A Renewable Boom means more Expensive and Less Reliable Electric Power

Posted by PITHOCRATES - October 20th, 2013

Week in Review

The news on our green energy initiatives sounds good.  We’re importing less oil.  And adding more and more wind power.  If you’re a proponent of green energy you no doubt are pleased by this news.  But if you understand energy and economics it’s a different story.  You’ll think the country is moving in the wrong direction.  Ultimately raising our energy costs.  Without making much of an impact on carbon emissions.  And just because we are exporting gasoline doesn’t mean we’re on the road to being energy self-sufficient (see The Renewable Boom by Bryan Walsh posted 10/11/2013 on Time).

Earlier this year, the U.S. became a net exporter of oil distillates, and the International Energy Agency projects that the U.S. could be almost energy self-sufficient in net terms by 2035.

This is not necessarily a good thing.  Being a net exporter of oil distillates.  It means that US supply exceeds US demand at the current market price.  That’s an important point.  The current market price.  The US has been in an anemic economic recovery—though some would say we’re still in a recession—since President Obama assumed office.  During bad economic times people lose their jobs.  Those who haven’t are worried about losing theirs.  And they worry about the uncertainty, too, about the cost of Obamacare.  So people are driving less.  And they are spending less.  Because they have less.  And worry about how much money they’ll need under Obamacare.  So they’re not taking the family on a cross-country vacation.  Some are even spending their vacation in the backyard.  The so called ‘staycation’.  No doubt the 10 million or so who disappeared from the labor force since President Obama assumed office aren’t driving much these days.  So because of this US demand for gasoline is down.  And, hence, prices.   Even though gasoline prices are still high and consuming an ever larger part of our reduced median family income (also down since President assumed office), gasoline prices are higher elsewhere.  Which is why refineries are exporting their oil distillates.  To meet that higher demand that has raised the market price.

But the biggest source of new electricity in the U.S. last year wasn’t a fossil fuel. It was the humble wind. More than 13 gigawatts of new wind potential were added to the grid in 2012, accounting for 43% of all new generation capacity. Total wind-power capacity exceeded 60 gigawatts by the end of 2012—enough to power 15 million homes when the breeze is blowing.

These numbers do sound big for wind.  Like it’s easy sailing for wind power to replace coal.  But is it?  Let’s look at the big picture.  In 2011 the total nameplate capacity of all electric power generation was 1,153.149 gigawatts.  So that 13 gigawatts though sounding like a lot of power it is only 1.127% of the total nameplate capacity.  Small enough to be rounding error.  In other words, that 13 gigawatts is such a small amount of power that it won’t even be seen by the electric grid.  But it gets even worse.

We used the term ‘nameplate capacity’ for a reason.  This is the amount of power that this unit is capable of producing.  Not what it actually produces.  In fact, we have a measure comparing the power generation possible to the ‘actual’ power generation.  The capacity factor.  Which measures power production over a period of time and divides it by the total amount of power that the unit could have produced (i.e., its nameplate value).  Coal has a higher capacity factor than wind because coal can produce electric power in all wind conditions.  While wind power cannot.  If the winds are too strong the wind turbines lock down to protect themselves.  If the wind is blowing too slowly they won’t produce any electric power.

The typical capacity factor for coal is 62.3%.  Meaning that over half of the installed capacity is generating power.  Some generators may be down for maintenance.  Or a generator may be shut down due to weak demand.  The typical capacity factor for wind power is 30%.  Meaning that the installed capacity produces no power 70% of the time.  And it’s not because turbines are down for maintenance.  It’s because of the intermittent wind.

So coal has twice the capacity that wind has.  Does this mean we need twice the installed capacity of wind to match coal?  No.  Because if you tripled the number of wind turbines in a wind farm they will still produce no power if the wind isn’t blowing.  In this respect you can say coal has a capacity factor of 100%.  For if they want more power from a coal-fired power plant they can bring another generator on line.  Even if the wind isn’t blowing.

You could say wind power is like parsley on a plate in a restaurant.  It’s just a garnishment.  It makes our electric power production look more environmentally friendly but it just adds cost and often times we just throw it away.  For if coal provides all our power needs when the wind isn’t blowing and the wind then starts blowing you have a surplus of power that you can’t sell.  You can’t shut down the coal-fired power plant because the wind turbines don’t produce enough to replace it.  You can’t shut down the wind turbines because it defeats the purpose of having them.  So you just throw away the surplus power.  And charge people more for their electric power to cover this waste.  Like a restaurant charges more for its menu items to cover the cost of the parsley the people throw away.



