Renewable energy advocates regularly ignore the intermittency of solar and wind energy in their analyses. As discussed in a previous article, this is a very serious omission because the mechanisms required to compensate for intermittency can increase the cost of solar and wind energy many-fold, especially at higher penetration levels.
The fact that wind energy still requires generous subsidies after having reached grid-parity with conventional power is a very direct real-world example of the added costs of intermittency even at low penetration levels. This article will explore the market mechanisms responsible for this often ignored added cost.
Electricity markets
In principle, electricity markets are fairly straightforward. Offers made by sellers are arranged in ascending order, bids made by buyers are arranged in descending order and the market clearing price and capacity is determined by the point where the two lines cross. In this way, no sellers are forced to sell power below the price they offered and no buyer has to buy power at a higher price than they bid.
When working with dispatchable generating capacity, the offers being put forward will mostly start with baseload coal or nuclear plants which are optimized to run at very high efficiencies and capacity factors. Load-following coal and gas plants will then bid in at a somewhat higher price because they have to work at lower capacity factors and efficiencies. And finally, peaking plants capable of rapid ramping will bid in at very high prices in case of very high demand.
Since it is very difficult to store electricity, this arrangement is necessary to closely match supply with demand as it varies over various timescales ranging from minutes to months. An example of how this arrangement will impact electricity prices is shown below for three different times of day. It is clear that electricity prices will be low in the early morning hours because very little of the more expensive load-following capacity is required. In the afternoon peak, however, electricity prices can increase substantially as more expensive supply is brought online.
The demand lines are drawn diagonally in order to visualize the limited effect that price can have on demand. For example, if prices fall for whichever reason (i.e. the blue curve shifts downwards) more capacity will be bought at this lower price perhaps due to some energy intensive industries upping production.
Practical difficulties posed by intermittent sources
This system of matching supply and demand operates very well for dispatchable sources, but things become a lot trickier when intermittent sources are included. Because of the practical challenges discussed in this section, intermittent renewables generally enjoy dispatch priority – a priority of selling electricity to the grid regardless of supply/demand fundamentals. Without such legislation, intermittent energy surges might not be accepted even if they made competitively low price offers.
The most important practical problem arises when intermittent renewable energy surges enjoying priority dispatch displace the demand for baseload power. Due to the potentially very large renewable energy spikes, this can already happen at fairly low penetrations. For example, German wind power shown below achieved a capacity factor of about 18% in 2012, but intermittent spikes regularly exceeded 70% of capacity – quadruple the mean output. As a result of such intermittent spikes occurring during times of low demand (e.g. at 04:00 in the graph shown above), wind will regularly eat into baseload demand even at penetration levels as low as 5%.
Cutting supply from a baseload plant to compensate for an hour or two of very high wind generation is not practically possible. This means that both the wind and baseload capacity must be cleared by the market through very large price reductions. In recent years, this has at times resulted in negative electricity prices.
In addition, renewable energy fluctuations often happen quite rapidly, thereby requiring very rapid ramping of load-following plants. The long neck of California’s “duck graph” (the time when solar PV supply falls at the same time as demand picks up towards the afternoon/evening peak) offers a good example of this issue. In practice, this situation will require a much higher percentage of the expensive peaking plants capable of such rapid ramping.
The effect of intermittency on price
Free market systems are very adept at correctly valuing commodities. It is therefore no coincidence that the electricity price is low (sometimes negative) during times of high production of intermittent renewable energy. As shown below, this relationship between prices in red (€/MWh) and wind energy output in blue (MWh) is clearly visible for German wind power even when the data is smoothed to daily averages.
Naturally, this significantly hurts the business case for intermittent renewables simply because wind and solar farm operators must sell the bulk of their product at below-average prices. From this point of view, it is only natural that wind power will continue requiring substantial subsidies even though grid parity has already been reached many years ago.
At this point, solar advocates normally point out that solar PV production is much better correlated with demand and therefore deserves to be sold at a premium. Yes, this is true for the first few percentage points of penetration, but, due to the very pronounced intermittency (low capacity factor) of solar PV, it is not long before the same problem is encountered. As an example, the projected electricity supply profile for Germany in the year 2020 is shown below with solar PV at 10% penetration.
