U.S. Secretary of Energy Rick Perry wants to know whether solar and wind are killing coal, nuclear and grid reliability. Thanks to Texas, where Perry was governor, we know that a combination of wind and solar with fast-ramping natural gas, smart market designs and integrated load control systems will lead to a cleaner, cheaper, more reliable grid, write four researchers at the University of Texas. Courtesy The Conversation.
In April U.S. Secretary of Energy Rick Perry requested a study to assess the effect of renewable energy policies on nuclear and coal-fired power plants.
Some energy analysts responded with confusion, as the subject has been extensively studied by grid operators and the Department of Energyâs own national labs. Others were more critical, saying the intent of the review is to favor the use of nuclear and coal over renewable sources.
So, are wind and solar killing coal and nuclear? Yes, but not by themselves and not for the reasons most people think.
Are wind and solar killing grid reliability? No, not where the gridâs technology and regulations have been modernized. In those places, overall grid operation has improved, not worsened.
To understand why, we need to trace the path of electrons from the wall socket back to power generators and the markets and policies that dictate that flow. As energy scholars based in Texas â the national leader in wind â weâve seen these dynamics play out over the past decade, including when Perry was governor.
Wrong question
There has been a lot of ink spilled on why coal is in trouble. A quick recap: Natural gas is plentiful and cheap. Our coal fleet is old and depreciated. Energy use in the U.S. has flatlined, so thereâs less financial incentive to build big new power plants.
Part of Perryâs review is aimed at establishing how wind and solar, which are variable sources of power, are affecting so-called baseload sources â the power plants that provide the steady flow of electricity needed to meet the minimum demand.
Posing the question whether wind and solar are killing baseload generators, including coal plants, reveals an antiquated mindset about power markets that hasnât been relevant in many places for at least a decade. It would be similar to asking in the late 1990s whether email was killing fax machines and snail mail. The answer would have been an unequivocal âyesâ followed by cheers of âhallelujahâ and âitâs about timeâ because both had bumped into the limits of their utility. How quickly 1990s consumers leaped to something faster, less impactful and cheaper than the older approach was a sign that they were ready for it.
Something similar is happening in todayâs power markets, as customers again choose faster, less impactful, cheaper options â namely wind, solar and natural gas plants that quickly boost or cut their output â as opposed to clinging to the outdated, lumbering options developed decades before. Even the Department of Energyâs own analysis states that âmany of the old paradigms that govern the (electricity) sector are also evolving.â
Wind and solar are making older generators less viable because their low, stable prices and emissions-free operation are desirable. And they arenât hurting grid reliability the way critics had assumed because other innovations have happened simultaneously.
Texas pioneer
Letâs use the case study of Texas to illustrate. Since Texas has its own grid, known as the Electricity Reliability Council of Texas or ERCOT, and has installed more wind capacity than the next three wind-leading states combined, the Texas experience shows what variable renewables like wind power do to the grid.
In competitive markets like ERCOT, companies that run power plants place bids into an auction to provide electricity at a certain time for a certain price. A bid stack is jargon for âa stack of bidsâ â or the collection of all these bids lined up in order by price â in auction-based markets (such as Texas).
Markets use bid stacks to make sure that the lowest-cost power plants are dispatched first and the most expensive power plants are dispatched last. This market-based system is designed to deliver the lowest-cost electricity to consumers while also keeping power plant owners from operating at a loss. Throughout the day, the market price for electricity (in $/Megawatt-hour) changes as demand changes.
An illustration of the electricity market bid stack for the ERCOT grid in Texas. Generators line up left to right from the lowest cost to highest cost every five minutes. As demand changes throughout the day, the âmarginal generator,â or the last power plant called to provide power, sets the price that every plant providing power (left of the vertical black line) is paid. Power plants to the right of the line are not dispatched and thus do not receive payment in an energy-only market. (NG CC = Natural Gas Combined Cycle; NG Other = NG boilers and combustion turbines). University of Texas at Austin, CC BY
The cost of natural gas also affects the price of electricity. As the price of natural gas drops, each of the natural gas power plants drop in price. Thatâs no surprise: When it costs less for them to operate, they can bid a lower price into the market and move earlier in the line.
When gas drops into the range of US$3 to $3.50 (per million BTU) and lower, it begins to displace coal as a less expensive source of electricity. This scenario reflects todayâs reality: gas is cheap so grids are using it for more of our electricity than coal.
