Renewables on the grid: Putting the negative-price myth to bed

Three years ago, the American Wind Energy Association (AWEA) rebutted arguments that occurrences of negative prices at nuclear plants in Illinois were frequently caused by wind energy. That “compelling” data led FERC Commissioner John Norris, who had previously discussed his concerns about negative prices, to affirm that “the focus on negative prices is a distraction.”
More recently, we have documented that many instances of negative prices are caused by conventional power plants.

AWEA has now made our prior analysis far more comprehensive by examining full-year 2016 price data for all retiring power plants in the main wholesale electricity markets that have a large amount of wind generation: PJM, MISO, SPP, and ERCOT.

AWEA has now made our prior analysis far more comprehensive by examining full-year 2016 price data for all retiring power plants in the main wholesale electricity markets that have a large amount of wind generation: PJM, MISO, SPP, and ERCOT.
The results, which we are releasing today for the first time, confirm that any instances of renewable policies like the Production Tax Credit (PTC) and state renewable standard credits being factored into market prices have a trivial impact on retiring power plants.

Across more than 1.8 million data points, which cover all 2016 pricing intervals in the day-ahead electricity market for all retiring power plants in those regions, only 55 instances of negative prices were found that could have been set by a wind project receiving the PTC. The analysis includes market price data for all power plants that have retired since 2012 or have announced plans to retire.

Our analysis focused on the day-ahead electricity market (the results bolded below), as that is where nuclear and coal generators sell most if not all of their generation. However, the results show that wind plants almost never set prices for an additional 2.4 million data points in the real-time electricity market as well. For more background on electricity markets and how prices are set, see the last section of this post.

In PJM and MISO, which account for a large share of all power plants in wholesale markets that are retiring nationwide, only 0.003 percent of day-ahead market prices at retiring power plants were in a range that could be set by a wind project receiving the PTC, as shown on the left side of the table. Occurrences of negative prices that could be wind-related were even less frequent in SPP, at 0.0017 percent of day-ahead market price intervals. Those occurrences were slightly more common at retiring plants in ERCOT, at 0.06 percent of price intervals, but it should be noted that there is only one retiring coal power plant in ERCOT.

To underscore the trivial impact of the PTC in setting market prices, the right side of the table shows how prices would change if wind projects receiving the PTC no longer received the credit. In PJM and MISO, conservatively assuming that all negative prices in that range were set by wind projects receiving the PTC, Day-Ahead Market prices at retiring power plants would increase by an average of $0.0007, or 1/13th of a penny per megawatt hour (MWh), if operating wind projects no longer received the PTC. Retiring power plants in SPP saw an even smaller impact at 1/25th of a penny, while the one retiring coal power plant in ERCOT saw an impact of around one penny per MWh.

It is important to clarify that the PTC does directly reduce consumer electricity costs outside of the electricity market. The PTC and other incentives allow wind projects to offer lower long-term contract prices to customers and the utilities who serve them, which translates into lower electric bills for consumers on a 1:1 basis.

However, those contract payments are outside of the wholesale electricity market, so they are not directly factored into the wholesale electricity market prices received by other generators.

The facts about energy incentives

In reality, the wind PTC has been a remarkable success in driving the American innovation and efficiency that have driven a two-third reduction in the cost of wind energy since 2009. The more than 102,500 Americans working in the wind industry today are creating a new industry with a bright future, bringing tens of billions of dollars in investment to rural areas and tens of thousands of manufacturing jobs to America. Production-based incentives like the PTC have driven efficiency increases that make U.S. wind projects some of the most productive in the world.