It is clear that solar PV supply surges will eat into baseline supply and force very deep and rapid ramping of load-following plants on many days during the summer. Under such circumstances, Germany will have to pay its neighbours to take this unwanted solar power off her hands, thereby severely hurting the business case for solar PV and forcing unnatural shifts in economic activity in the core of the already fragile European economy.
Added costs of the transition from baseload to load-following
This incompatibility between baseload capacity such as nuclear and intermittent renewables such as wind and solar is part of the reason why Germany is retiring her nuclear fleet and building more flexible coal plants. Naturally, this is a tremendously expensive endeavour and struggling German utility companies are now claiming €15 billion in damages. Without this compensation, German utilities will not be able to meet the great challenges posed by rapidly fluctuating loads such as the example shown above and the Energiewende will fail. It can therefore be expected that utility bailouts will contribute significantly to the rapidly rising costs of the Energiewende in coming years (the numbers below are in billions of Euros).
Summary
As this brief analysis has shown, intermittent renewables will sell at below-average prices even at relatively low levels of penetration, implying that these technologies will require generous subsidies even after grid parity is reached. This effect has shown itself in real-world markets even at fairly low penetration levels and will escalate rapidly as more intermittent capacity is added.
In addition, substantial added costs can be expected from the premature transition from a dispatchable power fleet predominantly running baseload plants to one running only load-following plants. Baseload plants must be retired early, new load-following plants must be constructed and the overall capacity factor and efficiency of dispatchable power generation will drop substantially.
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33 Comments on "Intermittent Renewables and Electricity Markets"
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” substantial added costs can be expected from the premature transition from a dispatchable power fleet predominantly running baseload plants to one running only load-following plants. Baseload plants must be retired early, new load-following plants must be constructed and the overall capacity factor and efficiency of dispatchable power generation will drop substantially. “
I guess this bureaucrat should also cover hereunder listed points in his article, to illustrate why yhis article is not realistic……
1. Germany is massively subsidising lignite coal extraction if the lignite is extracted from inside Germany, rendering this lignite the cheapest fuel available on the market, cheaper than free wind, sun and water…. Then it taxes CO2 emissions coming out of it’s indigenous coal plants, who are burning this subsidised German lignite. And all this subsidy circus gets paid by the electricity consumers. No wonder your EnergieWende is such a failure, and electricity prices are going through the roof in Germany. No wonder solar roof PV is such a success in Germany, it is the only way to avoid this government insanity, and avoid paying a lot for your consumed home/office/plant electricity.
2. Germany didn’t close out it’s nuclear plants because they were not compatible with intermittent renewable energy. It was a political decision after German voters pressure demands occuring after the Fukushima accident in Japan.
3. Nuclear can be baseload and load following. Canadian CANDU6 720MW nuke plants easily can ramp up and down according to grid demand, being able to operate as low as 50% of their nominal power setting. That is why China has so many of them. They are flexible enough to accomodate any intermittent renewables on demand, if the total power park capacity is not consisting of more than 50% of such plants. A shame they are so expensive and the newest evolutions are avaiiable only once you need 1000MW plus in nameplate capacity.
4. Germany has built many new load-following natural gas powered plants in the last five years. I almost worked on the construction of one of them near Koln. A humonguous amount of them were built. German utilities like RWE and Eon are now in financial difficulties because of them, since they are mostly not used. They are now losing money to their owners, because they produce electricity at too expensive rates, due to the high imported natural gas prices. They can not compete with wind, hydro and biomass/biogas.
5. Denmark has more than 25% in wind nameplate capacity in it’s total power generation park. They have no issues whatsoever with load following. They simply export their surplus wind to Norway when it’s own grid is wind saturated and baseload power plants have to be curtailed. Norway then simply shuts down some hydropower dams, until the Danish wind exports starts decreasing. Once Danish wind production is too low, they import hydro power generated in Norway. The same approach is now slowiy being put in place all over Europe, with interconnectors linking all countries, allowing load balancing on a continental basis. Yes it costs money. But it is far cheaper than depending on imported Russian or Qatari or Algerian natural gas, and sending spare euro to those countries. After all, building this grid sends the money to our own people, instead of sending it overseas….
