“Negative Electricity Prices and the Production Tax Credit” (2012 warning for Texas went unheeded)

From MasterResource

By Robert Bradley Jr. — May 17, 2022

[Editor note: The current (May) problems of the Texas Grid reflect a socialized wholesale market (ERCOT) in light of the wind/solar cancer that has wounded the ‘reliables.’ Specifically, negative pricing of windpower, a decade-old phenomenon, has ruined margins for natural gas and coal plants, causing premature retirements, decisions against new capacity, and less maintenance.]

History matters to understand the wounded Texas electricity grid of today. There were warnings time and again that the distorted market would have reliability issues, and reliability issues would cause price spikes for the worst of all worlds.

Consider the study Negative Electricity Prices and the Production Tax Credit” by Frank Huntowski, Aaron Patterson, and Michael Schnitzer (The NorthBridge Group: September 10, 2012), which was commissioned by Exelon, whose nuclear-plant margins were badly compromised by wind’s “predatory” pricing.

The article was subtitled: “Why wind producers can pay us to take their
power – and why that is a bad thing.” The executive summary speaks for itself–and speaks loudly today in Texas, as well as other parts of the country, given the federal Production Tax Credit for wind, already extended 13 times.

As a matter of both economics and public policy, no government production tax subsidy should ever be so large that it creates an incentive for a business to actually pay customers to take its product. Yet, the federal Production Tax Credit (“PTC”) for wind generation is doing just that with increasing frequency in electricity markets across the United States.

In some “wind-rich” regions of the country, wind producers are paying grid operators to take their generation during periods of surplus supply. But wind producers more than make up the cost of the “negative price” payment, because they receive a $22/MWH federal production tax credit for every MWH generated.

The federal wind Production Tax Credit (“PTC”) was originally enacted in 1992 to jumpstart the wind energy industry. The PTC has since been extended on six occasions [now 13 times] and is now due to expire on December 31, 2012. Today, policymakers on both sides of the issue are debating the merits of yet another extension of the subsidy on a variety of grounds. This paper focuses on one harmful, but often overlooked, aspect of the PTC — specifically, how the PTC interacts with wholesale electricity markets to create the phenomenon of distortionary “negative prices.” While the concept of negative prices might at first glance seem to be a money-saver for electricity users, or at best a harmless phenomenon, in fact these negative prices are: (a) funded by taxpayers; (b) distorting wholesale electricity markets; and (c) harming conventional generation and imperiling reliability.

As recently as September 6, 2012 the Public Utilities Commission of Texas Chairman Donna Nelson cautioned policymakers against further subsidies, noting that the PTC had undermined Texas reliability:

“Federal incentives for renewable energy… have distorted the competitive wholesale market in ERCOT. Wind has been supported by a federal production tax credit that provides $22 per MWH of energy generated by a wind resource. With this substantial incentive, wind resources can actually bid negative prices into the market and still make a profit. We’ve seen a number of days with a negative clearing price in the west zone of ERCOT where most of the wind resources are installed….

The market distortions caused by renewable energy incentives are one of the primary causes I believe of our current resource adequacy issue… [T]his distortion makes it difficult for other generation types to recover their cost and discourages investment in new generation.”

As part of our analysis, we have reviewed energy production and real time pricing information from the Nation’s grid operators to understand the production characteristics and bidding behavior of wind producers and to assess their impact on essential conventional electric resources.

We find that:

The PTC undermines and distorts price signals in wholesale electricity markets by incenting PTC-subsidized wind producers to sell electricity at a loss to earn enormous tax subsidies.

This taxpayer-funded subsidy artificially depresses wholesale power prices, and in hours of the year when demand for electricity is low it can result in negative pricing. Figure 1 shows the frequency of negative prices in a number of particularly wind-rich areas over 2006-11 alongside the growth in national installed wind capacity over the same period.

This figure demonstrates the clear linkage between wind generation and negative prices.

Wind producers can readily turn wind turbines on and off, but have no incentive to do so because they still receive positive margins during negative price hours due to the PTC subsidy they earn when they generate. They have no incentive to curtail their output – which, absent the PTC, would be in their economic interest. The failure of wind generators to curtail output when wholesale prices approach zero has both short term
and long term negative consequences. In the short term, the failure of wind producers to curtail output makes it more difficult for system operators to maintain reliability, and also makes it more costly for them to operate the regional electric grid.

In the long run, the PTC destabilizes the market for conventional electricity as generators that are not eligible for the PTC are significantly harmed by negative prices, both in terms of near-term daily operational decisions, as well as long-term decisions to build or retire generation.

America’s continued reliance on the PTC subsidy therefore will invariably deter investments in the conventional power generation needed to maintain a reliable electric system. Conventional generation is critical to reliability because wind generation often does not produce energy during times of peak electricity demand, while producing at high levels (and driving negative prices) when demand is low. In recent years, about
85% of total wind capacity has not operated during the peak hours on the highest demand days of the year, on average. Controllable conventional generation is thus needed to backstop wind and ensure the lights stay on. Our findings lead us to conclude that the PTC should be allowed to expire under current law.

PTC-driven negative prices directly conflict with the performance and operational needs of the electric system and with federal energy policies supporting well-functioning competitive wholesale markets. We urge policymakers to: (1) reconsider a national energy policy based on a tax incentive so large it incents wind producers to pay system operators to take their wind power; (2) address the reality that wind energy, while an important part of the energy mix, remains unpredictable and cannot be relied upon, especially during periods of high demand; and (3) ensure policies promoting wind do not undermine the conventional technologies that are needed to maintain reliability.

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Tom Halla
May 18, 2022 3:15 am

Perverse pricing schemes. Failure to require the subsidy miners invested in wind to pay for the conventional backup is giving said miners a gift.

Tom Abbott
Reply to  Tom Halla
May 18, 2022 5:40 am

Our leaders are insane.

DrEd
Reply to  Tom Abbott
May 18, 2022 7:17 am

Or corrupt.