In reality, the wind PTC has been a remarkable success in driving the American innovation and efficiency that have driven a two-third reduction in the cost of wind energy since 2009. The more than 102,500 Americans working in the wind industry today are creating a new industry with a bright future, bringing tens of billions of dollars in investment to rural areas and tens of thousands of manufacturing jobs to America. Production-based incentives like the PTC have driven efficiency increases that make U.S. wind projects some of the most productive in the world.    Regardless, Congress voted in December 2015 to phase down the wind PTC, and we are now in year three of that five-year phasedown period. Despite the recent focus on incentives for renewables, cumulatively wind energy has received only 3 percent of federal energy incentives, versus 86 percent for fossil and nuclear sources, according to the Nuclear Energy Institute and other experts. Given that the wind industry’s “tax reform” is already in place with the PTC phasedown legislation, we would welcome a comprehensive look at all forms of subsidies for all electricity sources.  Market dynamics are driving retirements  Market dynamics are benefiting consumers by driving retirement of older, less efficient resources in favor of more efficient resources. A wide range of experts agree that the primary factors driving power plant retirements and economic challenges for generators of all types are cheap natural gas and flat electricity demand.  The following map, compiled from Department of Energy data, shows that most retiring coal and nuclear plants are in regions that have little to no renewable generation, confirming that renewable energy or pro-renewable policies cannot be the primary factor driving those retirements.    Rather, the primary factor driving power plant retirements appears to be low-cost shale gas production undercutting relatively high-cost Appalachian and Illinois Basin coal in the Eastern U.S., as shown below. In the regions shaded red in the map, the fuel cost of producing electricity from natural gas is significantly
Regardless, Congress voted in December 2015 to phase down the wind PTC, and we are now in year three of that five-year phasedown period. Despite the recent focus on incentives for renewables, cumulatively wind energy has received only 3 percent of federal energy incentives, versus 86 percent for fossil and nuclear sources, according to the Nuclear Energy Institute and other experts. Given that the wind industry’s “tax reform” is already in place with the PTC phasedown legislation, we would welcome a comprehensive look at all forms of subsidies for all electricity sources.

Market dynamics are driving retirements

Market dynamics are benefiting consumers by driving retirement of older, less efficient resources in favor of more efficient resources. A wide range of experts agree that the primary factors driving power plant retirements and economic challenges for generators of all types are cheap natural gas and flat electricity demand.

The following map, compiled from Department of Energy data, shows that most retiring coal and nuclear plants are in regions that have little to no renewable generation, confirming that renewable energy or pro-renewable policies cannot be the primary factor driving those retirements.

Rather, the primary factor driving power plant retirements appears to be low-cost shale gas production undercutting relatively high-cost Appalachian and Illinois Basin coal in the Eastern U.S., as shown below. In the regions shaded red in the map, the fuel cost of producing electricity from natural gas is significantly lower than the fuel cost of coal power plants, explaining why utilities in those regions are moving from coal to natural gas generation.

For the entire story on the AWEA blog, MICHAEL GOGGIN, JULY 18, 2017

Analysis Group report: No evidence that changing power mix endangers electric system reliability

Washington, D.C. — A new report by Analysis Group answers questions asked two months ago by Energy Secretary Rick Perry about the reliability and market rules of the U.S. electric power grid.

Analysis Group finds it is market forces – primarily low-cost natural gas and flat demand for electricity – that are causing some coal and nuclear power plants to retire, and not state and federal policies supporting renewable energy development. The report finds that the changing electricity resource mix poses no threat to reliability of the nation’s power system.

Perry launched a 60-day review of “critical issues” on the grid on April 14. National business groups Advanced Energy Economy (AEE) and American Wind Energy Association (AWEA) commissioned Analysis Group to answer independently the questions Perry raised. The Analysis Group report has now been submitted to the U.S. Department of Energy to inform its review.

“Recently, some have raised concerns that current electric market conditions may be undermining the financial viability of certain conventional power plant technologies (like existing coal and nuclear units) and thus jeopardizing electric system reliability. In addition, some point to federal and state policies supporting renewable energy as a primary cause of such impacts,” states the Analysis Group report. “The evidence does not support this view.”

Recently, some have raised concerns that current electric market conditions may be undermining the financial viability of certain conventional power plant technologies (like existing coal and nuclear units) and thus jeopardizing electric system reliability. In addition, some point to federal and state policies supporting renewable energy as a primary cause of such impacts,” states the Analysis Group report. “The evidence does not support this view.” width=Recently, some have raised concerns that current electric market conditions may be undermining the financial viability of certain conventional power plant technologies (like existing coal and nuclear units) and thus jeopardizing electric system reliability. In addition, some point to federal and state policies supporting renewable energy as a primary cause of such impacts,” states the Analysis Group report. “The evidence does not support this view.solar helps the gridRecently, some have raised concerns that current electric market conditions may be undermining the financial viability of certain conventional power plant technologies (like existing coal and nuclear units) and thus jeopardizing electric system reliability. In addition, some point to federal and state policies supporting renewable energy as a primary cause of such impacts,” states the Analysis Group report. “The evidence does not support this view.
“The transformation now under way in the electric power system is driven primarily by market forces,” said Susan Tierney, senior advisor, Analysis Group, and one of the authors of the report, along with Analysis Group Principal Paul Hibbard.