Illustration of a bid stack with a fixed load and declining prices for natural gas, resulting in coal being forced to the right side of the bid stack. Moving to the right of the stack means that the power plant is not dispatched because there are other more economical options for producing electricity, in this case, NG CC. (NG CC = Natural Gas Combined Cycle; NG Other = NG boilers and combustion turbines). University of Texas at Austin, CC BY
How do renewables affect the bid stack? Renewable sources such as wind, solar and hydro have no fuel costs â sunlight, wind and flowing water are free. That means their marginal operational cost is near zero; the cost is essentially the same to operate one megawatt of wind as compared to the cost of operating 10 megawatts of wind since generators donât need to buy fuel. That means as more wind and solar farms are installed, more capacity is inserted at the cheapest end of the bid stack.
This insertion pushes out other generators such as nuclear, natural gas and coal, causing some of them to no longer be dispatched into the grid â that is, they donât supply power into the grid (or get paid). So as more renewables are installed, power markets dispatch fewer conventional options. And, because the marginal cost of these new sources is almost free, they substantially lower the cost for electricity. This is great news for consumers (all of us) as our bills decrease, but bad news for competitors (such as coal plant owners) who operate their plants less often and are paid less when the plants do operate.
Increasing the installed capacity of renewable energy (e.g., wind and solar) on the bid stack shifts generators with conventional fuels such as nuclear, coal and natural gas to the right. Since renewable sources have near-zero marginal costs since there is no cost for fuels, they are dispatched first and reduce the market price for electricity. (NGÂ CCÂ = Natural Gas Combined Cycle;Â NGÂ Other =Â NGÂ boilers and combustion turbines.)Â University of Texas at Austin
What does all this mean? Natural gas and renewables are affecting coal in two ways. Natural gas is a direct competitor with coal because both can be dispatched â turned on â when a grid operator needs more power. That is helpful for grid reliability. But, as the cost of natural gas has fallen, coal has become less competitive because it is cheaper to operate a natural gas power plant.
The effect of renewables is slightly different: Wind and solar power are not dispatchable, so they cannot be turned on at a momentâs notice. But, when they do turn on, during windy evenings or sunny days in Texas, they operate at very low marginal cost and thus operate very competitively.
Research at UT Austin shows that while installing significant amounts of solar power would increase annual grid management costs by $10 million in ERCOT, it would reduce annual wholesale electricity costs by $900 million. The result of all this is that renewables compete with conventional sources of power, but they do not displace nearly as much coal as cheap natural gas does. In fact, cheap gas displaces, on average, more than twice as much coal than renewables have in ERCOT.
What about nuclear?
Nuclearâs problems are largely self-inflicted. In short: The price to build nuclear is high, so we donât build many nuclear plants these days. Since we donât build, we donât have the manufacturing capability. Since we donât have the manufacturing capability, the price to build nuclear is high. Since the price to build nuclear is high, we donât build nuclear these daysâŚso on and so forth.
Today, cheap gas, having already beaten up on coal, is a threat to new nuclear power plants and less efficient, older plants. New natural gas combined cycle power plants can be built for about one-sixth the cost of a new nuclear plant, is almost twice as efficient and you can build them in smaller increments, making them easier to finance.
Market innovation and IT can fix reliability
Because wind energy comes and goes with the weather, it makes grid operators nervous. But wind forecasting has improved dramatically, giving more confidence to those who need to keep the lights on.
And, interestingly enough, the requirements for reserve capacity (backup power for when wind power dips) to manage the grid smoothly went down, not up, over the past few years in Texas, despite rapid growth in wind during Governor Perryâs tenure. That is, the costs for managing variability in the grid decreased.
Why has there been little disruption to the reliability of the Texas grid? Because alongside rapid growth in wind installations was a market transformation in ERCOT. While Secretary Perry was governor, the Texas market went from a coarse, slow market to a fine-tuned, fast market. Innovating the market to one that is dynamic and fully functioning made it easy to include more wind into the system. Itâs also a sign of how advanced technologies enable us to reinvent the grid toward one that is cheaper, cleaner and more reliable.