Andy Espersen
Reply to  DrEd
May 18, 2022 9:10 am

I think just plain stupid

Martin C
Reply to  Andy Espersen
May 18, 2022 12:40 pm

All 3 of the above . . . 🙂

AWG
Reply to  DrEd
May 18, 2022 12:46 pm

Embrace the power of “and”.

czechlist
Reply to  Tom Abbott
May 18, 2022 3:26 pm

Exactly. I recall back in 2017 read an ERCOT evaluation of electrical generation in TX. It warned that investment in renewable energy projects was depleting the monetary resources required to maintain traditional generating plants at full operating capacity. They basically predicted the Feb 2020 disaster. But, they got the blame for the politicians’ shortsidedness and greed. And wasn’t it San Marcos which voted to get all of their power from renewables? How did that work out?
Didn’t Google vow to go green? I see they are building a server plant in Midlothian, TX right next to a 17GW gas powered generating facility.

Martin
Reply to  Tom Halla
May 19, 2022 7:55 am

Normal grid scale production sources have to be able to deliver on schedule or they are penalized. The Wind and Solar people should have always had the same requirement. Frankly a 300 MW wind farm should have a 300MW gas plant hooked to the same substation and they need to be scheduled to produces like anyone else. The total nameplate rateing for the the combined wind and gas should be 300 MW Then they would be responsible for the 2x price that the 300MW plant costs and carry their own backup costs.

TonyL
May 18, 2022 3:29 am

Soon to be the most heard phrase in the power industry:
“We told you so”, “We told you so”, “We told you so” …..

Rocketscientist
Reply to  TonyL
May 18, 2022 8:49 am

Actually, its the most oft used phrase amongst retired engineers, regardless of the field.
When I was active, it was, “You want to do what?!”

RickWill
Reply to  TonyL
May 18, 2022 3:48 pm

Engineers are told to shut up and fix it. And they usually get reasonably well paid to come up with solutions. The problem of course is that the solutions ALWAYS add more cost.

Random electricity is the ultimate gift to the engineering profession. It is incredibly resource hungry and consuming industrial resources inevitably involves lots of engineers.

It is career limiting for an engineer not to take a pragmatic stance on “Climate Change” – it is a gift that will continue to give for decades to come. It is the major driver of new industrial investment. No junior engineer wants to start their career in a coal fired power station these days. They are told coal is a dead end.

There has never been so much ill-directed investment. Investing in random electricity is so hopeless that it can go on forever. It can never achieve an economic outcome using current technology but few people stand back far enough to appreciate it is a hopeless objective. It is a gift to the engineering profession that just keeps giving.

Rocketscientist
Reply to  RickWill
May 18, 2022 9:23 pm

Sadly it’s true. And I was not immune from feeding at that trough.
We developed another phrase for such well funded government boondoggles:
A bad idea, whose time had come!

fretslider
May 18, 2022 4:04 am

The great thing about wind – in the UK – is while electricity generation might be a highly intermittent affair, it is at least guaranteed to pay out on a reliable basis.

September 25, 2021 “Wind farms were paid more than £1.8 million to shut down this week – at a time when consumers face huge rises in energy bills because of the spiralling cost of natural gas.

The turbines were switched off over the course of three days because the electricity they would have produced could not have reached the regions that needed it.

Instead, electricity from gas-fired power stations was used at a further cost to consumers of several million pounds.”

https://www.wind-watch.org/news/2021/09/25/wind-farms-paid-nearly-2m-to-switch-off-even-as-customers-face-soaring-energy-bills/

One week!

“Electricity customers have paid windfarm operators £1bn to switch off turbines, STV can reveal. The compensation has been paid over the past decade.

Windfarm owners receive the money when the electricity grid is at capacity. The costs are likely to escalate.”

 https://scotlandagainstspin.org/2021/10/electricity-customers-paid-windfarms-1bn-to-switch-off-turbines-stv/

More windmills = more payments…

2022 “Tories plan big expansion of wind farms ‘to protect national security’

https://www.theguardian.com/environment/2022/mar/13/tories-plan-big-expansion-of-wind-farms-to-protect-national-security

It doesn't add up...
Reply to  fretslider
May 18, 2022 4:35 pm

Indeed. From now on we can expect surpluses to escalate quadratically, because not only are there the transmission constraints from Scotland to deal with, but we will begin to see more and more hours where there is more wind than demand as capacity is increased, and the size of surpluses will also grow for the lower demand hours. We will still have periods when wind is contributing next to nothing of course.

This chart shows the sort of thing we can expect as we add more wind. The marginal curtailment curve shows how much of the extra wind output from the next bit of capacity gets wasted. That means it needs a much higher price to be economically worthwhile, since the valuable output is only a smaller proportion of the overall potential output.

CCGT Wind Nuclear.png
Last edited 1 month ago by It doesn't add up...
Mark Miller
May 18, 2022 4:06 am

Overbuilding of RE in CA has required the powers that be to modify rates designs:

“Prof. Max Sherman

November 21, 2020 at 12:28 pm
“1. When you say your rates changed, do you mean the rate design changed or just the price level(s).
2. If only the level(s) changed, are you complaining because it (they) went up?
3. If your rate design changed, did you install your system after July 1, 2017 (when the grandfathering arrangement expired)”

I have had solar panels for about 13 years on my home and PG&E put me on a TOU tariff then. That peak period was much earlier in the afternoon, with a very large difference between on-peak and off peak rate which worked as planned. Twice now they have cancelled the tariff I was using and put me on one that was less favorable in that regard. The current one is much later in the day for peak time, with a smaller difference between peak and off-peak.
The normal incremental increase in all the rates over time would have been fine, but they changed the structure as a whole to be much more in their favor. The peak rates used to be when I generated a lot, which was the incentive to invest. Now not at all. It is interesting to note that they treated ENRON better than their customers.”

