Posts Tagged ‘wind power’

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Danish wind power ♥s Norwegian hydropower

April 6, 2012

Michael Giberson

From time to time a promoter of wind power will encourage the U.S. to follow Denmark’s lead and aim for a much higher levels of wind power on the grid. (Recently Denmark’s legislature established a goal of attaining 50 percent of its energy from wind power by 2020.)

A working paper by Johannes Mauritzen explains one of the key factors supporting Denmark’s current wind power capability: the flexibility inherent in Norway’s vast hydro-power capability. Mauritzen’s abstract:

It is well established within both the economics and power system engineering literature that hydro power can act as a complement to large amounts of intermittent energy. In particular hydro power can act as a “battery” where large amounts of wind power are installed. In this paper I use simple distributed lag models with data from Denmark and Norway. I find that increased wind power in Denmark causes increased marginal exports to Norway and that this effect is larger during periods of net exports when it is difficult to displace local production. Increased wind power can also be shown to slightly reduce prices in southern Norway in the short run. Finally, I estimate that as much as 40 percent of wind power produced in Denmark is stored in Norwegian hydro power magazines.

So, a first step for the United States renewable power policy might be to pick up and move the country a little closer to Norway.

Less facetiously, and projecting a little bit, we might casually infer that the New York power market won’t have too much trouble with a moderate amount of wind power since it also has access to a lot of hydro-power. (11 percent of generating capacity is hydro and another 4 percent is pumped hydro, plus it imports hydro-power from Quebec.) Similarly, we might be more puzzled about all of the difficulties that power system administrators in the Pacific Northwest are having integrating wind into the regional grid, given the extensive hydro-power resources available. (With hydro about 2/3rds of the electric capacity in the region.) Finally, we might be still more surprised by the relative growth of wind power in Texas, which has relatively little hydro-power capacity on its system. (About 0.6 percent of capacity.)

Admittedly, the thing that a mostly-uncontrollable, variable-output technology like wind needs isn’t hydro-power per se, but rather a certain amount of flexibility and control within the power system it is connected to. The necessary flexibility is one part technology and one part power system rules.

The Nordic power system has both the technical means and the supportive power market rules, same for New York, and same for the ERCOT market in Texas (only in Texas the “technical means” are not hydro-power, but rather fast-ramping gas generation along with other resources over which the market has some control).

The Pacific Northwest has tons of flexible capability on the technical side of things* and it has the federal Bonneville Power Administration on the power system rules side of things. Yet somehow the combination of lots of capability and federal agency management produces as much conflict as cooperation.

*About the only caveat in BPA’s defense is that, to some degree, many competing claims to that technical flexibility have already been granted to non-power system users of the water resources involved in the form of environmental constraints, irrigation demands, treaty obligations with Native American organizations, and so on. Maybe the residual flexibility is smaller than it appears.

Posted in Electricity, Energy markets | Tagged , , , , | Comments Off

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The WSJ’s awful editorial against the wind power industry

March 8, 2012

Michael Giberson

Like the editorial board of the Wall Street Journal, I’d like to see the Production Tax Credit for wind and other renewable energy technologies expire at the end of this year as scheduled. So policy-wise, I’m with them. Still, their editorial against the wind power policy yesterday was awful and it deserves public criticism.

So here are quotes from the WSJ in italics, followed by my comments.

“The renewable energy tax credit—mostly for wind and solar power—started in 1992 as a ‘temporary’ benefit for an infant industry.”

Stick with “mostly for wind.” Other technologies qualify, too, including a variety of hydroelectric technologies and geothermal power, but not currently solar power.

Solar was briefly included in the PTC through the American Jobs Creation Act of 2004, but then was back out at the end of 2005. Solar power benefits from the Investment Tax Credit, and until December 2011 benefited from “Section 1603″ cash grants in lieu of the ITC.

If you’re tempted to argue they said “renewable energy tax credits”, not specifically the PTC, note that they clearly say the renewable energy tax credits that began back in 1992 (in that year’s Energy Policy Act) – they’re talking about the PTC and they get the solar reference wrong.

Details on the PTC, via DSIRE.

“The ’1603 grant program’ pays up to 30% of the construction costs for renewable energy plants …. Wind producers then get the 2.2% tax credit for every kilowatt of electricity generated.”

No. To get the 1603 cash grant a developer has to forgo the Production Tax Credit. One or the other, but not both.

And for crying out loud, it is a 2.2 cents/kwh tax credit, not a “2.2% tax credit.” The Heritage Foundation can get this right, you’d think the WSJ could do as well.