Figure showing increasing wind in ERCOT and decreasing regulation requirements. The drop in requirements is due to market operational changes. There does not appear to be any correlation with increasing wind and regulation procurements. Juan Andrade, Yingzhang Dong, Ross Baldick
But there is still more to do â information technology coupled with integrated hardware can help. Consider this: There are 7.7 million smart meters in Texas, most of them residential. Weâve estimated that installing 7 million controllable thermostats for just the households in Texas would cost $2 billion. Residential air conditioning is responsible for about 50 percent of peak demand in Texas in the summer. That means about 30 gigawatts of peak demand in Texas is just from residential air conditioners.
By dynamically managing our air conditioning loads â that is, adjusting thermostats to lower overall demand without impacting peopleâs comfort â we could reduce peak demand by 10 to 15 GW. That means we might not need $10 billion to $15 billion worth of power plants. Spending $2 billion to avoid $15 billion is a good deal for consumers. In fact, you could give the thermostat away for free and pay each household $700 for their trouble and it would still be cheaper than any power plant we can build.
In the end, Secretary Perry has posed good questions. Thankfully, because of lessons learned while he was governor of Texas, we already have answers: despite concerns to the contrary, incorporating wind and solar into the grid along with fast-ramping natural gas, smart market designs and integrated load control systems will lead to a cleaner, cheaper, more reliable grid.
Editorâs Note
Joshua D. Rhodes, Postdoctoral Researcher of Energy, University of Texas at Austin; Michael E. Webber, Professor of Mechanical Engineering and Deputy Director of the Energy Institute,University of Texas at Austin; Thomas Deetjen, Graduate Research Assistant, University of Texas at Austin, and Todd Davidson, Research Associate, Energy Institute, University of Texas at Austin
This article was originally published on The Conversation and republished here under a Creative Commons licence. Read the original article.
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Renzo Tavoni says
A very interesting article and extreamely clear.
Compliments
Renzo Tavoni says
Just a few more words.
Naturally all exposed is valid for Texas,but for other countries the situation could be different.
China, for exemple, having an electricity demand growing and lower construction costs for big plants, could find good and economic, to couple renowable plants with nuclear ones.
Andrea T says
The paper you cite as proof of the benefits of increased solar PV penetration says, on page 608: “While the model can produce accurate results, its current version has several limitations. It does not include transmission constraints
treating ERCOT as a single node, assumes marginal cost bidding behavior by the generators, and uses perfect load and renewable electricity generation forecasts. The primary impact of these limitations is […] an inability to reproduce price spikes under scarcity conditions.”
I would say you would need a more sophisticated method to better defend your thesis, e.g. a stochastic one with an explicit representation of the network, in order to capture the costs due to the increase in net-load variability, induced by non-dispatchable RES.
other systems, e.g. Germany, as cited by your paper, had to implement negative prices to try to accommodate for that. That seems to be a signal of potential integration problems.
cheers,
Andrea
Bob Wallace says
“Because wind energy comes and goes with the weather, it makes grid operators nervous. ”
That’s an interesting claim when one looks at what ERCOT has said about integrating wind (and solar).
“ERCOTâs data is similar, Goggin said. âThe areas of the country that have efficient grid operating practices have shown it is possible to integrate very large quantities of wind very reliably at virtually zero incremental cost. The areas of the country that donât have efficient grid operating practices, namely, much of the West outside California, are seeing increased costs and challenges.â
Studies show nuclear and large fossil plants actually have âfar higher integration costs than renewables,â Goggin said.
âContingency reserves, the super-fast acting energy reserve supply required of grid operators in case a large power plant shuts down unexpectedly, are a major cost. Comparing the incremental cost of wind to those costs that ratepayers have always paid, the wind cost looks even more trivial.â
The fundamental issues are more or less the same with integrating solar, Goggin, who specializes in wind, said. âRelative to wind, solar has more minute-to-minute variability, which increases the cost. But forecasting the sun is easier because it is clear when the sun will come up and go down and when the peak is, and that reduces the cost. But grid operators who use efficient operating methods are finding it is no more of a challenge or cost than wind.â”
http://www.greentechmedia.com/articles/read/Grid-Integration-of-Wind-and-Solar-is-Cheap
A combination of wind, solar, NG and some storage should make for a carefree life for grid managers. Their computers will know ahead of time when wind or solar input will change. Storage (battery or PuHS) can bridge the time it takes for gas plants to fire up and take over and balance supply/demand as gas plants shut down. Grid operators can sleep through the process.