REF- https://energyhaas.wordpress.com/2020/11/16/reinventing-fixed-charges/#comment-84673

Reply to  Mark Miller
May 18, 2022 9:30 am

Mark, your link to: https://energyhaas.wordpress.com
does not seem to be valid; this message comes back: ” energyhaas.wordpress.com doesn’t exist “

Reply to  Mark Miller
May 18, 2022 9:32 am

Mark, I did find a valid wordpress account at https://energyathaas.wordpress.com/ though.

Mark Miller
Reply to  _Jim
May 19, 2022 12:05 am

Hi Jim,

Not sure what happened to the link…. I just accessed the comments of the post-

https://energyathaas.wordpress.com/2020/11/16/reinventing-fixed-charges/#comments

and scrolled down to the comment and it is there.

D. J. Hawkins
Reply to  Mark Miller
May 20, 2022 3:30 pm

Your original link was missing a “t” at “thaas”.

RickWill
Reply to  Mark Miller
May 18, 2022 4:08 pm

This simply reflects how the market is changing. Rooftops are the dominant lunchtime generator in South Australia and now produce close to 100% of the State demand at lunchtime on a mild, late spring day. They have installed synchronous condensers to provide system inertia so they can absorb all the low inertia output from rooftops. The grid scale intermittents are shut down because the wholesale price is minus a big number.

Mark Miller
Reply to  RickWill
May 19, 2022 2:10 am

Hi Rick,
 
I was an early adapter of PV and we had PG&E as our service provider too.    PG&E was a bit delayed in approving our interconnection which was rather annoying given we were experiencing a very hot summer!  The delay did lead to our having a historical start date 7/24/2006 though.   PG&E required us to pay for our semi smart accurate meter to enable net metering. Not sure if the professor had to buy his meter or not.  Like the professor we felt cheated/screwed by PG&E (and their regulators) when they cancelled our E-7 rate and made us pay higher meter fees per month on the new rate design/schedule (E-6) than our previous rate even though we paid upfront to receive the reduced daily meter rate (kind of like paying points to buy down a mortgage rate).  
 
The public utility regulators, state energy agencies and big private and public service providers (examples: SMUD, PG&E, First Solar, Tesla) all knew that negative prices and curtailments were going to be the outcome of their efforts to meet the RE goals (1).   The “solutions”  required breaking deals (say like canceling your 20 year fixed mortgage payment half way thought the term to an adjustable rate  mortgage-normally it takes a bankruptcy proceeding to get to an outcome like this).    
 
CAISO tracks negative prices in the wholesale energy markets as well as curtailments. (2)   
 
I agree with Rob that it’s past time to deal with the way the PTC has screwed up the wholesale energy markets. PG&E could of allocated more resources to making sure their distribution and transmission operations were up to snuff if they had gotten credit for providing reliable CLEAN energy from the combination of Diabo and Helms pumped storage.  Giving wind producers 23 bucks outside the market is essentially a graft payment that distorts the true costs.  Making the graft payment a floor price for generators in the wholesale markets seems appropriate to me.  
 
1)     http://disq.us/p/1q66ypz
https://www.caiso.com/informed/Pages/ManagingOversupply.aspx#dailyCurtailment

griff
May 18, 2022 4:30 am

Texas doesn’t have links to other grids and doesn’t maintain its fossil fuel plant sufficiently such that it works in cold weather. That’s it: no renewables issues.

Properly managed grids with more renewables work more reliably than Texas.

fretslider
Reply to  griff
May 18, 2022 4:33 am

More renewables cause more problems.

“Electricity customers have paid windfarm operators £1bn to switch off turbines, STV can reveal. The compensation has been paid over the past decade.
Windfarm owners receive the money when the electricity grid is at capacity. The costs are likely to escalate.”

And the Tories are fully on board with more

Reply to  griff
May 18, 2022 4:51 am

re: “Texas doesn’t have links to other grids”

Ignores the handful of DC links crossing into other ‘grids’ at several different locations to make that statement …

jeffery p
Reply to  griff
May 18, 2022 5:55 am

Wait, you expect fossil fuel plants to make up when renewables fail? Hello? Hello? Can you spot the flawed logic here, griffo?

ResourceGuy
Reply to  griff
May 18, 2022 6:00 am

Keep those blinders on real tight. Your going to need them in the face of real regulatory research findings in place of arm waving.

CoRev
Reply to  griff
May 18, 2022 6:07 am

Griff, did you even read this article? Clearly, if you claim to have read it, you didn’t comprehend it.”The market distortions caused by renewable energy incentives are one of the primary causes I believe of our current resource adequacy issue… [T]his distortion makes it difficult for other generation types to recover their cost and discourages investment in new generation.”
and
“PTC-driven negative prices directly conflict with the performance and operational needs of the electric system and with federal energy policies supporting well-functioning competitive wholesale markets. We urge policymakers to: (1) reconsider a national energy policy based on a tax incentive so large it incents wind producers to pay system operators to take their wind power; (2) address the reality that wind energy, while an important part of the energy mix, remains unpredictable and cannot be relied upon, especially during periods of high demand; and (3) ensure policies promoting wind do not undermine the conventional technologies that are needed to maintain reliability.”

Retired_Engineer_Jim
Reply to  CoRev
May 18, 2022 9:39 am

But the PTC is a feature, not a flaw. It is forcing all non-RE power generation plants to close. Well done.

CoRev
Reply to  Retired_Engineer_Jim
May 18, 2022 12:13 pm

If not close they become more fragile. Don’t forget the failure of 6 Texas power stations.

Remember the failure of the back ups is the problem that they were even needed. 😉

CD in Wisconsin
Reply to  griff
May 18, 2022 6:39 am

“Texas doesn’t have links to other grids and doesn’t maintain its fossil fuel plant sufficiently such that it works in cold weather. That’s it: no renewables issues
.
Properly managed grids with more renewables work more reliably than Texas.”

*************

Griffypoo,

Could you please enlighten us regarding where you received your expertise in electrical grid engineering and management? It wouldn’t be The Guardian, would it?