6. New coal power plant now achieve 50% plus in energy efficiency. That means that 50% of the energy contained in the coal fuel is going through the chimney. That is why decentralised smaller scale combined heat and power plants are far better. They achieve a 85% energy efficiency without a problem, since most of the heat is recuperated, and can displace imported natural gas used for space heating…
7. Greenpeace warns water pollution from German coal mining on the rise. The scenic waterways of the Spreewald eastern German natural area could remained choked with iron sludge from lignite coal mining for decades iron oxide content in the water showed to be more than 100 milligrams per liter — 3 milligrams per liter are considered harmful to the environment. Vattenfall, moving to meet rising electricity demand in Germany, has announced plans to develop 5 brown lignite coal strip mines in Lausitz, beginning with the Welzow-Sud II mine. The company is intending to mine 204 million tons of brown coal at the site through 2050.
http://www.energy-daily.com/reports/Greenpeace_warns_water_pollution_from_German_coal_mining_on_the_rise_999.html
8.Legacy of 1986 Chernobyl disaster seen in impact on region’s forests. While the worst effects in surrounding forests were recorded in the “first few years” after the accident, surviving trees were left vulnerable to environmental stress such as drought with young trees particularly affected. “Many of the trees show highly abnormal growth forms reflecting the effects of mutations and cell death resulting from radiation exposure,” he said.
http://www.terradaily.com/reports/Legacy_of_1986_Chernobyl_disaster_seen_in_impact_on_regions_forests_999.html
9. The operator of the crippled Japanese Fukushima Daiichi nuclear plant has started pumping out radioactive groundwater to reduce leakage into the Pacific ocean. The embattled utility — kept afloat by a government bailout — last month admitted for the first time that radioactive groundwater had been leaking outside the plant. It has since said tainted water has been escaping into the Pacific for more than two years since the atomic crisis triggered by a huge quake and tsunami in March 2011. An official at Japan’s industry ministry said this week that Tokyo estimates 300 tonnes of contaminated groundwater may be seeping into the ocean every day.
http://www.terradaily.com/reports/Fukushima_operator_pumps_out_toxic_groundwater_999.html
10. S. Korea facing power crisis. “We are facing potentially our worst power crisis,” Trade, Industry and Energy Minister Yoon Sang-Jick said Sunday. “We may have to carry out a rolling blackout… if one single power plant goes out of operation,” Yoon said, appealing to factories, households and shops to curb consumption over the next three days. The timing could hardly be worse, with South Korea in the grip of an extended heatwave and a lengthy disruption in its nuclear power sector. South Korea’s nuclear industry is struggling to emerge from a mini crisis which has forced the shutdown of numerous reactors — either for repair or as the result of a scandal over forged safety certificates. The country has 23 reactors which are meant to meet more than 30 percent of electricity needs. Currently six reactors are out of operation.
http://www.energy-daily.com/reports/S_Korea_facing_power_crisis_999.html
11. Price of Wind Energy in the United States Is Near an All-Time Low. The prices offered by wind projects to utility purchasers averaged $40/MWh for projects negotiating contracts 2011 and 2012, spurring demand for wind energy. Wind power comprised 43% of all new U.S. electric capacity additions in 2012 and represented $25 billion in new investment. Wind power currently contributes more than 12% of total electricity generation in nine states (with three of these states above 20%). Turbine scaling is boosting wind project performance. Since 1998-99, the average nameplate capacity of wind turbines installed in the U.S. has increased by 170% (to 1.94 MW in 2012), the average turbine hub height has increased by 50% (to 84 meters), and the average rotor diameter has increased by 96% (to 94 meters). Wind turbine prices have fallen 20 to 35% from their highs back in 2008, and these declines are pushing project-level costs down. At the same time, even with a short-term extension of federal tax incentives now in place, the wind power industry is facing uncertain times, in part due to low natural gas prices and continued policy uncertainty.
http://www.winddaily.com/reports/Price_of_Wind_Energy_in_the_United_States_Is_Near_an_All_Time_Low_999.html
Intermittency problems cited as a barrier to cost-effective renewables are overstated, and not as costly to remedy if we choose the right solutions, including end-use efficiency improvements, and distributed sources (rather than big generating plants).
more info from an old-ish, but still relevant article: http://completelybaked.blogspot.com/2009/02/renewables-intermittency-reliability.html
To help make Renewables like Wind and Solar more steady we can use http://WWW.V2G-101.COM Vehicle to GRID with the millions of new Plugin Vehicles coming out each day. Univerisity of Delaware and google have been doing this and it really works.