Bob Wallace says
By concentrating on marginal costs part of the realities of keeping a generation facility in operation is overlooked. There are fixed costs which must be covered. If those costs are not covered then the facility goes bankrupt.
Marginal costs will determine where a specific facility/type of facility will bid in but it does not reflect whether the facility can survive long term.
New coal and nuclear are off the table because their high capex and finex costs would drive their fixed costs too high to be recoverable on a grid that has access to wind, solar, and/or natural gas.
We’ve reached a point at which some paid off nuclear plants are being paid to stay online. The stated reason is that they are receiving subsidies for their low carbon electricity. But if one followed the local discussion it appears the reason they were bailed out is job protection, not environmental reasons.
Ian Grant says
The article leaves the impression that wind/solar are essentially free (near zero marginal cost).
Why is it then that many grid operators offer high feed-in tariffs as incentives for wind and solar capacity? For instance, in Ontario Canada the current FITs for wind and solar are many multiples the regulated price for nuclear and hydro electricity.
Does this mean that wind and solar capacity are uneconomic without subsidy?
Bob Wallace says
Marginal costs are the costs incurred when the plant is operating. They don’t include fixed costs like the cost of building the plant, staff, insurance, etc.
If a plant has very low marginal costs (wind and solar are almost free) then they can turn on for a low return and make some money that can be used to cover fixed costs. A plant that has to buy fuel would need a higher rate to break even.
Wind and solar WERE uneconomic without subsidies.
Like almost all emerging technologies wind and solar were very expensive at first. Looking back 30 years wind was over $0.55/kWh. Twenty years ago solar was about $0.35/kWh and solar panels were over $75/watt.
Subsidy programs and other programs designed to increase their use brought us along the ‘learning curve’ until now when wind is under $0.03/kWh, solar is breaking below $0.04/kWh and solar panels are under $0.50/watt.
1.1 and 2.1
https://goo.gl/8cbAX4
We’re reaching the point at which subsidies are not longer needed.
What we will now have to ask ourselves is “How hard do we want to fight against climate change?”.
If we want to work hard then we might want to keep some subsidy programs in place in order to encourage more investment in renewables and drive their installation faster.
In the US we (a few years back) were spending between $140 billion and $252 billion a year dealing with health problems caused by coal pollution. That’s probably down some because we’ve closed a number of coal plants, but still very serious money. Why not spend a few billion dollars a year on renewables in order to cut the $100+ billion we spend because of coal? That would just be smart business.
Hendrikus Degenaar says
[censored] The Global Wind Energy Council recently released its latest report, excitedly boasting that âthe proliferation of wind energy into the global power market continues at a furious pace, after it was revealed that more than 54 gigawatts of clean renewable wind power was installed across the global market last yearâ. You may have the impression from announcements like that, and from the obligatory pictures of wind turbines in any New York Times story, that wind power is making a big contribution to world energy today. You would be wrong. Its contribution is still, after decades “nay centuries” of development, trivial to the point of irrelevance. Even after 30 years of huge subsidies, wind power provides only slightly more than zero energy to the world.
http://rodmartin.org/utter-complete-total-fraud-wind-power/
Bob Wallace says
January, 1910
Equestrian Times
“After years and years of development Henry Ford sold only 10,660 of his Model T flivvers last year. Sales are trivial considering the number of horses used for transportation around the world.”
In 1920 Ford sold just under one million Model Ts.
By 1930 horses had basically disappeared from American and European cities streets. Car deniers didn’t hear the cars coming up behind them and about to run over their butts.
As for wind…
In 2000 wind provided 0.2% of global electricity.
In 2005 wind provided 0.6% of global electricity.
In 2010 wind provided 1.6% of global electricity.
In 2015 wind provided 3.5% of global electricity.
More than doubling every five years.
(Your [censored] linked site uses total energy in an attempt to minimize how rapidly wind generation is growing.)
Hendrikus Degenaar says
Apply the capacitance factor for wind and you are left with wind providing 1.25% of global electricity.
Time could be running out for todayâs wind farms, according to two researchers from the United Kingdom. Lets start all over again… https://www.eniday.com/en/technology_en/the-future-of-wind-turbines/
Bob Wallace says
Capacity factor comes before production.
Nameplate X CF = Production.
In 2015 wind provided 3.5% of global electricity. Provided 3.5%.
The statement does not say that wind was 3.5% of global capacity. It says production.
