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Excellent article, and then some.

I would like to coin and use the term "Jerome's Conundrum" with regards to the bizarre way that lots of wind in a variable price market works:  

"But the consequence of this is that the more wind you have into the system, the lower the price for electricity. With gas, it's the opposite: the more gas you need, the higher the price will be (in the short term, because you need more expensive plants to be turned on; in the long run because you push the demand for gas up, and thus the price of gas, and thus of gas-burning plants, up).

In fact, if you get to a significant share of wind in a system that uses market prices, you get to a point where wind drives prices down to levels where wind power loses money all the time! (That may sound impossible, but it does happen because the difference between the low marginal cost and the higher long term cost is so big)."

The conundrum: The more wind energy installed in a variable price market, the lower the marginal price, and the more likely it is that the wind plants will price themselves into bankruptcy.

In a more logical world/economy, that would not happen. That it does shows how screwed up these "competitive" electricity markets are - like New York State's "NYISO". Perhaps they can go the way of Milton Friedman.....6 feet under, as otherwise, its all these new wind turbine installations. Either that, or we get a Feed-In Law.

In NY State for April, 2007, the average NYISO price for electricity in the West Zone was 2.76 (with St Dev of 0.4c/kw-hr)....even coal will start to go belly up in that price range. Wind won't stand a prayer. And the nearby $500 million worth of newly installed wind farms will be on the auction block pretty soon unless things change really fast....maybe the new ~ 240 MW of wind farms is why this electricity price is so low...

Nb41

by nb41 on Sun May 3rd, 2009 at 10:29:53 PM EST

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