As mentioned in remarks on this page there are times when there is too much and others when there is to little. Millions of vehicles can regulate this and still have plenty of charge to replaace dirty imported OIL. My EV goes about 50-80 miles on 10 kWH $1 of energy vs a gallon of gas. Interesting fact, it take as much electricity to regine a gallon of gas as it does to drive that far in an electric vehicle! no OIL, no transmission or exhast !
Great companied like Tesla are 100% American, their vehicles are the highest rated of any vehicle regardless of fuel! They are placing SuperCharger locations all across the USA and World that are free for life and 110% Renewable energy powered., With a range of 300 miles and most drives only go 30-50 a day it’s a great way to keep $1 Billion a day from imported OIL in this country.
http://www.udel.edu/V2G/
What happened to the idea that the size of the grid would solve most of the problems.
As usual the world will optimize the balancing of intermittent renewables primarily through trial and error. This optimization will yield some combination of thermal power plants, expanded electricity networks and energy storage. The ideal ratio will vary strongly from case to case and will be quite difficult to determine.
Electricity distribution typically carries similar costs to electricity generation. However, this is for standard power plants where the distribution network simply has to distribute electricity from a fixed and concentrated source to a designated populated area. Using the grid for balancing renewables will require that electricity can be distributed over a very large populated area from wherever the wind is blowing and the sun is shining. Such a grid will require large amounts of excess transmission capacity to avoid congestion as the intermittent electricity surges shift from one area to the next. This will definitely not be cheap and will also have some unwanted visual impacts.
Battery prices must drop and endurance must increase but I agree with you. And progress on both fronts is moving rapidly. http://cleantechnica.com/2013/07/08/40-drop-in-ev-battery-prices-from-2010-to-2012/
Further, there is a new idea rapidly gaining traction and that is repurposing used EV batteries for dispatchable grid storage. http://www.sandia.gov/eesat/2011/papers/Tuesday/19_Jaffe_ESSAT_Abstract.pdf
It will be costly to expand the grid but again we get back to the difficult to monetize discussion. This time (unlike exernalities) the benefits are difficult to monetize. However to thus wipe them away and pretend that they don’t matter is in service of supporting a point of view rather than moving to the wisest couse of action. Here are two considerations for grid expansion:
Reliability – Progress has been made since the Northeast blackout but most are saying that it is far from sufficient. When the West Cost debacle ocurred, in part courtesy of then Wall Street darling Enron, Intel said that they would not build any more fabs in CA unless and until they had confidence in the grid. That alone is a huge loss. IC fabrication is not the only industry that benefits from grid stability, or is severely damaged from lack of it, there are many others. One fab is a huge employer and high value jobs. How do we monetize the value of a stable grid?
An upgraded grid is a market facilitator. It creates a much more transparent market for electric power. It makes it possible to make something much closer to a real market for electrical generation. The Transactive Grid concept allows something akin to the Nasdaq exchange for power over the grid – http://theenergycollective.com/ecsjessica/253846/transactive-energy-next-big-deal-smart-grid Those who support free markets generally agree that they optimize pricing.
How do we monetize the value of the Transactive Grid or a truly reliable grid? Do we just wait until we have it all figured out?
I say no. The value is compelling. Perfection is the enemy of the good particularly given the enormous costs we will incur from sea level rise.
Jim,
I’ve heard/read this argument many times before, and my impression of it has been very unfavourable.
1) First we have to have those millions of vehecles..we don’t
2) The excess power from renewables must cccur when the vehicles are plugged in and fully charged..what are the chances of relying on that?
3) The increased Charge/dischrge cycles of car batteries will lessen the longevity of said batteries, and if we tweek the discharge being fed to the grid to a minimum in order to preserve the car batteries, this act will lower their usefulness as grid backup.
Frankly I’d rather not have us rely on renewables in this way at all, except for concenterated solar (CSP), which could be collected from diverse areas (even rooftops?), and fed by fiber optic cables to a central location where molten salt is held.
For my money, CSP and 4th Generation Nuclear power are the future.