—
We’re just now completing the replacement of the turbines in our first US wind farm, Altamont Pass. Those turbines performed for 30 years before maintenance made replacement a better idea.
Modern turbines are designed so that it is easier to replace the parts that wear and we’ve learned a lot about design and materials over three decades. Expect current technology to last longer.
We could design turbines to last a century or longer. But since technology continues to improve it probably makes no sense to over engineer at this point in time. Once technological advances slowly then we might want to invest for longevity.
Remember, the cost of new onshore wind in the US has now dropped below $0.03/kWh. That’s for a just-stood turbine. The next generation of new turbines/wind farms should be even cheaper.
The cost of new wind is now less than the cost of operating some paid off nuclear reactors. The cost of taking down older wind farms and replacing the towers/turbines will be cheaper than running a paid off reactor.
Hendrikus Degenaar says
@Bob Wallace – wind will become so cheap, that in the end nobody makes any money from it… Boom all bust. Making power by splitting atoms unnerves the leftâs ageing hippies, suckled on Three Mile Island and the no-more-nukes 1970s. You donât have to be happy that we may need nuclear, there are legitimate safety and cost concerns, to accept that itâs a lesser evil than a warming world. Itâs true, as the group says, that ârenewable energy technologies and energy efficiency measures can help dramatically cut [greenhouse] emissions, and are safe, cost-effective, and commercially available today. Yet limiting the worst effects of climate change may also require other low- or no-carbon energy solutions, including nuclear power,â which provides almost a fifth of YOUR America’s electricity, your third biggest source of juice.
New nuclear plant designs arenât your motherâs nuclear plant, but rather âare small, hyper-efficient, and radically safe,â the Breakthrough folks write. âThey canât melt down, are often a tenth or less the size of conventional light-water reactors, can be manufactured in factories just like wind turbines and solar panels, and can operate at sufficiently high temperatures to provide heat and power for steel, cement, hydrogen, and fertiliser production. Like wind and solar, these reactors produce energy with zero carbon dioxide. Unlike wind and solar, they produce it 24/7.â
Bob Wallace says
“wind will become so cheap, that in the end nobody makes any money from it⌔
Hen – that shows a total lack of knowledge about how business works. No one will build a wind farm unless they can make a profit. Wind will be built out until the market is saturated. That last wind farm that takes us to demand saturation won’t be built unless the market is willing to pay for it, including enough profit to attract investors.
Nuclear isn’t failing due to either real or fantasized dangers of nuclear energy. Nuclear is failing because it costs far more to generate electricity with nuclear reactors than with wind and solar.
Someone may build one of these new wonderful reactors that you believe in. If so, we’ll be able to see what the cost of electricity is. If those new reactors are economically competitive then the market will consider building more.
Hendrikus Degenaar says
Perry Advocates for Nuclear Power – U.S. Energy Secretary Rick Perry says he’ll advocate for nuclear power as the nation looks for ways to fuel its economy and limit the effects of electricity generation on the environment. “If you really care about this environment that we live in, and I think the vast majority of the people in the country and the world do, then you need to be a supporter of this amazingly clean, resilient, safe, reliable source of energy,” Perry said during a news conference. https://www.usnews.com/news/best-states/new-mexico/articles/2017-05-10/energy-secretary-rick-perry-tours-birthplace-of-atomic-bomb
Bob Wallace says
Perry’s as dumb as a box of rocks. Texas went from Governor George W. Bush to even dumber Governor Rick Perry.
That was not a problem for Texas. Their governorship is largely a ceremonial role somewhat like the guy who wears funny clothes and bangs a large stick on the ground in UK politics.
Perhaps you folks outside the US aren’t aware, but Trump is finding it very difficult to find people to accept positions in his administration. It’s largely viewed as a career ender.
The people he’s getting are mostly people who have no future career to consider and are attracted by the temporary status they will get. Plus the ability to put “Secretary”, “Ambassador”, or some other affectation before their name while in their dotage.
Trump’s Secretary of Education is incredibly uninformed about education. His Secretary of Housing is a highly skilled brain surgeon who is otherwise an idiot.
Perry didn’t even know that the Department of Energy was in charge of the design, testing and production of all US nuclear weapons until after he was sworn in.
The US government (unlike the Chinese and French governments) does not build commercial reactors. They provide subsidies for private companies to build them. And private companies are going tits up building reactors.