Did Texas have these problems before the age of renewables? Were the problems back then as bad as they are now? Honestly Griffypoo, your inability to tell the difference between science and engineering on one hand and a secular quasi-religion on the other is amusing.

Griffy-poo, show me a feasibility study that demonstrates that fossil fueled- and nuclear-powered grids can be successfully transitioned to wind turbines and solar panels with a reasonable (and I do mean reasonable) amount of time, money, raw materials and other resources. Be aware that cults usually have no use for feasibility studies — such studies have no value or meaning in a cult.

I’ll bet that deep down inside Griffypoo you know you are making an argument here based on religious faith in wind and solar and little else. At any rate, I eagerly await your answers to my questions (which I probably won’t get).

observa
Reply to  griff
May 18, 2022 6:48 am

I’ll give you the definition of a properly managed grid griff. NO DUMPING!
Suppliers to the communal grid can only tender that quantity of electrons they can reasonably guarantee 24/7/365 (ie short of unforeseen mechanical failure) along with frequency and voltage control or keep them. That’s called a level playing field for competitive supply.

TexSwede
Reply to  griff
May 18, 2022 7:44 am

Last Saturday, Texas had an installed wind generating capacity of 35,391 MW. Mid afternoon, wind was producing 3,400 MW of electricity. Less than 10% of its capacity. During periods of peak demand in Texas, wind fails on massive scale. During 2021, there were 424 hours where demand exceeded 65,000 MW. Over 53% of those hours, wind produced less than 25% of its installed capacity, and almost 32% of the those hours produced less than 15% (4,802 MW). When six thermal generation plants go offline and take <3,000 MW hours down, having wind perform so poorly is what makes a grid unreliable and results in blackouts. So, yes, our grid problem in Texas is we are adding too much unreliable wind power and not enough reliable thermal and nuclear sources. I suggest instead of drinking the kool aide and the political climate scientists, you do some individual research. The data I cite can be downloaded from the US IEA and ERCOT.

DonM
Reply to  griff
May 18, 2022 9:31 am

griff,

what “fossil fuel plant” are you referring to?

May 18, 2022 4:36 am

re: “[Editor note: The current (May) problems of the Texas Grid ”

Maybe you saw this, maybe you didn’t … YESTERDAY’S wind output topped out at over 20,000 MW … last week and/or this weekend (when we were running close to demand=equaling supply) wind topped out at around 6,800 MW.

Last edited 1 month ago by _Jim
Retired_Engineer_Jim
Reply to  _Jim
May 18, 2022 1:01 pm

Topped out at over 20,000 MW for how long. Topped out at around 6,800 MW for how long?

Reply to  Retired_Engineer_Jim
May 18, 2022 6:08 pm

The data is available at the ERCOT website; I simply cite several samples, sample points in time known-to-me as data-points that support my assertion (BECAUSE I knew these issues would be coming up in discussion) – wind IS intermittent, and undependable, and will FAIL at the most inopportune time.

May 18, 2022 4:42 am

Can someone disabuse me of the constant notion I have that says “Wind power is a gateway for the ‘grifters’ in the capital (stock) markets to gain a foothold in the lucrative almost-guaranteed profitable (electric) utilities market.”

OweninGA
Reply to  _Jim
May 18, 2022 4:51 am

Sounds right, how do you disabuse someone of the truth…

Reply to  OweninGA
May 18, 2022 5:06 am

Heh. Give the man an upvote then!

Retired_Engineer_Jim
Reply to  _Jim
May 18, 2022 9:42 am

Maybe that should be griffters?

Reply to  Retired_Engineer_Jim
May 18, 2022 12:48 pm

Remember the joke about the foo bird? https://amazingjokes.com/jokes/2011-06-10_the-foo-bird.html

Hans Erren
May 18, 2022 5:37 am

So when the sun is shining, there is free electricity, so i do not need to invest in solar panels on my rooftop, and people who did cannot earn back the investment.

CoRev
Reply to  Hans Erren
May 18, 2022 6:20 am

There’s that ole Return on Investment question again. Without incentives will they EVER pay for themselves?

ResourceGuy
May 18, 2022 6:48 am

Texas needs a special tax on highly subsidized grid (wind) suppliers to support grid stability.

Retired_Engineer_Jim
Reply to  ResourceGuy
May 18, 2022 9:45 am

Maybe, if they want to hook up to the grid, we should just require that the RE power folks agree to deliver a minimum of X MW 24/365, at a given voltage and frequency, and they have to come up with the power to cover any shortages in their output when the wind isn’t blowing enough, or is blowing to much, or the Sun isn’t shining.

CD in Wisconsin
May 18, 2022 7:03 am

Spreading the grid issues in Texas to the rest of the world. The Associated Press (surprise surprise) is reporting that…

“The United Nations chief on Wednesday launched a five-point plan to jump-start broader use of renewable energies, hoping to revive world attention on climate change as the U.N.’s weather agency reported that greenhouse gas concentrations, ocean heat, sea-level rise, and ocean acidification hit new records last year.”

https://tinyurl.com/2s46et89

***************

It is truly amazing that the lame-stream media keeps posting articles with this content without adding any data-based or other evidence to support the claims made. Poor, sloppy journalism if you wish to call it journalism at all.


DrEd
Reply to  CD in Wisconsin
May 18, 2022 7:23 am

They are lying and they know it.

vboring
May 18, 2022 7:09 am

Negative prices are mostly a problem for nuclear plants. They have minimal ability to control their output.

Coal are more flexible, gas are most flexible.

This is why regions that build more renewables also build more gas at the same time.

Storage is an even more flexible option, but gas is way cheaper.

Entertainingly, where nuclear plants exist and you add renewables, the first big chunk of renewables has little or no impact on emissions. The nuclear plants become uneconomical. When they retire early, it offsets the renewables emissions reductions. Lots of money to accomplish nothing – just a shift from nuclear to RE.

Reply to  vboring
May 18, 2022 8:04 am

re: “… nuclear plants. They have minimal ability to control their output.”