Low natural gas prices, technology changes, and flat demand for electricity have been putting financial pressure on and leading to the retirement of older, less economic power plants

This is a natural consequence of market competition. The result is a more diverse set of energy resources on the grid that is being capably managed in a way that provides reliable electric power.”

Key findings of the Analysis Group report:

Market forces: Fundamental market forces – flat demand for electricity, low natural gas prices since the mid-2000s and the addition of significant amounts of highly efficient new gas-fired resources since 2000 – are primarily responsible for altering the profitability of many older, merchant generating assets in the parts of the country with organized wholesale competitive markets. These market fundamentals are producing savings for consumers. 

Lesser factors: Factors such as rapid growth in deployment of advanced energy technologies, and state policies supporting such technologies also contribute to reducing the profitability of less economic assets, but such factors are secondary to market fundamentals in causing financial pressure on merchant plants without long-term power contracts.

Aging resources: The retirement of aging resources is a natural element of efficient and competitive market forces, and where markets are performing well, these retirements mainly represent the efficient exit of uncompetitive assets.

Reliability benefits: Many advanced energy technologies can and do provide reliability benefits by increasing the diversity of the system and by providing important reliability services to the grid. The addition of newer, technologically advanced, and more efficient natural gas and renewable technologies is rendering the power systems in this country more, rather than less, diverse. 

Baseload” an outdated term: Given the many attributes associated with a reliable electric system, the term “baseload resources” is an outdated term in today’s electric system which depends upon a wide variety of resources to provide essential reliability services and is seeing gas-fired resources and renewable capacity together providing both around-the-clock power and the flexibility to cycle and ramp as needed to meet and sustain bulk power system reliability objectives.

“The electricity system in the United States is stronger than it’s ever been,” said Graham Richard, CEO of AEE. “Thanks to innovation and smart policy, we have a more diverse fuel mix, a more reliable grid, and lower electricity costs. The Analysis Group report highlights how advanced energy technologies are helping to modernize the grid and how grid operators are well equipped to manage this market change. As DOE finalizes its report on reliability, we hope the Department will incorporate these key findings, which reflect the true state of the grid.”

Tom Kiernan, CEO of AWEA, said, “Like DOE, we wholeheartedly agree that reliable and affordable electricity is essential. Analysis Group’s report finds that wind and other advanced energy resources, driven by markets and technological advances, are improving electric reliability and reducing costs. Past dependence on a few fuel sources has given way to a more diverse grid, which is more robust and resilient. We think this analysis will be useful for DOE’s study, and we look forward to working with state and federal policymakers to implement market-based policies that will provide consumers with even more reliable electricity at lower cost.”

BACKGROUND

In a memo dated April 14 to his chief of staff, Brian McCormack, Secretary Perry directed the Department of Energy to conduct a study that would “explore critical issues central to protecting the long-term reliability of the electric grid,” and to analyze “market-distorting effects of federal subsidies that boost one form of energy at the expense of others,” and to report back in 60 days. 

On April 28, business trade groups AEE, AWEA, and SEIA sent a joint letter to Sec. Perry asking that the DOE “initiate a public process,” and that the study “follow standard practice and be conducted in an open and transparent manner,” noting that it is “customary” for agencies developing reports that provide policy recommendations to allow public comment on a draft, prior to the report being finalized. No reply was received. A DOE spokeswoman told Axios on May 5: “The findings will be released to the public (including stakeholders) once the study is completed this summer. The Secretary looks forward to receiving input from all parties once that occurs.”

On May 16, AEE, AWEA, SEIA, and ACORE held a press briefing on documents each submitted to DOE to inform its study of the electric power system and reliability:

AEE: Changing the Power Grid for the Better – shows that today’s electric generation mix is more diverse than ever; low-priced gas is primarily driving the change in resources, followed by flat load growth and competition from renewables; ERCOT and PJM experience shows reliable grid management with high degree of variable renewables and even in extreme conditions.

