Wind Produces Negative Pricing in the Northwest
Wind energy has advantages and disadvantages. The fuel comes absolutely free, it only requires that the wind be blowing. But the wind doesn’t blow all the time, nor with the same intensity, and so wind power is intermittent and unpredictable. Since electricity cannot be stored in large commercial quantities, this begins to play havoc with an electrical grid.
The way this havoc is manifesting itself is in negative pricing. Believe it or not, in the Upper Northwest, where wind has been extensively developed in the Columbia River Valley, wind is not producing so much electricity during certain times of the year that utilities are actually paying the grid to take it off their hands. In other words, instead of customers paying the producers for electricity, the producers are paying customers to relieve them of excess supplies.
The graph shows off-peak prices in the Columbia River Valley during the spring of last year. Off-peak is 10 a.m. to 6 p.m. weekdays and Saturdays and all day Sunday. The green “Mid C” diamonds indicate prices in the mid-Columbia Valley. The blue and beige diamonds indicate outlying areas, the California-Oregon border (COB) and the Nevada-Oregon border (NOB). The data points indicate incidents of negative pricing during last spring and early summer. The scale runs from zero (electricity offered for free) all the way down to -$7 per megawatt hour, meaning the generator was actually paying the utility $7 per megawatt-hour to take electricity off their hands.
Why would this be? For most generating stations, running at a steady rate is the cheapest way to operate. This is particularly true of nuclear reactors, which operate at nearly full capacity for two years running before shutting down briefly for refueling. Nuclear is the ultimate base load power and adjusting output, even on the long-range basis of a week or a month, is costly and wasteful. Coal burners have the same problem, but on a smaller scale. It usually takes a matter of hours for them to ramp power up or down by adjusting the amount of coal in the boiler. For coal it would be too difficult to try to match wind power’s minute-to-minute vagaries.
Hydroelectricity runs on a completely different schedule. It is seasonal, with the largest output produced by the spring runoff with low periods of output during winter and summer. In addition, hydro’s output must be carefully calibrated to avoid damage to fish populations. If a dam cuts output, it must run more water over its spillway, which increases oxygen content. This can harm migrating fish populations. The generators best suited for short-term adjustments in output are gas turbines. These are essentially jet engines bolted to the ground. Their turbines are driven by the exhaust fumes alone. Because they do not boil water they can be adjusted almost instantaneously. However, gas turbines are also the most expensive way to generate electricity. They are generally used for peaking power alone, which means they may operate no more than 10-20 percent of the year.
The introduction of wind power has changed all this. Now, with wind’s unpredictable ups and downs, the other forms of generation must be prepared to adjust their output, since putting too much electricity on the grid can cause power surges that destroy electrical equipment. (That’s why you have a surge protector between your computer and the wall.) In most regions, gas turbines are being used to match wind’s rapid fluctuations. This is enormously expensive and also burns a lot of natural gas. Robert Bryce has pointed out that using gas turbines to level wind’s output actually burns more gas than if more efficient combined-cycle turbines were used without any windmills. (Because they run on both gas exhausts and the water boiled by the heat, combined-cycle gas turbines have an efficiency of 60 percent, as opposed to only 30 percent for regular boilers.) In the Northwest, however, there is too much wind power to be matched by natural gas.
All this came to a head last year when the Bonneville Power Administration announced it was going to reject wind power during periods of excess or force wind to pay a premium for unpredictability. Defenders of wind power rushed to complain about this “discrimination,” however, and in December the Federal Energy Regulatory Commission, which is big on renewables, ruled in favor of wind providers.
So this spring, Bonneville will be forced to take wind power even when it doesn’t need it and other generators will have to make the adjustment. Part of that will involve paying Bonneville to take electricity off their hands. Bonneville will either try to export or run the power into the ground.