The French would take contention on that point, but, that is in France and different than the concept implemented here in the US.

It doesn't add up...
Reply to  _Jim
May 18, 2022 5:01 pm

In practice there is rather less flexing of French nuclear output for short term demand following than might be possible: there are costs in using it, so it is generally prefferd to use hydro and gas to provide short term flex. Nuclear was used to provide seasonal flex by timing shutdowns for maintenance and refuelling to lower demand summer months on rotation. Lately, the flex has gone out of it altogether, as plants have been shut down for inspection or actual problems of aging – France is becoming an electricity importer instead of the exporter it once was, and often had the highest prices in Europe over the winter..

Noordpool FR-DE-NL-BE-AT.png
Reply to  It doesn't add up...
May 18, 2022 6:01 pm

France is a study all unto itself; IF you have been cognizant of issues arising form workmanship and materials at the new plants, and discoveries of (I think it was) embrittlement of piping at several existing plants.

FRANCE is a great study of how mankind maybe, just maybe, can’t build and and utilize ‘big nukes’ after all, on account of a myriad of issues that arise during construction stemming from problem materials, problem workmanship, and as we saw with the Mk II GE ‘problem’ designs as at Fukushima … perhaps smaller, more modular factory-built nukes with consistency of materials and workmanship is possible, BUT caution is advised here (owing to sunk, un-recoverable costs) on account of *other* tech just beyond the line-of-sight of most ppl (ISN”T that the way it always works with MOST new tech? NO ONE sees it – until it is HERE. on the shelf at McMaster-Carr or some start-up so one heard of before.)

Retired_Engineer_Jim
Reply to  vboring
May 18, 2022 9:46 am

It’s a feature.

Kevin kilty
Reply to  vboring
May 18, 2022 10:50 am

They don’t have trouble controlling output, but what I think you mean to say is they have trouble ramping output quickly. They are slower than even coal plants in this regard.

It doesn't add up...
Reply to  vboring
May 18, 2022 4:56 pm

It’s instructive to see what happened to the UK grid over the past 25 years. Nuclear output has slowly eroded as stations age, although it seasonally represents a higher share in summer when demand is lower. Until renewables coal was used to provide winter uplift, so some gas could be reserved for home heating. After Fukushima, imported LNG gas became very expensive as Japanese demand soared to replace nuclear they no longer trusted. But we still had coal capacity to switch to. As renewables came in they replaced baseload generation, squeezing out coal in particular. But gas generation recovered from its post Fukushima lows: it is needed to balance fluctuating wind. That isn’t going to change much as wind capacity increases, and the peak requirements for dispatchable flex generation like gas will barely change at all. CCGT will see slowly eroding average capacity factors and erratic operation, raising unit costs and lowering efficiency. But, as I’ve noted elsewhere in the thread, wind costs are going to rise becuase curtailed useless output has to be paid for.

UK Elec Gen Shares gas wind.png
Kevin kilty
May 18, 2022 7:12 am

This is certainly a market perversion resulting from the PTC. But there is another problem as I see it coming down the pike. This is that utilities are buying big wind plants they have contracted with the developers to build for them. So, instead of IPPs bidding in a game with perverse incentives to wreck markets, the utilities will incorporate the troublesome plants into their generating assets themselves. Now they can ask the local public service commission (PSC) to provide them a rate needed to maintain stability.

Perhaps this will lead to grid stability, but the ratepayer is going to get hit with much higher costs caused entirely by the “wind is free” mentality. Moreover, the mix of generating assets being proposed (Rocky Mountain is planning for 60%+ non-dispatchable by 2030) has far too high a proportion of non-dispatchable plants. One has solved only part of the problem — solved the money problem but hasn’t touched the technical problem. Everyone involved gets to feel virtuous, however.

Jim Gorman
Reply to  Kevin kilty
May 18, 2022 8:30 am

I have often wondered when this would happen. I suspected it would occur some time in the future as wind farms were being abandoned because PUC’s would require regulated providers to buy them and raise rates to cover their costs. It looks like the tax incentives are making that happen sooner.

Reply to  Kevin kilty
May 18, 2022 8:53 am

re: “but the ratepayer is going to get hit with much higher costs caused entirely by the “wind is free” mentality.”

I think we are there, at this point in Texas already, but, we arrived at this point via a circuitous route …twenty years back nobody really foresaw the ‘shell’ game the wind players would campaign for via the political class.

Retired_Engineer_Jim
Reply to  Kevin kilty
May 18, 2022 9:49 am

Soi the regulated public utilities will buy up the wind farms just before the equipment has to be replaced?

Reply to  Retired_Engineer_Jim
May 18, 2022 10:04 am

re: “Soi the regulated public utilities”

I need a name – name names – who **are** these ‘public utilities (in Texas)? I know of only one such ‘utility’ (at the moment) – the City of Garland ‘Power and Light’ company; they own (did own? lemme check) a generating plant on Lake Lavon. Point being, we have very few so-called ‘public utilities’ making ‘power’ in Texas anymore … YMMV in the several different states.

Garland Power & Light – https://www.gpltexas.org/ “Since 1923, the City of Garland has been providing electric service to its citizens through Garland … ”

My point was that electric rates would go UP on account of this wind fiasco, ANY which way one tried to ‘game it’. It matters little which way you game it … your costs go up through the use of thin, widely-spaced, widely dispersed wind-energy collection units located FAR from the populated ‘load centers’, compared to central gen.

ciphertext
Reply to  _Jim
May 19, 2022 6:34 am

CPS Energy in San Antonio. They are a power generating company owned by the City of San Antonio TX.

Kevin kilty
Reply to  Retired_Engineer_Jim
May 18, 2022 10:48 am

Perhaps, but there are many contracts now to have the wind farm built for the utility.

Reply to  Kevin kilty
May 18, 2022 12:45 pm

re: “for the utility”

And again, I don’t think you’re getting it. We don’t have classic “utilities” in Texas anymore.

