We’re leading off with Texas once again – the petri dish mixing massive shares of wind energy, the nation’s largest free-market for electricity, and commensurate spikes in cost. See the $900 per gallon kWh. Fatefully, on July 27, 2018, the Public Utility Commission of Texas (PUCT) rejected a proposal for 2 GW of new wind generation proposed by American Electric Power. For perspective, that would be about 700 giant turbines, although I’m not sure of the exact capacity of these behemoths today.
Wind’s Speed Limit
Possibly, the PUCT realizes there is something a little weird with a market providing long periods of negative pricing – paying others to take excess power, netting overall profit via the federal tax credit – and periods of $9 per kWh; 100 times normal rates.
Earlier in the year, the Public Service Commission of West Virginia also rejected a bid by Appalachian Power to build a wind generating station. Appalachian Power is an operating unit of American Electric Power, a very large supplier of coal-derived electricity.
Pumped Hydro? Compressed Air Would be Less Bad
In another demonstration of maxed out renewables, California is proposing to use the Hoover Dam as a “giant battery” in the form of a pumped hydro storage system. This is insane. Consider that you would be shutting off generation, or sharply curtailing production at the dam.
Hydro is renewable. The marginal cost is zero. Why would you shut down a renewable resource to store another one?
Why would you need to shut down the dam during the day, Jeff? Where is the power going to come from to pump the hydro (storage) during the day? It will come from California’s excess solar generation! Ok. So the Hoover Dam generates electricity while California solar power pumps the water back into the reservoir. Why not just shut off the dam and call it a day? And not waste zillions of dollars developing an inefficient (50% tops) pumped storage clunker? This is cartoon physics. Who comes up with this stuff? It’s like hiring men to dig holes with shovels and fill them back in again. And do it again! Where is the value?
I must say, it is an interesting engineering problem. Utility Dive reports the project would pump water upstream 20 miles and back into the dam. Why so far? I imagine because they need that much river water and that much delay or there is no water to pump. Imagine, they would have to overcome the 100% lost energy in the 20 mile stretch of river, plus the friction losses, plus the elevation of the dam.
I am quite convinced that pumped hydro is a dumb way to store energy. Simply use the hydro as needed to fill the electric-load valleys. You’re never going to do better than that with water. Ever.
How do the Dollars Work for Renewables?
Utilities are in business to make money like every other for-profit enterprise. However, since utilities operate as monopolies, they get paid for the rate base (poles, wires, power plants) “necessary” to provide reliable power. Like government, they are funded for the cost of delivery with no incentive to get to the lowest cost. How would I manage such a for-profit firm? I would manage it to build as much stuff as possible while keeping prices in a comparable zone with my neighbors.
How is it that we can build all the intermittent renewable generation (aside from California which is in a whole different league) while shutting down coal and nuclear plants?
I’ve thought about this a long time. How can a valuable asset be shut down because it isn’t cost effective to operate? How is that cost-effective? Is the price of wind energy lower than the cost of fuel, as described in Question: Carbon and Benefits: Answer = Efficiency? See the image below for a demonstration. Is the cost of wind turbines and transmission cheaper than fuel? Probably not. Utilities are awarded for building stuff; not delivering power at the lowest possible cost. Some states are working to change this policy fundamental. We will cover that later.
My guess as to why and how the vast swaths of renewables we have today are possible:
- Our conventional generation fleet was built on 10-20 year load forecasts for high load growth. It takes years, especially nowadays, to plan, license, get approval, and build a power plant.
- The fleet was vastly overbuilt.
- Many plants are fully functional and useful, but they are also fully depreciated, earning utilities no money. Flawed policy.
- Overbuilt, depreciated assets can be shut down as ratepayer expenditures shift from funding from depreciated assets toward new assets.
- With zero marginal cost, the freshly built wind supplies kWh for less cost than depreciated plants. The old plants are retired, after they are paid for, but before the end of their useful lives.
- Rates remain in the same zone.
This is the result of the policies we have and what the public wants, given the information they have. What would they think if…? Never mind. I won’t ask.