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Spain’s Massive Investment in Solar Power has Greatly increased the Cost of their Electric Power

Posted by PITHOCRATES - August 24th, 2013

Week in Review

People think renewable energy is the answer to all our energy problems.  But that isn’t quite so.  In fact, all it does is increase the cost of our electric power.  For sunshine and wind may be free.  But the equipment to harness the energy in sunshine and wind is not free.  It is very, very expensive.  And you need a lot of it.  You will not see one wind turbine service the power needs of one metropolitan area.  You may see a wind farm providing a small percentage of the electric power needs of a large metropolitan area.  And only when the wind blows.

Wind can blow day or night.  But it can also NOT blow day and night.  While solar panels will not work at all at night.  So you have massive investments to install renewable energy generation capacity.  And there will be times when they will provide no power.  So what do you do?  What do you do when the wind doesn’t blow and the sun doesn’t shine?  You turn to old reliable.  The electric grid.

This is why renewable energy is so costly.  It cannot replace our fossil-fuel power plants that can provide reliable power day or night in any type of weather.  It can only supplement what we call our baseload power.  Like our beloved coal-fired power plants.  One of the most cost-efficient ways to produce reliable electric power.  Which the power companies have to still run and maintain day and night.  For those who don’t have a wind turbine or a solar array providing their electric power.  And to light up the night.  So instead of one cost-efficient power generation system we have two systems.  One cost-efficient and one cost-inefficient.  And those who invested heavily into renewable energy are now having to deal with these very real problems (see Out Of Ideas And In Debt, Spain Sets Sights On Taxing The Sun by Kelly Phillips Erb posted 8/19/2013 on Forbes).

With so much sunshine at its disposal, Spain has aggressively pursued the development of solar energy: over the past ten years, the government has made significant advances in pressing solar energy and is one of the top countries in the world with respect to installed photovoltaic (PV) solar energy capacity.

It might, however, be too much of a good thing. Spain is generating so much solar power, according to its government, that production capacity exceeds demand by more than 60%. That imbalance has created a problem for the government which now finds itself in debt to producers. And not by a little bit. The debt is said to have grown to nearly 26 billion euros ($34.73 billion U.S.).

So how do you get out of that kind of debt? You propose incredibly onerous taxes and fines, of course. And you do it on exactly the behavior that you encouraged in the first place: the use of solar energy panels. That’s right. Spain is now attempting to scale back the use of solar panels – the use of which they have encouraged and subsidized over the last decade – by imposing a tax on those who use the panels…

…many residents in Spain generate enough electricity from solar that they get paid to selling the excess energy back to producers. This, it turns out, is a problem. The government is putting a stop to that, too: as part of the reform efforts (read: desperate measures), there will be a prohibition on selling extra energy.

If the power companies are providing all the power at night they have to maintain their power plants.  And their power distribution system.  Which means they even have to trim the trees away from their overhead power lines from people who use solar power during the day.  Nothing changes for the power companies.  Except that they can’t sell as much power as they once did.  So their costs of producing power remain the same.  But their revenue has fallen.  Forcing them to operate at a loss.  Or find other ways to replace their lost revenue.  Which they have to.  Because they must have the same capacity available during the day that they have at night.  Even if they aren’t selling as much power during the day as they are at night.  And the last thing they want to do is buy excess power back from homeowners with solar panels on their house when they’re producing their own power that they can’t sell.

Baseload power plants like coal and nuclear take time to bring on line.  They have to produce the heat that boils water into steam.  Then superheat the steam to remove all water from it.  So the steam can spin the generator turbines without damaging the vanes on the turbine.  And once they start these plants up they run these systems at full capacity where they produce power most cost-efficiently.  During peak demand they may bring on some gas-fired turbines that can start and produce power quickly.  And add them to the grid.  When the peak subsides they can shut down these gas-fired turbines and let the baseload generation carry the remaining load.

The Spanish government invested heavily into solar power for whatever reason.  It’s ‘free’ power.  It’s ‘clean’ power.  Or it was just a good way to create a lot of jobs.  But what Spain has now is a surplus of peak power generation during the day that doesn’t eliminate the need to maintain baseload power generation during the day.  Creating a surplus of electric power during the day no one wants.  While requiring power companies to maintain their baseload power during the day so they can provide power at night.  Incurring great costs on the power companies.  Which must be passed on to the same people who paid for the renewable energies subsidies.  The electric power consumer.

This is a classic example of a Hayekian malinvestment.  Friedrich Hayek of the Austrian school of economics said this is what happens when governments interfere with free markets.  They make investments to produce what they think is best while the market demands something else.  The market demanded low-cost electric power.  Which baseload power plants (coal and nuclear) provided.  But the government intervened and subsidized the more costly solar power.  This bad investment—or malinvestment—has only increased the cost of electric power for the Spanish consumer.  And now the Spanish have a big problem on their hands.  What to do with this surplus of peak power no one wants to pay for?  And how to replace the lost revenue of the power companies so they can cover their costs?  Two problems they didn’t have until the government intervened into the free market.



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