Do you understand that? Are you unfamilar wiht the ‘market’ approach Texas has taken with respect to the bulk electricity supply?

Retired_Engineer_Jim
Reply to  _Jim
May 18, 2022 1:03 pm

Does the Texas PUC regulate them?

Reply to  Retired_Engineer_Jim
May 18, 2022 5:51 pm

I know there are different rules applicable to those whose service is supplied by what are called ‘co-ops’ (co-operatives) and perhaps city-owned utilities as well, but on this last note IDK.

CoRev
Reply to  Kevin kilty
May 18, 2022 12:24 pm

“Perhaps this will lead to grid stability, but the ratepayer is going to get hit with much higher costs caused entirely by the “wind is free” mentality.” My own example is a 1/3 price increase from my supplier coop.

Other than the price of fossil fuel, the other major change is the two (2) solar farms that they have created. 1/3 price increase? Guess who is paying for the cheaper solar energy.

ResourceGuy
May 18, 2022 11:31 am
BobM
May 18, 2022 11:53 am

I believe it best to ignore griff and therefore not reply to him at all. That said, there are many more references that back up the main contention of this post.

Not only are wind and sunlight renewables just “subsidy farms”, they are destabilizing grids. 

As EIA notes, the PTC can create an incentive for wind generators to bid at negative prices. Variable Renewable Energy (VRE) has especially effected ERCOT (Texas grid), CAISO (California grid).

From: “Staff Report on Electricity Markets and Reliability, U.S. Department of Energy”

In those off-peak hours, the production tax credit has created an incentive for renewable resources to bid negative prices as they must run in order to receive their payment from the federal treasury.” (my bold)

“Negative prices in ERCOT are now on the rise due to subsidized wind….. In addition to the PTC, VRE may also be incentivized to submit negative bids into markets by demand for RECs (to satisfy state environmental mandates and/or corporate sustainability goals).”

“However, more frequent negative pricing has been observed in CAISO, and in constrained hubs that feature a relatively large amount of VRE and/or nuclear generation.”

In fact, wind in Texas is usually displacing nuclear power at night, not fossil fuels.

Let’s look at Texas and California. 

“This has become known in the electricity business as the “missing money” problem. It has been exacerbated recently by very cheap natural gas and a large contribution to the grid from renewable power generation in places like Texas and California. These states have seen sustained periods of day-ahead and real-time energy market prices at $0 per MWh or even negative prices. The capacity market is one solution to the missing money problem — one that has been adopted in every US Regional Transmission Organization except the ERCOT system in Texas.” https://www.e-education.psu.edu/ebf483/node/727

At $0 per MWh and “must take” rules that discriminate against reliable power, it is no wonder that the system will break when under stress. That’s what happened in Texas last year, and it will happen again.

Reply to  BobM
May 18, 2022 1:20 pm

re: “That’s what happened in Texas last year, and it will happen again.”

That’s what froze up nat gas well heads, and the various pressure sensors and liquid level instrumentation gauges at power plants? Well, I never know … /S <– this is the closing HTML ‘sarc’ tag.

It doesn't add up...
Reply to  _Jim
May 18, 2022 5:28 pm

The big problems happened when there was almost no contribution from wind – simply because the winds died – leaving all the demand to be met from other generation, but with no reserve margin backup. When one plant failed, with no reserve grid frequency plummeted causing several other plants to trip offline, until load shedding at 59.3Hz arrested the decline. There was too little capacity to provide an adequate reserve while handling a failure of wind generation.

Once those plants had tripped out and demand had been shed supply to key electrically driven pumps in the gas transmission system meant that several CCGT plants found themselves starved of fuel. The automated load shedding program hadn’t taken account of that, and so it became impossible to restore generation until demand dropped back, allowing shed loads to be reconnected.

In reality, ERCOT indulged in poor grid management: they should have started imposing controlled rotating blackouts rather than operate on zero reserve margin so that they would not have had the cascade of plant trips when one plant failed.

Frozen wellheads had very little to do with it, since there was ample drawdown from dry gas in storage so long as the gas compressors worked. You have to expect that in extreme weather with plants being asked to operate beyond rated capacity problems will occur. Indeed, they also occurred at some wind turbines which iced up and would have been unusable even if the wind had been stronger.

Reply to  It doesn't add up...
May 18, 2022 5:47 pm

re: “Frozen wellheads had very little to do with it,”

Did you read and study the 2011 report? Did you happen to see the 1989 report by chance (it IS a little more rare than the 2011 report)? These were prologue events (freeze events) to 2021 occurring in those previous years.

Go back and actually READ and digest those reports and come back and tell me – I’m wrong …

You ppl are _not_ as well informed on these topics, subjects as you THINK you are.

It doesn't add up...
Reply to  _Jim
May 18, 2022 7:29 pm

I took the trouble to research the 2021 event in considerable depth. You will find my contributions at this site. I have summarised the essential points. You will see in the attached chart that the major loss in generation all occurred in the same short period, due to cascading losses with a frequency spike downwards. Whilst it is true that wellheads froze over, it was not in any way the proximate cause of loss of power, or the reason why power could not be restored. You are not going to convince anyone that frozen wells led to the frequency event. It was a cascading trip.

Texas grid freq febPic+4.PNG
Reply to  It doesn't add up...
May 18, 2022 8:12 pm

re: “You will see in the attached chart that the major loss in generation all occurred in the same short period, due to cascading losses with a frequency spike downwards.”

I lived it. I watched IN REAL TIME as the “Consecutive BAAL Clock-Minute Exceedances (min)” figure began (due to low frequency and eventual cycle slips) to climb late that night into the early morning hours … I have screen caps on my smartphone yet-unloaded onto a PC for use elsewhere. The reality, the ‘weight’ of what was taking place before my very eyes was NOT lost on this engineer.

I still think you are fact-challenged when it comes down to all the factors that came into play that night into the wee morning hours and the next day … you need to read those reports.