ACORE: Energy Fact Check – The Impact of Renewables on Electricity Markets and Reliability – ACORE-produced report covering questions around baseload power and economic impact raised in Secretary Perry’s April 14, 2017 memorandum directing a study to explore critical issues central to protecting the long-term reliability of the electric grid.

AWEA: Renewable Energy Builds a More Reliable and Resilient Electricity Mix. Grid operators are already reliably integrating large amounts of wind energy, and their studies show they can go much higher. Integrating renewables on the power grid costs less than integrating baseload sources; modern power electronics enable renewables to provide reliability services as well as or better than conventional power plants; and renewables diversify the energy mix, improving economics and resiliency. Renewables are not the primary factor undermining baseload sources – as can be seen by maps of where each is predominately located, cheap natural gas is the primary factor. AWEA also submitted a literature review of over 30 existing research studies by federal agencies, regional grid operators, the North American Electric Reliability Corp. (NERC), and others.

SEIA: Solar & Renewables Benefit Grid & The U.S. Economy – Solar and renewables provide significant advantages to the national grid in terms of reliability, fuel diversity and national security. This SEIA review highlights multiple studies showing that the existing grid can handle high penetrations of renewable energy to the benefit of ratepayers, grid system operators and system performance.

In their letter transmitting these materials to DOE, the groups concluded: “We believe that, taken together, these reports demonstrate that the U.S. electric power system is more diverse in its energy sources than ever before, and due to the flexible way these resources are now managed, becoming more reliable and resilient as a result.”

Sources: Advanced Energy Economy at American Wind Energy Association, June 20, 2017

AWEA statement on White House Energy Week

June 29, 2017
WASHINGTON, D.C. — The following is a statement from Tom Kiernan, CEO of the American Wind Energy Association (AWEA) on President Trump’s Energy Week remarks:

“We support President Trump’s strategic vision to seek American energy dominance. The wind industry — America’s largest source of renewable energy capacity — stands ready to do our part implementing the President’s vision to deliver American jobs, investment and prosperity. 

We are proud to join with the White House recognizing Energy Week and highlighting how wind power works for America. The Administration’s all-of-the-above energy strategy, including resources like wind, can work to make America safer and more self-reliant while growing the economy.

We know this because the U.S. is already a global leader in wind power with world-class natural resources. Our wind turbines are among the most productive in the world because of those resources and technological innovation. Unleashing American wind power is breathing new life into rural and Rust Belt communities, building new schools, fixing roads, improving emergency services, and creating well-paying jobs.

By tapping into more of our inexhaustible wind resources between now and the end of President Trump’s first term we can generate $85 billion in new economic activity and nearly 50,000 new jobs direct and indirect jobs, according to Navigant Consulting.

We embrace the Administration’s plan to expand America’s leadership and fully harness our nation’s abundant energy potential from all sources. Eliminating barriers and approving vital infrastructure, including electric transmission lines and wind energy projects, will put even more Americans to work and unlock our vast energy potential.  

A true all-of-the-above energy strategy will ensure American energy dominance.”

Source: AWEA is the national trade association of the U.S. wind energy industry.

Phase two of Ellershouse Wind Farm in Nova Scotia is now generating clean power

ELLERSHOUSE, NS, June 29, 2017 /CNW/ – Today, the launch of phase two of the Ellershouse Wind Farm is being celebrated by Bullfrog Power®, East Coast Credit Union, developer Minas Energy, and Alternative Resource Energy Authority (AREA), which is the facility owner. AREA, a partnership between the Towns of Antigonish, Berwick and Mahone Bay in Nova Scotia, was created by the towns to reduce energy costs, expand green mandates and develop new revenue streams for the municipalities. 

The second phase adds three turbines to the original four-turbine wind farm in West Hants, near Ellershouse, Nova Scotia. The project is the first wind development in Nova Scotia to be funded and built independently of the local power authority or any provincial government incentive program.

“Bullfrog Power launched in the Maritimes in 2009 to mobilize and create further demand for renewable energy in the region. The launch of the second phase of the Ellershouse Wind Farm is proof of the impact that our customers, like East Coast Credit Union, are having in growing the amount of renewable energy generated in Nova Scotia,” said Ron Seftel, CEO, Bullfrog Power.

