Wind Producers Getting Paid to not Produce

[Judi Lynn]

Wind Producers Getting Paid to not Produce
By Holbert Janson
March 7, 2012

It must be a difficult thing to watch for Texas electricity grid operators who will be struggling to generate enough electricity to meet demand this summer but wind energy producers in the North West are being paid to not generate power. Critics of green energy policy are decrying the situation that is seeing tax payer money used to pay producers to not generate electricity from the facilities that were built partially with the help of subsidies to begin with.

There are a number of subtexts in this story. Aside from green energy policy critics the move is also drawing the ire of green energy proponents who feel it’s setting a bad precedence.

Wind output in Texas is also booming with production in February up considerably thanks largely to ideal conditions. Texas electric companies usually provide green rate plan options that allows consumers to specifically select electricity produced from renewable sources. The distinction may not be as meaningful these days, though ,as the Texas grid needs every bit of output it can get as grid operators have warned the grid might not be able to keep pace with demand.

The fact that this capacity has to be turned down once again highlights a major hurtle that must be overcome before wind and solar can become cornerstones of the U.S. energy mix. The unpredictability of output from wind power means that effective new storage technologies are a must.

http://www.renewableenergyworld.com/rea/blog/post/2012/03/wind-producers-getting-paid-to-not-produce

[malakai2]

1. About that storage...

In this case the dam operators in Bonneville Power Administration's area of influence MUST release water in periods of flood. Where would there be sufficient storage for length periods of flood that require curtailment if pumped hydro is out of the question? Congress should probably step in here and remove production tax credit payments for periods of curtailment when wind generators' delivery obligations are already being met with essentially free energy from the dam operators. Watch this get worse as the windmills multiply and every curtailed turbine operator comes to ratepayers looking for a tax credit handout he feels he is owed simply for existing.

[phantom power]

2. recommend

[kristopher]

3. Recommend what?

The OP is a blog post making a completely unsubstantiated claim that is absolutely devoid of contextual information about the pricing structure of the electric market.

It is garbage.

[Dead_Parrot]

4. So, you'll stop posting them?

It never stopped you before...

[Yo_Mama]

5. If you don't have storage isn't this inevitable?

Power curves on wind turbines are such that a very substantial amount of total power gets produced in much less than half the operational annual time.

If you can't store that power, eventually you have to stop accepting it at high periods. There's a high rate of correlation in high wind periods.

As the number of wind turbines feeding into any grid grows, the times when there will be an unavoidable surplus of power expand. That leads to less net average acceptance, and makes the economics unworkable for those who have built the turbines.

[kristopher]

6. Why isn't that a problem for coal?

Because the way the electric market is designed favors coal's operational profile. As we shift to renewables the way we prioritize the products on the electric market will also shift. Think for a minute how power would be sold if we had no nuclear or coal that must run 24/7. The zero fuel cost generating sources will feed all of their power into the grid first and those sources that shape the load around these zero fuel cost sources will sell their products as needed to match the load to demand.

Currently large generators like coal and nuclear consume fuel 24 hours a day whether their power is needed or not. To some extent that presents opportunities for load shifting, a point that figures prominently in discussions about the roll out of EVs. I'm sure you've heard that charging at night is recommended - that's because of the spilled power from coal that is now available for almost nothing.

In the long run the spilled power from wind or solar will be somewhat different, however, since their variable nature will provide more profit opportunity for time-shifting the spilled power to periods of low wind. This stored power will, however, have to compete with other sources such as various forms of hydro, biofuels, and geothermal.

[malakai2]

7. Unless the local ratepayers are forced to cover the RTC

Which is exactly what FERC decided in overruling Bonneville Power Administration and all the interested parties save Iberdrola and three or four other wind companies who were curtailed. When this hits people who already have the misfortune of living in the Dakotas and they are suddenly stuck paying wind companies' "rightful" RTC profits out of their own pockets, they will be personally subsidizing power generators under federal policy. If the RTC must be paid because the wind companies are somehow entitled to electricity they are not generating, it needs to come out of the general treasury and not local ratepayers' pockets.

For the record, the situation here is that Bonneville is responsible under federal mandate for maintaining grid reliability and low price for consumers, local electric coops and the like, which then go on to sell power on the retail market. The dams from which Bonneville draws part of its supply needed to release water to alleviate reservoir flooding, which oversupplied the grid. Bonneville's response under the existing plan was to curtail first the coal generators tied into the grid, then the wind generators, to meet their legal obligation to protect the dams/rivers and to protect the grid. The curtailed coal and wind generators were supplied with electricity from the hydro generation to cover their supply obligations. The wind producers were unhappy with this because they felt Bonneville also owed them for the Production Tax Credit dollars they would have earned if they hadn't been curtailed (as the wind was blowing that day). Bonneville refused to pay the RTC, arguing all the generators had been made whole by the electricity that had been supplied. FERC sided with the wind companies. Now local ratepayers will be paying wind companies PTC money whenever they are curtailed.