Reply to  It doesn't add up...
May 18, 2022 8:43 pm

re: “rather than operate on zero reserve margin”

More poo. There was ALWAYS an effort to have more dispatchable generation (reserve) on hand, BUT when operating (or spinning reserve even) ‘goes down’ THEN it becomes necessary to shed load to get some margin back in the system.

DON’T YOU KNOW what happens if NO reserve margin is maintained in the system, and something catastrophic happens, like the loss (trip) of a 1,000 MW nuke plant occurs? Immediate frequency decline to the point UNDER-FREQUERNCY RE:LAYS start tripping and the system quite literally ‘falls apart’ – generators on the system can begin to violently slip out of synchronism ….

BobM
Reply to  _Jim
May 18, 2022 9:34 pm

“For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.” –Warren Buffet cited by U.S. News/Nancy Pfotenhauer

There was little to no effort by ERCOT to have more dispatchable generation. Six coal plants were shut down in the previous decade. The ERCOT “price” marketplace basically relegated reliable, dispatchable power generators to second class. There were no incentives to ensure dispatchable power had a long-term business case, could predict revenue, could rely on investments, upgrades and maintenance to pay for themselves. Only the VRE power suppliers could do that, and they didn’t winterize. Why on Earth should the gas wellheads be done? Had no wind been built in Texas, those 200 people would be alive today.

It doesn't add up...
Reply to  _Jim
May 19, 2022 6:58 am

They started out the evening with reserve. By midnight, it was gone. You can see the frequency blips as capacity was lost and covered by reserve. Then around 1 a.m. frequency started to slide with no restoration from spinning reserve or from load shedding, which only happened finally on an automated basis when the frequency fell to 59.3Hz. Exactly the scenario of running out of reserve leading to a catastrophic cascade trip. It might have been prevented had they indulged in rotating blackouts to maintain reserve, but they though they were being heroes in keeping the lights on.

They had a forecast of peak demand of 75GW but only a maximum of 69GW of available capacity, and as the winds died overnight the margins disappeared.

Of course gas production was much lower, but the system is built for enduring shutdowns for hurricanes, using storage to cover.

May 18, 2022 3:11 pm

Over in Vietnam, a boom in renewables forced down their throats by the World Bank has spectacularly failed. Solar producers are now mandated to disconnect their farms during peak sunlight for a few hours around midday every day, to stop the grid saturating. Investment in the sector has turned sour.

https://www.aljazeera.com/economy/2022/5/18/after-renewables-push-vietnam-has-too-much-energy-to-handle

Another nation experiences the delights of the great renewables Ponzai scheme.

Last edited 1 month ago by Phil Salmon
May 18, 2022 3:24 pm

Inspired by the quirky green background to the text of the quoted article (presumably there to help dyslexics like me) here’s a simple question that’s relevant to renewable power generation:

Why are leaves green?

The answer is counter-intuitive and profound. Green is at the middle of the sunlight spectrum and offers the most energy of all the colours. But leaves’ greenness means they are rejecting green and only accepting energy from photons at the meagre low-energy blue and red ends of the spectrum.

Why this rejection of the energy-rich green centre of the sunlight spectrum? A fuller explanation is linked below but in short, it turns out that for a photosynthesising leaf, a steady even supply of photon energy is more important that just amount of energy, and that too much variation in energy input is damaging. Greenness is about avoiding big swings of incoming energy and keeping supply more constant and stable.

https://ptolemy2.wordpress.com/2021/07/24/why-are-leaves-green/

“Greens” need to understand the implications of their adopted colour and why plants are green. And why wind and solar are a road to nowhere, a path rejected by nature.

Robert of Texas
May 18, 2022 3:28 pm

They take my taxes and give it to wind energy producers who then harm reliable producers so that energy prices end up higher and reliability is lost…this is my government at work. I can only imagine the various schemes in place to funnel money back to the politicians.

RickWill
May 18, 2022 3:34 pm

The coal plants in Australia bid a block of energy close to the floor price of minus AUD1000/MWh so they remain scheduled when the rooftops kick in. That is forcing the grid scale intermittents to shut down. They will not operate below their subsidised price of minus AUD47/MWh so they voluntarily reduce output. Intermittents are gradually becoming the price setters in the Australian market – 12% of the time in Q1 2022.

Bidding in the Australian electricity market is incredibly complex and they bid for energy as well as a whole raft of stability and reliability services in 5 minute blocks. There are software providers designing programs to optimise prices for bidding blocks to maximise profit – blidding has become very complex.

In 2025, Australia will introduce a capacity payment that will go to dispatchable generators, including batteries, for sitting idle but available.

It appears the Australian market is far more “advanced” in accommodating intermittents than the Texas electricity market.

Has Texas got any synchronous condensers yet? These are the ultimate indicator of the grid indigestion that intermittents cause.

Reply to  RickWill
May 18, 2022 8:33 pm

re: “Has Texas got any synchronous condensers yet?”

Of course not (/s). The ONCOR system has some facilitates located nearer to load centers in the bigger cities …

For instance: “Technical Tour: Oncor Static Var Compensator”
https://www.tdworld.com/electric-utility-operations/safety/article/20967125/technical-tour-oncor-static-var-compensator

Two ABB +300/-265 MVAr Static VAR Compensators (SVCs) are connected to the Oncor 138 kV transmission grid at Parkdale. When installed, this was the largest bank of SVCs in the world.

It doesn't add up...
May 18, 2022 4:23 pm

Here’s some basic economic analysis of wind surpluses and deficits. In the chart we have some simplified assumptions: demand is a constant 30GW, and wind generation can vary all the way from 0 to 60GW of nominal capacity, with each output level being equally likely, so we have a straight line upward sloping duration curve for wind generation. This divides the chart into four coloured areas.

The green is where wind is making a partial contribution to meeting demand, which has to be topped up by the orange, which must be from some dispatchable source (possibly ex storage, CCGT etc.). For the upper 50% wind is supplying 100% of demand, represented by the grey rectangle, but also a rising surplus represented by the pink triangle. The average output from the wind turbines is 30GW. The area of all the triangle shapes is the same – each one covers the equivalent of 25% of demand (half the rectangle that covers 50% of demand).

