But I think this is a relatively minor factor in Texas, and I’m not aware that anyone is proposing to change the transmission rate design. (On the other hand, the Midwest ISO offers a bit more of a challenge given the long distances and diverse customer base served.)

Fat Man: In general think that the ‘Carl from Chicago’ post is pretty on target. If I were to pick a bit, I think the use of the term ‘free riding’ is a bit fast and loose. But this quibble is exactly the complicated issue at the heart of the problem – who should be responsible for what share of which costs.

Also, the low marginal price of wind power does push down prices in the market, but this is a desirable feature of power markets. Obviously, subsidies and other policy efforts are mostly responsible for getting the wind farms built in the first place. But given that the wind farms are there and generating at a low marginal cost, the resulting lower market price is locally efficient.

“Wind in a way is “free riding” on the grid; wind is paid as if it is reliable, when in fact it isn’t, and then the other electricity providers de-facto subsidize wind (again, they already receive Federal and State subsidies) by not charging them for failing to deliver AND taking on their pro-rata share of the power needed when the wind farms don’t deliver.

“Not only does wind power get a “free ride” on backup capacity, which hurts the gas generators, but the gas generators that DO run are also getting a lower per-unit reimbursement because the revenues are set based upon the highest “marginal” cost for electricity; on a given day when there is more wind only nuclear, coal and the most efficient gas plants will be online (along with the wind, which always is in the stack, depending on weather conditions) if there isn’t much demand, so not only do gas plants lose money from NOT being on but the gas plants that ARE on receive a lower price for their power. This concept wasn’t really touched upon in the WSJ article (it was better than most of their articles, but still had some holes).

“This article is key to an understanding of wind’s impact on the grid; either wind operators should need to estimate their available power more cautiously (to ensure that they meet their commitments), or they should pay to have alternate power (in some reliable form, like natural gas) online.”