation sources (coal, nukes, wind) rae cheaper than gas-fired power plants. And yet the market, over the past 15 years, has built NOTHING BUT gas-fired plants in North America and Europe. Please think about this.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Apr 25th, 2010 at 04:44:51 PM EST
[ Parent ]
for a truly excellent discussion, which has addressed many of the nagging concerns about my (lack of) understanding of wind power and its effects on existing investments, new investments, returns on investments, and long term electricity price trends.

Some questions:

  1. Can wind turbines have remotely/automatically controlled variable pitch to respond to changes in demand and/or wind speed and thus assist in regional supply regulation and reduce drastic shut downs.

  2. To what extent will "smart grids" be able to assist in demand regulation - e.g. by charging electric cars at night but also targeted at times when maximum wind is available

  3. To what extent can power storage plants like Turlough Hill assist in supply regulation - and what is their effect on average costs - is their an optimum penetration of storage plants

  4. Are there any examples of paying for capacity rather than output as a means of ensuring there is sufficient investment in new peaker capacity.  Would doing so not be analogous to guaranteeing feed in tariffs for wind?

  5. If the major losers from increasing wind penetration are the owners/operators of existing plant, are there any examples of mechanisms for compensating them for loss of production - e.g. through some payment for capacity scheme?  Clearer the operator of a plant that is only required 5% of the time would need either very high marginal prices or some sort of "state guarantee" in return for providing security of supply.

  6. What is the effect of "internationalising/widening the grid"  on wind variability - i.e. the larger the geographic area, the greater the likelihood of at least some wind in parts of the grid.

  7. What is the impact of rising transmission costs if power for parts of a widening grid is sourced from increasing remote sources - e.g. wind/wave from Ireland, Solar from the Sahara.  Ireland is investing a lot of money in inter-connectors to the UK (and, I think, France) as a means of widening its grid.

  8.  Conversely, what are the transmission cost savings from (sometimes) being able to favour areas of supply deficit with local wind production (rather than remote nuclear or some other v. centralised resource).  I'm thinking of low population density areas or other areas remote from major power plants but whose needs could largely/often be met by local wind/wave/solar.

  9. Surely there are computer models available for optimising not just the supply mix, but the cost mix, which could assist in estimating the impact of introducing more wind on the overall system and returns for all stakeholders.  

This should be a scientific rather than an ideological debate - and the impact of regulatory policies (or market deregulation) on costs, prices, carbon footprints, employment, imports/exports, tax take, returns on investment, security of supply etc. should all be calculable. Or am I being naive here and is there a value (to some) of obfuscation?

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Apr 26th, 2010 at 08:05:21 AM EST
[ Parent ]
You are being naive.
by rootless2 on Mon Apr 26th, 2010 at 08:49:39 AM EST
[ Parent ]

Can wind turbines have remotely/automatically controlled variable pitch to respond to changes in demand and/or wind speed and thus assist in regional supply regulation and reduce drastic shut downs.

Yes, they mostly do these days.


To what extent will "smart grids" be able to assist in demand regulation - e.g. by charging electric cars at night but also targeted at times when maximum wind is available

The potential is massive; it remains to be seen how it can be implemented. This is largely a regulatory question more than a technical one.


To what extent can power storage plants like Turlough Hill assist in supply regulation - and what is their effect on average costs - is their an optimum penetration of storage plants

Storage plants help. They are limited by topography, unfortunately.


Are there any examples of paying for capacity rather than output as a means of ensuring there is sufficient investment in new peaker capacity.  Would doing so not be analogous to guaranteeing feed in tariffs for wind?

yes, some US markets have explicit capacity markets. Others do it through the spot markets through "balancing costs" ie penalties for producers who under or over deliver and special payments for producers that make "spinning reserves" (ie immediately available spare capacity) available


If the major losers from increasing wind penetration are the owners/operators of existing plant, are there any examples of mechanisms for compensating them for loss of production - e.g. through some payment for capacity scheme?  Clearer the operator of a plant that is only required 5% of the time would need either very high marginal prices or some sort of "state guarantee" in return for providing security of supply.

Peakers can generate a profit producing electricity only a few % of the year; as to incumbents, they are the ones pushing for market pricing these days, but yes, at some point, some regulatory changes will be needed, either in the form of minimum prices or some other mechanisms.


What is the effect of "internationalising/widening the grid"  on wind variability - i.e. the larger the geographic area, the greater the likelihood of at least some wind in parts of the grid.

Yes, the wider the grid area, the more stable it can be and the more intermittency can be absorbed.


What is the impact of rising transmission costs if power for parts of a widening grid is sourced from increasing remote sources - e.g. wind/wave from Ireland, Solar from the Sahara.  Ireland is investing a lot of money in inter-connectors to the UK (and, I think, France) as a means of widening its grid.

Conversely, what are the transmission cost savings from (sometimes) being able to favour areas of supply deficit with local wind production (rather than remote nuclear or some other v. centralised resource).  I'm thinking of low population density areas or other areas remote from major power plants but whose needs could largely/often be met by local wind/wave/solar.
Surely there are computer models available for optimising not just the supply mix, but the cost mix, which could assist in estimating the impact of introducing more wind on the overall system and returns for all stakeholders.  

Well, transmission costs can be balanced by the lower prices of electricity from having a wider market.

 

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon Apr 26th, 2010 at 11:07:30 AM EST
[ Parent ]
Jerome:
as you surely know, much of the problem is "cost of finance" which is an artificial cost.
Imagine IKB had invested in wind in Germany instead of giving money to Paulson and others - and employing a lot of "experts" in Germany to produce negative value. The result would not only have been an actually good producing loan, but it would have improved profitability of IKB industrial customers in Germany by giving them both cheaper power and a customer for their engineering equipment and services.

See:

http://www.dailykos.com/storyonly/2010/4/25/860462/-The-Goldman-Sachs-scandal-and-solar-power

by rootless2 on Sun Apr 25th, 2010 at 09:49:30 PM EST
Thanks for crossposting.

I put up a diary of my own about wind power.

If the US is able to sustain the same year over year growth that the Spanish did for the last decade, it's possible to get to 15% wind penetration by 2015.  

There's a commercial real estate crisis coming that's going to wipe out a lot of smaller, regional banks.  I'd like to see the US government start a program to loan money at prime to these banks, and have the banks loan it out to wind farm developers at prime plus 1%.  They get their books shored up, and they have an incentive to do the leg work in lining up developers who can take out the loans.  The government gets its money back, with interest.  And a whole new industry gets off the ground. This could create something like 450,000 new manufacturing jobs over the next five years, and give the economies of scale needed for turbine manufacturers to invest in North America plants.  

Doing this right could take a chunk off the Ohio River Valley  off of coal, and that would seriously cut into US C02 emissions.  Plus, the region is ideally suited to be a turbine manufacturing hub.  Steel, metalworking, machine tools, and plants that can make the generators.  It connects into the types of industry already there, and carries this strength forward into new areas.   I see that three manufacturing hubs: the biggest in the old auto states (Indiana, Ohio, Michigan) supplying most of the eastern United States, with lesser hubs in Texas and California supplying local needs.  This supposes of course a local (US) buying requirement.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Apr 25th, 2010 at 11:10:44 PM EST


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