Now for the economics. When there is a surplus, the value of all the output is zero. That’s the grey rectangle plus the pink triangle (which in practice absent storage would be curtailed output, always ready to compete for any marginal revenue if prices blip above zero). Imagine that the levelized cost of a turbine is £100/MWh. We now have that 75% of its output has no market value. So it must recover 100% of the levelized cost from just 25% of the output, making the required revenue £400/MWh.

Say demand is lower: only 20GW. Then the orange and green rectangle is smaller and shifts to the left – it becomes 4/9ths the size, so the useful output green rectangle is now just 1/9th of the total output, pushing up the required revenue to £900/MWh. Of course we now have a large output surplus. Instead of accounting for 50% of the output the grey rectangle now accounts for 4/9ths of it, so the pink triangle also enlarges to 4/9ths of the output. We could feed some low efficiency storage and generation with the surplus which now has the luxury of not having to compete with anything other than wind desperate to secure high average revenues. With a 25% efficiency roundtrip through green hydrogen as generator fuel you would just balance the pink surplus with the orange deficit.

Of course, you could use subsidies to shift money around from one pocket to another. But there is no getting round the fact that at the 30GW demand level, a quarter of the output must be curtailed if storage is uneconomic. Likewise, in the lower demand plus storage scenario we waste a third of the output to storage round trip losses, plus we must pay for all the kit to make it possible: extra transmission capacity, electrolysers, generators.

Wind surplus econ.png
Reply to  It doesn't add up...
May 18, 2022 6:14 pm

Titanic deck-chair re-alignment; Central gen has lost the plot … next stop on this ‘trip’ is micro-gens situated on customer property, cutting out ‘central gen’ (as a player) altogether (for the most part) … now settle down, this won’t happen tomorrow …

Reply to  _Jim
May 19, 2022 6:00 pm

Where is the customer going to get power for the 75% of the time unreliable are unavailable? And “From someone else’s Micro-gen” is NOT a viable source. PERIOD. What happens when a whole section of a state has no sun for a month? a whole section of a state has no Wind for a month? Only time that will work is when they have Micro Nukes in a safe storge pit under your house. and your great, great great, grand children might see it or similar.

Geoff Sherrington
May 18, 2022 6:08 pm

These electricity schemes are not natural events like plants growing from seeds under forces of Nature – they are made by humans and these humans have to be somewhat intelligent to get to where they are.
These intelligent human designers are creating and/or enforcing schemes that are killing people. These designers should not be allowed to go free after committing murder.
If a person dies from lack of electricity through no fault of that person, then it should be treated as a homicide and the perpetrator should be able to be charged with murder. Worse, these intelligent designers must know that their schemes have the capacity to kill people, so the serious charge of premeditated, deliberate murder is available to be used.
It is no defence to plead that some have to die now to prevent many more deaths in the future as global warming worsens. That defence is invalid because it replaces facts with ideological ideas. Those future deaths are mere modelled ideology deaths, not actual ones. We have many examples of past murderous ideologies, like the Stalin and the Pot Pol events, or even the 1978 Jonestown cyanide ideology slaughter. We do not need more events.
The engineers and others who are involved in these electrical schemes have to be made aware that they have to avoid murders. One way to do this is by the successful prosecution of several people who have been involved in causing deaths already. Sadly, there is no shortage of candidates, not just in Texas, but in many parts of the world.
Readers who are lawyers should correct any errors I have made.  Geoff S

May 19, 2022 10:48 am

I do not see even one mention of Scheduled Outage”, in these comments when discussing the Texas failure. “The second largest reported category of offline capacity was existing outages, including scheduled and planned outages, mothballed units, and forced outages that started before the February 8 OCN. At noon on February 14 approximately 8,400 MW of capacity was offline due to existing outages. The majority of this capacity (7,700 MW) was from coal and natural gas power plants. The total amount of these pre-existing outages steadily declined to 7,300 MW by the end of the event.” [https://www.puc.texas.gov/agency/resources/reports/UTAustin_(2021)_EventsFebruary2021TexasBlackout_(002)FINAL_07_12_21.pdf ]
Generating stations, Oil, Coal, NG, Nuclear are usually scheduled in the Spring or fall. This is the lowest electrical usage period. This happened in Texas. Texas is warmer than most states north of Texas earlier. Therefore, Texas performs their scheduled outages earlier so that they will be on line latter during the Spring when the northern states perform their outages. The availability of workers is also important. This is because no utility has the manpower to do an outage completely on their own. They need contractors. Texas utilities usually schedules these outages to be completed by the end of February. Thus a large number of plants were shut down. Data shows that typically the electricity usage is in the range of 40 – 50 thousand MWh in February. But on Feb 10 the usage moved up into 50 Thousand MWH PLUS and stayed there. The Lack of that 8,000 MWhr became important and there was no way the plants could end their outage. Worse, it was also very cold From Texas through ND. Even the Southwest power pool forced member utilities to meet their commitments and that meant they also had rolling blackouts and outages. and of course when bad things happen they get worse, AR power had a Nuc plant shutdown and could not provide power. They had their own outages.
Renewable’s are NOT, I repeat NOT, reliable. Quit pretending they are, Or that they can be scheduled or that you can get power from 1,000 miles away anytime and every time you need it because Stuff Happens. If you want renewable energy you need to have a two week backup for the expected peak load for every day of that two weeks. And even that is going to give you days long outages annually.

[Also Enough of this propaganda that ERCOT is not connected to the Grid. I was in one of those Outages in NE so that TX could have power. People lost heat, stores closed, etc. ]

May 19, 2022 1:23 pm

Banks pay interest on minimum balance for a reason.

May 20, 2022 5:35 am

Just demonstrating for the 263,911,932,294 time that “Green” only exists because of taxpayers.

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