Posts Tagged ‘electricity prices’

Europe is paying the price for its infatuation with renewable energy

July 30, 2013

Electricity and the price of its generation is now one of the most fundamental parameters which steers the economy and industry and ultimately the level of unemployment in any country. It ought not to be subject to the misguided whims and fancies of “feel-good” environmentalism, but for the last 2 decades much of Europe has been travelling down a cul-de-sac chasing a mirage. Instead of just focusing on generating electricity at the lowest possible cost while keeping the air and water sufficiently clean, politicians have been lured down the renewable energy path in a fantasy of saving the world from the imaginary dragon of carbon dioxide emissions. Instead of just using wind and solar energy in the special niches they are suited to, they have been subsidised and promoted as basic generation which is a role they cannot fulfill.

The US with its much lower electricity prices now has a significant competitive advantage over Europe and will come out of the  recession much faster as it creates jobs.

As David Garman and Samuel Thernstrom write in the Wall Street Journal:

Europe has bet big on wind and solar energy, and many environmental advocates would like America to follow. Wind and solar have a role in the U.S. energy economy, but we would be wise to see the cautionary tale in the European experience and adjust our plans accordingly.

Wind and solar generate 3.5% of America’s electricity today, but Denmark gets 30% of its electricity from wind and hopes to produce 50% by 2020. Germany, Europe’s largest national economy, produces roughly 12% of its electricity from wind and solar today, and it wants renewable energy to account for 35% of electricity generation by 2020.

Clean energy powered by renewable resources is understandably attractive. But the honeymoon with renewables is ending for some Europeans as the practical challenges of the relationship become clear.

The first challenge is cost. Germany has reportedly invested more than $250 billion in renewable energy deployment, and its households pay the highest power costs in Europe—except for the Danish. On average, Germans and Danes pay roughly 300% more for residential electricity than Americans do.

But it is not just price that is at issue. The reliability of electricity supply is not helped by the inherent instabilities of having too much dependence on intermittent and unforeseeable sources.

Another challenge of Europe’s growing dependence on renewable energy is far more serious: the potential loss of reliable electrical supply. It’s one thing to ask consumers to pay more for cleaner energy; it’s another to force them to endure blackouts. …..

……. Grid operators generally rely on coal and nuclear plants to meet baseload demand while modifying gas and hydroelectric power output to meet shifting demand. But electricity from wind and solar is variable and intermittent. Nature determines when and how much power will be generated from available capacity, so it is not necessarily “dispatchable” when needed.

When intermittent renewables are small players in the grid, they can be easily absorbed. But as they reach European levels of penetration, the strain begins to show. There are increasing reports of management challenges resulting from wind and solar across the European grid, including frequency fluctuations, voltage support issues, and inadvertent power flows. Anxious operators are concerned about potential blackouts.

In an April 17, 2012, letter to EU Commissioner for Energy Gunter Oettinger, for example, Daniel Dobbeni, the European Network of Transmission System Operators president, said grid operators are “deeply concerned about the difference in speed between the connection of very large capacities of renewable energy resources and the realization in due time of the grid investments needed to support the massive increase of power flows these new resources bring.” He also expressed great concern “about the potential destabilizing effect of outdated connection conditions for distributed generation that are not being retrofitted anywhere fast enough.”

The article continues with a warning to the US about unhealthy subsidies.

There is also an important lesson in the European experience with energy subsidies: Focus incentives so they reward the right behavior. Lavish subsidies for wind and solar have changed Europe’s generation mix, but the costs have been high because the subsidy structure prioritized mass deployment rather than efficiency, reliability and innovation. Even in the U.S., the wind-production tax credit has occasionally produced “negative pricing”—that is, turbine operators pay grid operators to take their power even though it isn’t needed, just so the wind generators can collect tax credits.

Subsidies for electricity production in the US show that renewables are far from commercialisation

November 23, 2011

Data for 2010 is now available from the US Energy Information Administration.  Solar and Wind power are still a long way from being commercial with just direct subsidies being equivalent to 7.8 and 5.6 cents/kWh respectively. Indirect subsidies and increased costs for alternate capacity are not included.

My view of subsidies in power generation is that they are usually counter productive and provide windfalls for developers and constructors but rarely lead to benefits for the consumers of electricity.

Factors Affecting Electricity Prices:

The average retail price of electricity in the United States in 2010 was 9.88 cents per kilowatt-hour (kWh). The average prices by type of utility customer were:

  • Residential: 11.6¢ per kWh
  • Transportation: 11.0¢ per kWh
  • Commercial: 10.3¢ per kWh
  • Industrial: 6.8¢ per kWh


Bleak future for wind power generators in Sweden

November 22, 2010

Swedish P1 Radio had a broadcast this morning where wind turbine owners in southern Sweden were interviewed. Wind turbines in Southern Sweden operate at an average capacity of about 25% but when the wind blows in in Sweden it usually blows in Denmark as well. As Denmark builds more subsidised but intermittent wind turbines they become more dependant upon the import of hydro and nuclear power from Sweden and Norway.

It could be a dark future for wind power, at least for wind power owners in southern Sweden. As wind turbines multiply, the surplus power when the wind blows reduce prices and wind turbine revenues are reduced drastically.

The Marketing Director for Lunds Energi said that they had no plans for building any more wind turbines to add to the 6 small wind turbines they already had.  There was no chance, he said, of the Danes importing wind power from Sweden when the wind was blowing for then they had their own power. And when the wind was not blowing and prices were better there was no power to sell!

Vindkraftverk i Vänern. Foto: Fredrik Sandberg/Scanpix

Wind power plant in Lake Vännern. Foto: Fredrik Sandberg/Scanpix

Kjell Jansson, the Managing Director of Svensk Energi was also interviewed and pointed out that electricity could not be stored except as hot water. Therefore using surplus wind energy to store in heating systems was at best a partial solution but did not help the fact that industry and people needed electricity as electricity – and not just as hot water. Even the planned Danish solution of using surplus power to “charge up” heating systems for district heating as hot water or for “charging up” electric cars relied on having electricity – from nuclear and hydro power from Sweden and Norway – available to be imported for the Danish electricity system.

Therefore, he continued, when the wind did not blow in Denmark  – and then usually did not blow over the whole of Scandinavia – the high electricity price was an advantage for the hydro and nuclear generators. In any case this would require much more investment in transmission systems and in hydro power generation.

But I can see a situation where Denmark will pay swingeing prices for imported electricity when the wind is not blowing and a cold wave is sweeping across Europe. And if it is a really severe cold wave then there may be no electricity available for import.

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