(Or, more precisely, that was last year’s subsidy but the PTC is adjusted annually for the effects of inflation so in 2012 it will be slightly higher.)

… and Senator Jeff Bingaman of New Mexico has introduced a national renewable-energy mandate so consumers will be required to buy wind and solar power no matter how high the cost.

I didn’t notice this problem myself, not having dug through the details of the bill Sen. Bingaman introduced last week, but Richard Caperton and Stephen Lacey at Climate Progress point out that the bill caps the cost increase at 3 cents/kwh.

These sloppy errors don’t mean the WSJ is wrong, only that they’re willing to publish poorly researched opinion pieces.

The Caperton and Lacey post at the Climate Progress blog mentioned the above errors and raised some additional complaints. Most of their additional complaints concern the relative virtues of oil and gas production when compared to wind power, and who gets how much subsidy. On these points I mostly lean toward the WSJ‘s view. Suffice to say that wind power subsidies are orders of magnitude higher per unit of energy provided to consumers.

But this brings us to one key point they raise: “one justification for the tax credit is to makeup for the fact that taxpayers are bearing the harm from fossil fuels.”

There is, embedded in this idea somewhere, the foundation of an analytically sound justification for policy intervention. My problem with the Production Tax Credit for wind power is that it flows to wind investors for every qualifying kwh of power generated irrespective of any such benefit. The wind power investor gets the same subsidy whether the wind power produced displaces coal-fired electric power or efficient natural gas-fired power or hydropower. Wind would still qualify for a PTC even if its output was displacing solar power while wind turbines chopped up migrating birds.

While there may be an intellectually defensible case for a policy supporting renewable energy because it reduces a harm, the Production Tax Credit bears little resemblance to that policy.

So let’s let the Production Tax Credit die, and get on with the business of developing sound public policy on emissions. (And please, WSJ, stop embarrassing yourself with silly mistakes.)

 

Posted in Electricity, Energy markets, Environmental policy, Politics, Regulation | Tagged , , , | 8 Comments »

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The Matt Ridley Prize for Environmental Heresy

March 5, 2012

Michael Giberson

The Spectator magazine in the U.K. announces the Matt Ridley Prize for Environmental Heresy:

Matt Ridley has long deplored the wind farm delusion, and was appalled when a family trust was paid by a wind farm company in compensation for mineral rights on land on which it wanted to build a turbine. The trust would be paid £8,500 a year for it, and Matt couldn’t abide the idea of profiting — even in part — from this. So he is donating £8,500 in an annual prize to be given to the best essay exposing environmental fallacies. Entries open today.

The rules are simple. We invite pieces from 1,000 to 2,000 words in length, to gore one of the sacred cows of the environmentalist movement. Matt says more in his cover essay for the new Spectator (which you can also read on Facebook) : ‘There are many to choose from: the idea that wind power is good for the climate, or that biofuels are good for the rain forest or that organic farming is good for the planet or that climate change is a bigger extinction threat than invasive species.’ A shortlist of six will be put to a panel of judges and the winning entry will be published in the magazine in July.

Entries … close on 30 June 2012.

More details at the first link above. £8,500? That is more than US$13,000. Hmmm, which sacred cow do I want to gore?

Matt Ridley is the author of several books on science and society, including The Rational Optimist, The Red Queen, The Origins of Virtue, and Genome.

Posted in Electricity, Environmental policy, Miscellany | Tagged | 2 Comments »

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A.C. Pigou, public choice economist, on the use of government

February 20, 2012

Michael Giberson

At the end of a comment on Windfall, a new documentary on the effects of wind power development on a community in upstate New York, Michael Munger pulls out the key Pigou quote.

Pigou is relevant because the best possible case to be made for subsidizing wind power production involves correcting for the externalities associated with conventional electric power production. Maybe we imagine a Pigovian tax on conventional generators as a sort of first-best solution, and direct subsidy to alternative generators as a second- or third-best solution.

Well, here Munger whips out the Pigou:

It is not sufficient to contrast the imperfect adjustments of unfettered enterprise with the best adjustment that economists in their studies can imagine. For we cannot expect that any State authority will attain, or even wholeheartedly seek, that ideal. Such authorities are liable alike to ignorance, to sectional pressure, and to personal corruption by private interest. A loud-voiced part of their constituents, if organized for votes, may easily outweigh the whole.

From A. C. Pigou, Economics of Welfare, chapter 20, paragraph 4, available online free via the Library of Economics and Liberty.

Yes, well before James Buchanan, Gordon Tullock, Mancur Olson, Robert Tollison or even Michael Munger were objecting that government intervention may go awry, Professor Pigou was already there.