At some point, I wonder if there will be enough wind generation in regions on windy days that all wind generators will be curtailed to some extent, and then at that point whether or not ratepayers would still be expected to pay PTC money to wind generators for electricity not produced.

[kristopher]

8. Could you provide the source for your recitation of events?

I'm not clear on several assertions you've made and I'd like to read the information you are drawing from before responding.

TIA.

[Yo_Mama]

9. It's happening in Scotland

They don't curtail them all - they just shut down a few to get it back in balance.

I don't think the general treasury can pay for this. I think each consumption area has to pay for its own power and its own grid.

Eventually it gets cheaper to pay for the storage.

[kristopher]

10. It is impossible to determine the economics of the situation from the information provided.

[Yo_Mama]

11. It's all up at Bonneville!

Latest Bonneville proposal:
http://www.bpa.gov/corporate/AgencyTopics/ColumbiaRiverHighWaterMgmnt/20120306-filing/EL11-44_BPA_Compliance_Filing_03-06-2012.pdf

It's a 50-50 cost split.

This is the page with all the links:
http://www.bpa.gov/corporate/AgencyTopics/ColumbiaRiverHighWaterMgmnt/?utm_source=Go%2BAddress&utm_medium=Print&utm_campaign=Oversupply

This spring Bonneville will convene a rate case to establish a rate for the recovery of costs incurred under the Oversupply Management Protocol. In its initial proposal in the rate case, Bonneville will propose to allocate approximately 50% of the costs to generators that submit displacement costs under the protocol and approximately 50% to purchasers of power from the Federal Base System (a defined term under the Northwest Power Act; it includes the Federal Columbia River Power System hydroelectric projects, resources acquired by the Administrator under long-term contracts in force on the effective date of the Act (December 5, 1980), and resources acquired by the Administrator to replace reductions in the above resources).

Reasonable arguments have been made that both federal hydroelectric resources and wind resources contribute to the oversupply problem and the costs associated with negative pricing. In one sense the costs are caused by fish and wildlife obligations that predated the interconnection of wind resources to Bonneville’s system. On the other hand, Bonneville was able to adequately manage high-water occurrences before the development of large amounts of variable energy resources, primarily wind power, that receive incentives for production and therefore need to be compensated beyond low-priced or free substitute electricity. There is also a view that costs should be allocated based on what generating resources are on-line at the time of the oversupply (which would be primarily hydro) while another view holds that the federal hydrosystem will have engaged in substantial spill prior to engaging in wind displacement due to reaching Clean Water Act limits for gas supersaturation

Bonneville is also seeking to find a solution that has the greatest chance of being found to be equitable by the affected parties and hence a reduced chance of litigation. Therefore, the 50/50 cost allocation is arguably a reasonable and fair allocation of costs and alignment of costs and benefits because it recognizes all of these arguments, and it is not unreasonable for Bonneville to advance it as a proposal at the opening of Bonneville’s ratemaking process. In addition, it creates an incentive for beneficiaries of both hydro and wind power to seek longer-term, potentially lower-cost solutions that would provide a better use of a surplus of low variable cost, carbon-free electricity that occurs in the Pacific Northwest.

The proposal is that the cost will be split equally between purchasers and displaced generators.

[kristopher]

13. No it isn't a 50/50 split

BPA is a vertically integrated entity that operates both the hydro generating facilities and the distribution lines. This positions it to unduly affect competition by denying access to distribution - which is exactly what the regulator (FERC) determined had happened. The 50/50 split is what BPA would like to have adopted, but it isn't what FERC has ruled for and they are the final authority.

The post by malakai2 is completely divorced from reality.

http://www.reuters.com/article/2012/02/13/utilities-bonneville-idUSL2E8DDHDS20120213

[txlibdem]

15. You are absolutely correct - storage is needed

Even the fossil fuel generating plants and nuclear power plants should have energy storage.

That would cut down on so much waste and unnecessary pollution from peaking natural gas plants and therefore require fewer fracking wells.

[joshcryer]

12. Thanks to a cleverly written procurement contract, to be sure.

[kristopher]

14. There is nothing "clever" about it.

They are operating under standard federal rules governing access to transmission and distribution systems.