EU WIND’S FOREMOST MERIT

Too much cheap wind?!
Dave Elliott, May 15, 2010 (Environmental Research Web)

"A study by consultants Poyry on behalf of the European Wind Energy Association claims that wind power generation can reduce electricity prices by between €3 and €23 (£2.60 and £19.90) per megawatt hour depending on the scale and location…[Wind Energy and Electricity Prices]…concluded that an increased penetration of wind power reduces wholesale spot prices…[M]arket dynamics and the lower marginal costs of wind power compared to conventional power [reduces spot electricity prices]… 1.9 €/MWh per additional 1,000 MW wind capacity…

"…[I]n Germany, increased wind power has reduced costs in the range of €1.3-5 billion per year…[and] some power companies have begun to reduce charges to consumers, although this is mainly…[because] at periods of low demand and when there is excess wind available, a price rebate system has been used in Germany, to avoid wind curtailment (i.e. power dumping)…[which has been as much as] 500.02 euros a megawatt-hour…In effect it’s negative pricing-selling power at below cost."

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"Anti- wind cynics might of course say that this just goes to show that we should not subsidise wind…[T]he counter point is that, although the capital cost is high, so that subsidies may be initially needed to establish it in the market, once [wind] is established the marginal operating costs are low (there is no fuel cost) making it very competitive, especially if curtailment can be limited…[T]his does eat into profits. And since the spot price volatility is unpredictable, it makes it hard to plan ahead. So arguably there have to be limits on how low prices can fall, or else it becomes uneconomic to produce power, at least within a competitive market system.

"…Nord Pool, the Nasdaq OMX Group Inc.-owned Scandinavian power bourse, last year took steps to encourage generators to limit production by implementing a minimum price…Similar arrangements have evidently been made in Australia, where excess wind generation has also at times been forcing pool prices to go negative…But that is a pretty crude approach…[and not] sustainable long-term solution…RWE, Germany’s second-largest utility, minimizes the risks of having to pay consumers to use power by using a ‘broad’ range of different generation technologies in different markets…"

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"Longer term what’s needed is diversity plus better and wider ranging grid links, which can allow excess power to be sold further afield, and also compensate for any shortfalls by drawing power from other areas…[T]his is already done amongst France, the Netherlands and Belgium, and Germany plans to join…[T]he HVDC supergrid would…[allow] for EU -wide optimisation of green energy…Storing excess energy…is another option, and this could be done on an EU-wide basis, using the supergrid…Denmark already…[sells] its surplus wind-derived electricity…to Norway and Sweden, who, if they don’t need it immediately, may store in their hydro reservoirs. Denmark then, in effect, buys it back when there is a wind shortfall…The only problem is that the Danes get less for the excess wind they sell than they have to pay for the bought-back power.

"…[A]ccording to the Electricity Reliability Council of Texas, Texas had so-called negative power prices in the first half of 2008 because wind turbines in the western part of the state weren’t adequately linked with more populated regions in the east…[I]n parts of Texas, some utilities are using wind power because it’s the cheapest form of energy. But until there’s more integration and better transmission grids, prices probably will continue to fluctuate, leading to negative prices, with payment to consumers being reflected as a discount on their monthly bills…[R]ather than just leaving it up to the market or fixing floor prices…a cross feed tariff on power transfers…[would] help balance cash and energy flows [and]…optimise carbon savings by avoiding curtailement…[I]t could raise money via a levy…or from sales, to stimulate investment in grid upgrades and reward suppliers who…[develop] energy storage facilities."