by Jerome a Paris
Wed Jul 2nd, 2008 at 03:13:18 PM EST
City of Houston Gives Wind Power a Turn
HOUSTON -- The heart of the U.S. oil patch on Tuesday began using wind-powered electricity for about a fourth of its municipal power needs at a lower price than it is paying for power produced from coal and natural gas, city officials said.
The move shows how renewable energy's prospects are improving at a time of soaring fossil-fuel prices. Long derided as an expensive niche, wind power now is moving closer to the mainstream.
Yes, wind is cheap enough to be competitive head on with coal and gas - even as they aren't taxed for the pollution they cause or the carbon emissions they generate.
Houston's push also underscores how far renewable energy has to go. Wind power has taken hold more in Texas than in many other states, both because the western part of the state is breezy and because Texas has enacted a mandate designed to boost wind-power generation. The federal government has rejected calls to implement that kind of mandate nationally.
See: this is good government in action: get things happening that may not make sense in the short term but pay off handsomely for society in the long term. Like other States that forced wind generation upon their kicking and screaming utilities (and kick and scream they did, before painting themselves as green now that they do have wind capacity), they are reaping the benefits of wind:
- lots of jobs
- no dependence on unfriendly foreign suppliers
- no carbon emissions
- a guarantee that prices will not increase for as long as the turbines run (20-25 years)
That last topic is worth exploring a bit, followin the next quote in the article:
Under a five-year contract, Houston will pay a fixed price of 7.5 cents per kilowatt hour for the wind-generated electricity, 21% lower than the 9.5 cents per kilowatt hour it pays for conventional power. The city will buy half the wind power through Goldman Sachs and half through Reliant Energy, said Issa Dadoush, director of the city's department of general services.
Note that: fixed price - no increase even if oil prices go up, gas prices go up, coal prices go up or if carbon gets a price. It's only a 5-year contract, but it could easily have been a longer one: the main cost of wind is the repayment of the initial investment, and that's usually a mortgage-style debt repayment at a rate agreed at the time of construction.
Note also that 7.5c/kWh is actually rather expensive for wind: my bank has been financing projects where the electricity generated was paid at 3-4c/kWh acouple of years ago. But the power market has moved, and those that had the foresight to enter it early, like Goldman Sachs, and acquire generation capacity, can now sell it at a much higher price than actual production cost - and still be highly competitive. And note in that case that Goldman Sachs and Reliant will also get an extra 2c/kWh in Production Tax Credits, the federal mechanism used to support wind.
Another point to note is that wind, by virtue of having a very low marginal cost, brings prices down when it is available, by making the most expensive plants in the merit order unnecessary at that particular time, and thus lowering the market price. In Denmark and Germany, it has been calculated that prices are 30 to 70% lower when wind blows than when it does not; altogether, the savings on power prices, which accrue to consumers (or at least to the utilities that need to buy power from the market) are now significantly higher than the cost to society of the subsidy for wind.
Which, again, makes it smart policies, which only government can carry out, because this requires global coordination and regulation to happen.
So, how about intermittency?
The power that the city buys won't necessarily come directly from wind turbines. Because wind power is intermittent -- it is produced only when the wind blows hard enough -- the city's contract calls for back-up power to come from conventional sources. But the energy companies will certify that an equal and offsetting amount of power will be produced by Texas wind farms.
This is dealt with by Reliant, which can easily manage it through its existing portfolio of production assets. As I've noted many times, this is actually rather easy to do for penetrations of wind much higher than what is seen in the US or even in Texas, and it does not require more carbon-spewing plants: it actually requires these existing plants only occasionally, and it reduces the need for them the rest of the time. A MWh more of wind power is a MWh less of coal- or gas-fire electricity, and means a net reduction in carbon emissions. And forget about the fact that wind MWs provide less MWhs than coal MWs: it's true, but irrelevant: users buy MWh, not MWs.
(And if you want ot bring up that event a couple of months ago where Texas almost suffered a blackout when wind stopped blowing quite abruptly, it should be noted that the problem then was that several traditional power plants that should have been in production were not, so the problem was rather a failure of the supposedly reliable backup than the wind variations, which should have been absorbed easily otherwise. It was altogether too convenient to blame wind for that SNAFU. Hmmmm... I wonder who would have wanted to do that...).
And, of course, wind farms brings income to farmers (who get a nice check in exchange for a few square meters of their land, which remains fully productive); they bring job to rural communities that often sorely need them (and these are nice, well-qualified, long lasting jobs that will not be outsourced), and increasingly they bring good manufacturing jobs, as European wind turbine manufacturers increasingly set up operations in the US.
And, should it be said again, wind turbines don't need oil, they don't spew carbon, and their electricity, once they are built, is essentially free.
I've been writing in many of my energy diaries that there is no silver bullet, and I'll repeat this here, but wind seriously has the potential to be a significant part of the solution.
(Oh, and speaking of "seriousness", I'm glad to see the WSJ note that wind is no longer a Dirty Fucking Hippy business and is now part of the "mainstream". Good of them to notice. The industry needs to be taken seriously: it would have taken off a lot faster in the US if it had been so earlier.