[ASIDE: I was led to wonder why this insight was seemingly lost from economics for several decades after Pigou published his work. Maybe someone has researched the question carefully. In the absence of someone setting me straight, I'll blame Paul Samuelson.

Samuelson's influential Foundations of Economic Analysis refers to Pigou several times, according to the book's index, but so far as I noticed just once it mentions that the presence of Pigou's external costs means "there is of course need to interfere with the 'invisible hand'." (p. 196)  Samuelson neglects Pigou's qualification: "The case, however, cannot become more than a prima facie one, until we have considered the qualifications, which governmental agencies may be expected to possess for intervening advantageously." (And then Pigou continues with the public choice-like lines Munger quoted.)]

Posted in Economics, Electricity, Energy markets, Environmental policy | Tagged , , | 8 Comments »

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Marc Gunther on the brewing solar PV trade wars

January 10, 2012

Michael Giberson

Marc Gunther asks, “Should we worry about Chinese government subsidies to its solar industry? Or send the Chinese a thank-you note?“ The issue is a “dumping” complaint filed by several U.S. based manufacturers with the U.S. International Trade Commission alleging China so subsidizes its solar PV production that the PV panels are being sold here at a loss.

As Gunther notes, “it takes chutzpah (that’s a technical term in economics) for US solar manufacturers to complain about subsidies in China since they, too, benefit from … [long list of subsidies provided by U.S. federal and state policies].”

ASIDE: Elements of the wind power industry have taken inspiration, as a few weeks ago four U.S.-based manufacturers of wind turbine towers filed a complaint with the ITC against Chinese and Vietnamese wind turbine tower manufacturers.

[HT to AltEnergyStocks.com, where Gunther's column was republished.]

Posted in Electricity, Environmental policy, Regulation | Tagged , , , , | Comments Off

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Is subsidising renewable energy is a good way to wean the world off fossil fuels?

November 17, 2011

Michael Giberson

The Economist is hosting an online debate on the motion, “This house believes that subsidising renewable energy is a good way to wean the world off fossil fuels.” Matthew Fripp of the Environmental Change Institute at Oxford University has presented the affirmative case for the motion, Robert Bradley, Jr., of the Institute for Energy Research has argued the negative.

In closing arguments, Fripp makes what seems to be the best possible case for a combination of directed renewable energy subsidy (either renewable portfolio standards or feed-in tariffs) and gradually increasing carbon tax. While actual policy is unlikely to be as gradual, certain, and efficient as Fripp suggests, it seems desirable for policymakers to at least try, right?

That is, it seems desirable for policymakers to aim for gradual, certain, and efficient policy support for renewable energy assuming we accept the goal of weaning the world off fossil fuels. Bradley doesn’t.

Against a proposition that is formally about the means to an end, Bradley closes by arguing against the end. He argues cheap energy is good energy:

Good public-policy intentions are not enough …. Higher-quality, less-expensive energy enhances living …. This fossil-fuel dividend, if you will, enables a variety of lifestyle enhancements, including those for better health. Wealth is health, and human health should be at the core of environmentalism.

To me Fripp’s polished policy scenario is unappealing in part because of how appealing he makes it seem. (!) I’m not at all ready to turn the energy industry over to a central planning bureau, even Fripp’s ideal which would limit its interventions to minimally intrusive ways of promoting renewable power while a carbon tax was phased in and then disappear. Government attempts to manage the economy tend to destroy economic value; Fripp hasn’t convinced me government has overcome the knowledge problems and coordination problems inherent in economics action.

When renewable energy sources earn a place at the “high-quality, less-expensive” table, we’ll all be wealthier and healthier for it. In the meantime, in a world with significant problems of poverty and disease, wasting resources to install inefficient technology on large scale is destructive of wealth and health.

NOTE: At the moment I’m posting, the reader voting shows 49% in agreement with the motion and 51% opposed. Today, November 17, 2011, is the last day for reader voting. My recommendation: if you like government planning for the energy economy, vote Yes; if you prefer wealth and health, vote No.

Posted in Electricity, Energy markets, Environmental policy, Politics | Tagged , , , | 9 Comments »

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Massachusetts observes that green power mandates may be raising consumer costs

November 10, 2011

Michael Giberson

Let’s just say when the best example of a success story is a long-term contract signed by a utility and the Cape Wind project, you haven’t exactly resolved concerns about the practicality or cost-effectiveness of the law.

