Wind and solar capacity have grown significantly in the last decade, and many believe that significant reductions in carbon emissions require continued expansion of their capacity (see for example recent papers by Jim Williams et al and Jimmy Nelson et al[1]). With the declining cost of wind and solar, the economic case for increasing production from sources whose fuel is free is getting better.
But getting these energy sources on to the grid is not without its engineering and economic challenges. Wind and solar production is both variable and uncertain, and grid system operators need to make sure they have enough reserves to balance them. That variability can lead to increased cycling of dispatchable, fossil-fuel-fired generators, which burns more fuel and increases mechanical wear on those machines. Sometimes those cycling costs are significant enough that energy prices go negative when there is an excess of wind. This is because it’s more cost effective to pay someone to take your surplus capacity than to shut down a generation source.
Tools such as California’s new “flexiramp” market product, energy storage products, and Demand Response (DR) programs can mitigate the problems of integrating renewables onto the grid. However, the absence of paths to capture all the economic value created by these solutions means their true worth is often not reflected in current markets. This presents a significant barrier to private investments in deregulated power regions that rely on free markets. Even for grid systems with regulated vertically integrated monopolies that have a relatively simple path to investing in those solutions, doing so would likely come at a significant premium.
Moving forward, a best-case scenario to decarbonize the grid is probably a world with a complex portfolio of market products. However, investors may not have the stomach for the resulting volatility, and increasing market complexity could lead to unintended consequences.
Q: How should the electric power industry be organized to achieve very deep penetrations of wind and solar generation? Would the cost of doing it with regulated monopolies be too high? Would free markets be too complex?
[1] Note, you need a subscription to these journals to read these papers
The US situation on this is so complex, politically and legally, that it is best that I get deep into it here, even WITH the obvious caveat that nothing I… Read more »
• America’s power system is outdated. Seventy five percent of coal plants are over 30 years old. The entire system — from transmission lines, local distribution grids, transformers and controls… Read more »
“Non-hydroelectric renewable energy refers to electricity supplied from the following renewable sources of power: solar, geothermal, biomass, landfill gas, and wind. Although installation of these renewable energy resources is growing,… Read more »
Good post, Duncan. Thank you for raising this important issue. You’re right that we need energy storage products to help minimize the challenges of integrating renewables. And I agree with… Read more »
Unless there is a free market solution that doesn’t require constant propping up by governments, I don’t see renewable energy being a large percentage of the total used. Perhaps wind… Read more »
Ben hits the nail on the head: “Solving this [transmission infrastructure] problem won’t happen overnight and it won’t work unless it’s predicated on the notion that real change is required.… Read more »
Roger: Your view of history is to my mind quite simplistic. The regulated utilities produced low prices in the post-World War II period because the real price of fossil fuel… Read more »
Well said, Peter. Indeed, the tricky part is managing monopoly vs. free market. The current challenge for renewables, it seems to me, is getting the power to the load. A… Read more »
Roger, Your posting makes some excellent points that need more attention / discussion. Our national power grid has indeed produced excellent results; I believe it is the foundation of our… Read more »
While integrating any new technology into ongoing older systems is a challenge, we have done so well in the past, such as seamlessly integrating thousands of cell towers into the… Read more »
Scott, You like citing records as if they represent typical and reliable output. We are having a discussion about energy storage precisely because of the unpredictability and unreliablity of intermittent… Read more »
I’d like to share some information from the July 26th edition of The Economist (pg. 63), which provides an analysis of wind and solar intermittency, including the cost of back-up… Read more »
Amory Lovins has written a critique to the article you cite … saying both methods and data are incorrect. “How does Dr. Frank reach his contrarian conclusions? By using, apparently… Read more »
There should be quotation marks around this extended excerpt from Amory Lovins’ published work. Do you agree with all he says?
Sorry about the quotes … this English major thought it was evident that I was quoting … I usually use italics but they don’t always come through on copy and… Read more »
Found this in an email from American Power Plan people this AM … They too find the Economist’s article flawed as Dr. Lovins did. Q: I saw that Brookings piece… Read more »
Our utilities, organized as central generation monopolies cannot, in the face of technological change and the continued declining level of demand, continue to operate as they have in the past.… Read more »
Jane, I read Lovins’ “Soft Energy Paths” when I was in college in the late 70’s. In those idyllic, altruistic days, I too was eager to save the world from… Read more »
Here is an article about solar and grid parity … http://reneweconomy.com.au/2014/solar-grid-parity-why-australia-leads-the-world-80853 With regard to your tax subsidies … are you willing to ask the fossil companies to give up the… Read more »
I agree with Roger on this. If solar is so cost-effective why do the countries that have gone heavily into solar (and wind) have such high prices for electricity? In… Read more »
I guess most agree, as I remarked above, about the Wellinghoff and Tong’s suggestion … that the wires need to remain in a monopoly regulatory situation, separate from generation, which… Read more »
A recent study by the German Association of Energy and Water Industries (BDEW) showed taxes and fees account for 52% of the monthly power bill for retail consumers. The renewable… Read more »
The comments by Todd and others about the U.S. power system being outdated (particularly transmission) are spot on. The infrastructure was built based on centralized power generation. As renewables and… Read more »
Dawn, You seem to have identified the major problem that will limit the expansion of wind and solar power generation. Assuming we are to sustain the reliability of the grid.… Read more »
The idea that taxes are the overwhelming reason why German retail electricity rates are on average three times those in the US seems really a stretch. Given that Germany’s exports… Read more »
Duncan while your question is an excellent one I still believe that you are asking the wrong question and because of that I think you will get answers that are… Read more »
While we can restructure markets, it is the underlining physical infrastructure and increasing its flexibility through modernization of the grid and new hydroelectric pumped storage to achieve very deep penetrations… Read more »
It is always amusing to see Amory Lovins and RMI touted as credible sources. Amory is the Al Gore of energy. He has been pushing his special brand of futurist… Read more »
Thank you Ike, Your posting covers much of what needs to be said. It is good to know your expertise is available to this group. Hopefully we will read, study,… Read more »