Source: Bullfrog Power

The Ellershouse Wind Farm is the latest wind project supported by Bullfrog Power. Thanks to the support of Bullfrog Power’s customers, the organization has been involved in the commissioning of wind farms across Canada, including some of Ontario’s first wind turbines. In Nova Scotia, Bullfrog Power funded community-based rooftop solar projects with both Hope Blooms and The Deanery Project. Bullfrog Power has also helped to change Canada’s energy landscape by offering innovative new products, including green natural gas in 2012, and, last year, a green fuel product to help businesses address their transportation-related emissions.

“The financial support of Bullfrog Power was important in ensuring the ongoing success of this project. By launching the second phase of the Ellershouse Wind Farm we are demonstrating real progress in developing new, cleaner forms of power for Nova Scotians,” said David Devenne, Mayor of Mahone Bay and AREA Vice Chair.

The seven Enercon E-92 wind turbines have a total capacity of 16.1 megawatts, which is enough to power 4,900 Nova Scotian homes.1 All three of these towns’ electric utilities as well as the Riverport Electric Light Commission purchase part of their energy requirements from the Ellershouse Wind Farm. In addition, Bullfrog Power sources the green power produced by the facility for its Maritime customers, such as East Coast Credit Union. AREA owns and operates the wind farm.

“Minas Energy believes that local stakeholders are essential in developing new renewable energy throughout Nova Scotia. With the launch of its second phase, we’re proud to see the continuing success of the Ellershouse Wind Farm,” said John Woods, Vice President of Energy Development, Minas Energy.

Sources: Bullfrog Power, The Alternative Resource Energy Authority (AREA), PR Newswire

New approach for matching production and consumption of renewable electricity promotes large-scale integration of solar and wind power

VTT Technical Research Centre of Finland is coordinating the BALANCE project, which brings together leading European research institutes in the field of electrochemical conversion. The project aims to demonstrate a technology that enables flexible storage of large amount of renewable power. Such technologies are needed for the further integration of additional wind and solar power. The European Commission funds the project by 2.5 million euros.
As the investment costs of solar and wind installation are decreasing, the most significant obstacle for further integration of renewable electricity is the imbalance between their weather-dependant production and the general power consumption. It is this issue that the BALANCE project partners aim to solve by further developing an electrochemical conversion technology called ReSOC (Reversible Solid Oxide Cell).

A ReSOC device uses electricity to split water into hydrogen and oxygen gas by a high temperature electrolysis process, which is significantly more efficient than other electrolyser technologies today. What makes ReSOC particularly interesting, however, is the fact that the exactly same device can also be operated “in reverse” to produce power from the very same hydrogen gas it produced. Using the same device for converting power to a storable gas and for converting this gas back to power again enables very flexible usage of the device, thus increasing its operating hours as well as reducing it capital costs.  

Already today, the electricity market is being challenged when flooded by green electricity on a windy or sunny day. This causes the electricity prices to plunge or even go negative in some European countries. Because electricity cannot be stored as such and our current capacity to store it with hydropower or batteries is limited, the production of windmills and solar panels must at times be curtailed to avoid power grid failure. This issue will become more and more important as the production capacity of renewable electricity is growing rapidly.

With a flexible energy conversion technology, such as a ReSOC, it is possible to balance the power market. At peak production hours, power is converted into a chemical, which can be stored for later use or used as industrial feedstock. Similarly, during peak consumption hours or on a calm, cloudy day, the stored chemical is converted back to electricity at the same site. Therefore, a ReSOC unit supports the integration of wind and solar power with the current power system by providing a compact, affordable and flexible technology for the conversion and storage of renewable power.

The three-year project began in December 2016 and will receive EUR 2.5 million in EU Horizon 2020 funding (grant agreement 731224). It includes several leading European research institutes and universities in the field of electrochemical conversion, including VTT (FI), DTU (DK), CEA (FR), ENEA (IT), University of Birmingham (UK), TU Delft (NL), EPFL (CH) and IEn (PL).

Figure: Schematics of the ReSOC concept. It is the missing link between the power grid and the fuel or the chemical feedstock for the industry.
Figure: Schematics of the ReSOC concept. It is the missing link between the power grid and the fuel or the chemical feedstock for the industry.

Source: VTT Technical Research Centre of Finland Ltd, www.vtt.fi, Press release 6 March, 2017