Tuesday, March 02, 2010

Wind Power and the Grid

The Wall Street Journal wrote a front page article titled "Natural Gas Tilts at Windmills in Power-Generation Feud". This article was well written and describes a controversy in Texas related to wind energy and their (inherent) inability to deliver reliable power.

Texas is unique in that it is "walled off" from the rest of the USA on its own grid called ERCOT. To be technically correct, the Texas grid doesn't include El Paso (I used to consult out at El Paso Electric) but that part of the state really is more like New Mexico, anyways.

Texas has a large percentage of wind power - 6% for 2009. The other sources of generation are about 20% for nuclear, 30% for coal, and 45% for natural gas. Per the article:
Texas... has 9,400 megawatts of wind-power generation capacity - more than all the power plants in Utah. Texas has more wind power than any other state... more than three times as much as California.

Power is generally dispatched in the following manner:

1) the grid control operator makes a request for how many megawatts of power that it needs for the next day
2) the various owners of generating capacity (wind, gas, coal and nuclear) submit their available power for the next day
3) the wind power is always taken because it has the lowest incremental cost, along with the nuclear power available as well as coal. Then natural gas is selected until demand is equal to supply, with older less-efficient "peak" gas plants turned off if there isn't enough demand

The issue is that wind power can't guarantee its available capacity. In general, if a generation owner "commits" to a certain amount of supply capacity and can't provide the electricity, then that generation company is charged a penalty for failing to deliver.

In the case of wind power, the generation owners are not penalized if their promised power is not available. All of the other power providers (nuclear, coal and gas) face penalties for failing to deliver.
Coal, nuclear and gas operators must pay for their own backup if an operational or maintenance problem prevents them from delivering power as promised. But if wind generators fail to deliver promised power because the wind doesn't blow,, the cost of backing up wind power companies is spread among all the generators, state officials say. This puts an unfair burden on non-wind generators, says the gas faction.

This issue, the useful capacity of wind power (not its "rated" capacity), and who pays for backup capacity since the wind may or may not be blowing reliably on any given day, is a critical question. Wind in a way is "free riding" on the grid; wind is paid as if it is reliable, when in fact it isn't, and then the other electricity providers de-facto subsidize wind (again, they already receive Federal and State subsidies) by not charging them for failing to deliver AND taking on their pro-rata share of the power needed when the wind farms don't deliver.

Not only does wind power get a "free ride" on backup capacity, which hurts the gas generators, but the gas generators that DO run are also getting a lower per-unit reimbursement because the revenues are set based upon the highest "marginal" cost for electricity; on a given day when there is more wind only nuclear, coal and the most efficient gas plants will be online (along with the wind, which always is in the stack, depending on whether conditions) if there isn't much demand, so not only do gas plants lose money from NOT being on but the gas plants that ARE on receive a lower price for their power. This concept wasn't really touched upon in the WSJ article (it was better than most of their articles, but still had some holes).

This article is key to an understanding of wind's impact on the grid; either wind operators should need to estimate their available power more cautiously (to ensure that they meet their commitments), or they should pay to have alternate power (in some reliable form, like natural gas) online.

It is interesting to see more and more articles such as this in mainstream papers such as the WSJ and the New York Times. They are starting to have some journalists that seem to know something about their topic, too.

Cross posted at Chicago Boyz

1 comment:

mark said...

I'm surprised with modern forecast technology the wind operators would miss their target by such a wide margin that they don't need to pay for their own backup. If a company owns a mix of generation (wind + gas + others) then they could pick up the slack themselves with available unused gas capacity. Or the wind generator could create an agreement with a gas generator who has excess capacity if there is a shortfall of wind.