Carl from Chicago, who oddly knows quite a bit about the grid in Texas, notes that wind power doesn’t have to live up to its commitments:
Power is generally dispatched in the following manner:
- The grid control operator makes a request for how many megawatts of power that it needs for the next day.
- The various owners of generating capacity (wind, gas, coal and nuclear) submit their available power for the next day.
- 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.
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 weather 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.
My thoughts:
The fact that everyone sharing the grid has to play nice, or the whole grid goes down, makes me wonder about the wisdom of breaking up ownership and control amongst so many firms using such disparate technologies. Sorting out everyone’s responsibilities is non-trivial.It obviously makes sense to use wind power when the wind’s blowing and you’ve already got windmills — the fuel cost is zero, after all — and it doesn’t make much sense to punish a wind generator when the wind’s not blowing — because it’s not negligence that’s causing the unreliability — but the natural gas generator, which is quick to fire up and available on demand, is what’s keeping the whole system from crashing. That would imply that the natural gas generator shouldn’t be paid so much based on how much natural gas gets burned but more on how much capacity it can provide, as insurance.
If the wind and natural gas generators were owned by the same firm, I think the problem would resolve itself — and we’d more clearly see that a kW of “backup” natural gas capacity combined with a kW of intermittent wind capacity has very high capital costs for its sometimes-low, sometimes-high variable costs. Right now, as Carl points out, the wind folks are free-riding on the security provided by the natural-gas folks.
(Another option would be to tie the wind power in with hydro power, which could serve as storage.)