From the Boston Herald, “AG: Energy costs rising under Mass. renewables law“:

The Green Communities Act, signed in 2008 by Gov. Deval Patrick, was intended to help Massachusetts wean itself off fossil fuels and reduce emissions that lead to global warming.

In remarks prepared for a legislative oversight hearing, [Massachusetts Attorney General Martha] Coakley indicated that a review by her office found plenty to like about the three-year-old law, along with some concerns.

“In short, we have found a number of benefits — including increased energy efficiency programs that lead to savings for many consumers,” Coakley said. “But we also have found that the (law’s) programs have escalating costs that will cause an increase in electricity rates.”

The cost of implementing the law will exceed $4 billion over the next four years, Coakley said, resulting in the estimated 7 percent increase in the total delivered costs of electricity to consumers and businesses. She noted that Massachusetts electric customers already pay some of the highest rates in the nation and that the state is “likely to remain at the top of that list.”

Okay, so they’ve identified the costs at over $4 billion for the next four years. The article doesn’t mention any estimate of the benefits created.

(Note that it wasn’t Coakley that cited the Cape Wind deal, but rather the state’s Secretary of Energy and Environmental Affairs and the chairwoman of the Department of Public Utilities.

“A long-term contract provides the certainty that can be critical in making financing available,” [DPU chairwoman Ann] Berwick said.

Of course she is right! A long-term contract can transfer a substantial portion of the riskiness from the private investors to the utility’s locked-in ratepayers. It can be a great deal for the investor, and I’m sure the investors are quite happy to have government policy and state policymakers helping to ensure a good return on their private investments.

Uh, and by the way ratepayers, your already high rates are going higher.)

Posted in Electricity, Environmental policy, Regulation | Tagged , , | 1 Comment »

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Scottish wind power plants paid not to produce

July 13, 2011

Michael Giberson

The Telegraph has reported “six Scottish wind farms were asked to stop producing electricity on a particularly windy night last month as the National Grid was overloaded.” The operators were paid a total of £900,000 to take the night off, likely earning more from not operating than they would have earned from selling power that night.

The payments were discovered by the Renewable Energy Foundation, a green think tank, which accused the Government of building too many wind farms in northern Britain.

John Constable, director of policy and research, said not enough care had been taken to ensure there were enough high-voltage cables to transfer the power to other parts of the UK when it was needed.

“Hasty attempts to meet targets for renewable energy mean some Scottish wind farms are now in the extraordinary position of not only printing money when they generate, but printing it even faster when they throw their energy away,” he told the Sunday Times.

The Renewable Energy Foundation provides additional information on its website:

Posted in Electricity, Energy markets, Environmental policy | Tagged , | 7 Comments »

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Cheap natural gas upsetting wind development plans, and other energy stories

May 23, 2011

Michael Giberson

Energy stories from around the web.

  1. Financial Times, Gas threat to wind farm growth – “Construction of new wind farms in the US is set to decline next year because of competition from cheap natural gas for power generation, the country’s largest developer of new wind power projects has said.”
  2. Greentech grid, California ISO opens new high-tech control room - “We partnered with Google and we went from your typical map board made of plastic tiles, with digital readouts, to an 81-foot video display wall.”
  3. Reuters, “Japan eyeing plan for solar panels on all new buildings-Nikkei” – Japan may this week announce proposal to require all new buildings to have solar PV panels by 2030.
  4. San Antonio Express-News, “Eagle Ford’s calling card: help wanted” – Fracking not just for natural gas. Oil from shale big in South Texas. “But drilling in the Eagle Ford, a 400-mile-long formation stretching from East Texas to Webb County, has touched off a hiring frenzy in South Texas that is generating thousands of jobs. Now, drilling is moving so swiftly that the scramble for workers has caught some short.”
  5. Houston Chronicle, “Nat gas feud pits prosperous N. Texans against energy industry” – Oil and gas wells not always the best of neighbors.
  6. Reuters, “Chesapeake handed record fine for Pennsylvania gas drilling” – The company was fined a total of $1.1 million for problems at two sites in Southwestern Pennsylvania: $900,000 for seepage from non-shale shallow gas formations due to a poorly-done well casing and cementing job, and $188,000 for violations associated with a fire that injured 3 workers. (See also this Associated Press story.)
  7. Houston Chronicle reporter Richard Dunham, “Why Washington is no help at the pump” – Dunham says “politics as usual” is causing Washington to be of no help in solving our energy problems. (My view: For the most part we’d be better off without Washington trying to “help” consumers. If politics-as-usual is keeping Washington out of the energy business, that is probably a good thing.)
  8. William O’Keefe at the FuelFix blog, “3 Myths About Breaking U.S. Oil Habit” – Counter to some prevailing wisdom (while at the same time affirming popular views held by others) about climate change, energy independence, and resource scarcity.
  9. The Hill’s E2-Wire, “Greens, industry draw battle lines in fight over oil pipeline” – More on the political maneuvering surrounding the Keystone XL pipelines. Environmentalists are mostly opposed to the pipeline since it will mostly be supplied from the Alberta tar sands, and environmentalists are mostly opposed to tar sands development.

Posted in Electricity, Energy markets, Environmental policy, Politics, Regulation | Tagged , , , , | 4 Comments »

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Bonneville Power Administration says no to negative prices again

May 20, 2011

Michael Giberson

The Bonneville Power Administration (BPA) Administrator has adopted interim Environmental Redispatch and Negative Pricing Policies to deal with potential overgeneration conditions on the BPA power system. In brief, BPA plans to employ “Environmental Dispatch” rules for operating the power system in a manner conducive to BPA meeting various legal and regulatory constraints; the BPA Negative Pricing Policy is “we won’t allow it.”

Excepts from pages 10-12 of “BPA’s Interim Environmental Redispatch and Negative Pricing Policies: Administrator’s Final Record of Decision,” May 2011, below. I haven’t yet read the 68-page long section “Negative Pricing Policy,” but am adding it to my summer reading plans.

Related:

From the BPA report:

The events of early June 2010 illustrate how the increase in wind generation has influenced the ability to manage high flows on the Columbia River. … In early June, however, a strong Pacific jet stream brought storm systems with heavy precipitation and runoff. Snake River streamflows nearly tripled, and Columbia River streamflows nearly doubled. The resulting flows exceeded those needed to meet flow and spill objectives for fish passage. Federal water management staff focus shifted to developing strategies and modifying operations to reduce excess spill and minimize excessive TDG production to the extent practicable.…

During this time, most Northwest thermal generation shut down or reduced to minimum operating levels. These generation owners obtained low-cost or free Federal hydropower to replace thermal generation. Thermal generation normally finds it economical to displace their fuel with lower-cost hydropower since they can store or conserve their fuel while they receive hydropower.

However, due to differing economic considerations, the roughly 3,000 megawatts of wind power projects located in BPA’s Balancing Authority Area did not respond to the availability of free Federal hydropower. Wind power projects cannot store their fuel and are generally eligible to receive Federal Production Tax Credits (PTC) and/or state Renewable Energy Credits (REC). Wind power output ranged from zero to nearly full output, depending on wind conditions….

Unlike thermal operators, wind operators have an economic incentive to operate as much as possible, regardless of system conditions. The PTC is currently $21 per megawatt-hour (“MWh”) and state RECs are generally in the $8 to $20 per MWh range, so this incentive is significant. While all wind power projects are eligible to receive RECs for production, most new wind power projects have opted not to take the PTC and instead opted for the Investment Tax Credit (“ITC”) or other grants that provide up-front financial benefits tied to the cost of the project and not actual production. Wind power projects that opt for the ITC or other grants receive the full financial benefit of these incentives regardless of project output (pp. 11-12).

BPA believes that its statutory responsibilities and the objectives of the Northwest Power Act would be frustrated if BPA were required to pay negative prices in order to ensure compliance with BPA’s environmental responsibilities.

… While one purpose of the Northwest Power Act is to encourage the development of renewable power in the Pacific Northwest through BPA’s acquisition authority, that is one purpose among many that BPA must meet, including assuring the Northwest has an economical power supply, providing environmental quality, continuing to repay the U.S. Treasury on a current basis, and protecting, mitigating and enhancing fish and wildlife of the Columbia River and its tributaries. …

[P]aying negative prices to displace renewable generation to ensure BPA’s environmental responsibilities are met is neither socially optimal nor consistent with traditional principles of cost causation. BPA’s statutory preference customers would end up paying the costs of displacing renewable generation that is currently almost entirely serving the loads of utilities outside of the BPA Balancing Authority Area. The costs of Federal and state production incentives should be borne by a broad group of taxpayers and ratepayers receiving the wind power, not concentrated on smaller subsets of consumers with limited economic interest or benefits from the renewable generation.

Note that about 750 MW of wind capacity has been added to the BPA Balancing Authority Area since June 2010, to a current total of 3522 MW, and “as much as 3,000 MW of additional wind generation expected to come on line in the next few years” according to the report.

Posted in Electricity, Energy markets, Environmental policy | Tagged , , , | 1 Comment »

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