Reliable versus intermittent energy sournces

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It ain’t what you don’t know that gets you into trouble. It’s what
you know for sure that just ain’t so. – Mark Twain


There seems to be great interest in promoting “renewable energy” (aka clean energy), e.g., wind power, solar power, and motor vehicles that run on rechargeable batteries instead of burning fuel. Enthusiasts talk about phasing out the use of fossil fuels (shudder) within a few decades, which would supposedly save the world from catastrophic global warming, open up vast economic opportunities and create millions of high-paying “green jobs.”

Don’t bet on such results! Wind and solar (W&S) currently supply less than 1% of global energy needs - the growing use of W&S to generate electric power has been heavily supported by governments and taxpayers/consumers will rebel at some point – W&S power facilities take up lots of space that might be better used for other purposes - there may not be enough silver available to make all those solar panels – etc. The future isn’t green: Why renewable energy is a pipe dream, Spencer Morrison, constitution.com,
10/31/17.

Human beings will probably replace fossil fuels with better alternatives in due course, but we doubt wind and solar power will win the race. Hydrogen fusion power seems like a far more elegant solution, and research on how to generate it economically is underway. [Princeton Plasma Physics Laboratory] dedicates fusion reactor, a powerful new “star on Earth,” Morgan Kelly, princeton.edu,
5/23/16.

SAFE doesn’t oppose using W&S to generate electric power, provided governments don’t try to determine the outcomes. Let business managers, investors and consumers decide what energy sources will be used based on their assessments of costs and benefits. There should be no mandates, no subsidies, no special tax breaks.

The failure of governments (both federal and state) to keep their hands off the controls has contributed to the proliferation of W&S power, creating situations in which it may be perceived as less expensive than fossil fuel or nuclear power. But the cost comparison is unrealistic. W&S power is only available intermittently, so more reliable power sources are essential to maintain the stability and reliability of the electric power grid.

Discussion follows of the energy policy issues created by the aforesaid cost comparison conundrum and a proposed solution.

A. Background – Most readers are familiar with the manmade global warming theory (MMGWT), which holds that (a) carbon emissions from human activity have somehow become the prime driver for global temperatures (overshadowing the natural factors that drove climate changes over the ages, e.g., fluctuations in the level of solar activity), and (b) a rising level of CO2 in the atmosphere (currently about .04%) will result in runaway global warming over the next 100 years or so.

Unless and until the MMGWT theory is proven, we believe it would be unwise to expend substantial resources on a crash program to reduce carbon emissions. What’s the evidence, and why do global warming alarmists seem so reluctant to discuss it? Global warming skeptics are not enemies of science,
5/2/16.

Relying primarily on the MMGWT, but also offering other arguments when convenient, government legislators and regulators have created an arsenal of mandates and subsidies to (a) discourage the use of fossil fuel for generating electric power and propelling motor vehicles, and (b) promote energy conservation and the use of W&S power. Aside from environmental regulations that can be justified on a realistic cost/benefit basis, we believe such measures should be avoided in favor of allowing the free market to work.

SAFE has persistently shared its views on energy policy issues with political leaders and regulators. See, e.g., our letters to (a) the Environmental Protection Agency on its proposed finding that CO2 is a hazardous pollutant,
6/4/09; and (b) the members of Congress urging them to block the EPA’s Clean Power Plan of the EPA because, among other things, it represented legislation (the function of Congress) versus regulation, 6/16/14.

Policy decisions in the name of combatting global warming have often been taken at the state level if Congress wasn’t disposed to take national action, as when Delaware decided to participate in a Regional Greenhouse Gas Initiative to promote the growing use of wind and solar power and comply therewith by phasing in a Renewable [Energy] Portfolio Standard. This scheme has already cost Delawareans more than the General Assembly intended, and it will become increasingly costly as the phase-in continues. Delaware: REPSA cost cap,
4/10/17.

Notwithstanding the dubious results from the First State’s renewable energy programs to date, a high-level study is underway as to whether Delaware should become involved in some sort of offshore wind power project. If such a venture was undertaken, it would predictably result in more bad news for Delaware taxpayers and/or electric power consumers. Assessing potential for offshore wind power projects,
10/9/17.

Solar power is also being pushed; it’s planned to speed things up by siting solar panels on farm land as well as on properties zoned for industrial use. Project would double state’s solar capacity; 400 acres may become home to Delaware’s largest array of panels, Xerxes Wilson, News Journal,
10/26/17C.

B. Costs – Here are some projected cost data for various types of new power plants, considering capital costs, operating costs, and where applicable tax credits over the estimated useful life of the facilities. Levelized cost and levelized avoided cost of new generation resources, US Energy Information Administration, Table 1b, April 2017 (download PDF).

Screen Shot 2017-11-04 at 3.15.38 PM


The data suggest that combined cycle natural gas would be the best bet for adding highly reliable (85%+) generating capacity. Coal has basically been knocked out of contention by (a) low natural gas prices resulting from the fracking boom, plus (b) government regulations requiring CO2 sequestration for new coal power plants. New nuclear plants come closer to being cost competitive, but they take years to build and are subject to many uncertainties re future regulatory requirements.

Offshore wind power is prohibitively expensive (as the current Delaware study will presumably conclude if it is honestly conducted), and solar power is pricey (although considerably less so if the currently available 30% investment tax credit is taken into account). Onshore wind is competitive with combined cycle natural gas (even before tax credits), but it provides intermittent output (lower capacity factor).

Note that the costs for wind and solar power are almost exclusively for capital investment. As no fuel is required, variable costs are close to zero. Solar power is only generated when the sun is shining, however, and wind power is dependent on the wind blowing (hard enough to turn the turbine blades, but not so hard as to damage them). Accordingly, the grid must be backed up by more reliable power sources (coal, natural gas and/or nuclear) to ensure electrical power will be continuously available to meet consumer demand.

If this point seems confusing, a layman’s language explanation of why “each unit of wind or solar power deployed [must be] backed up with an equal unit of reliable energy” may help. Simple, neat and wrong, John Nichols, SAFE newsletter,
Spring 2012.

Now here comes the real puzzle. During periods of availability, should W&S power be used in preference to power from more reliable sources? Such a practice provides variable cost savings, but may undercut the efficiency and economics of the reliable power sources that are essential to keep the grid operating.
Ibid.

As alternative energy penetration increases (e.g., in Texas, which has the most installed wind capacity of any state), these problems will increase in frequency and severity – forcing the curtailment of demand. Renewable energy proponents understand this point, but they have not chosen to emphasize it.

The cost comparison issue will be addressed a bit later, but first let’s identify some other trends in the electric power industry. The primary source will be a recently completed study of the Energy Department. Staff report to the secretary [of energy] on electric markets and reliability,
August 2017 (download PDF).

#FLATTENING DEMAND – Historically, electric power usage grew at about the same rate as the US economy. The growth rate flattened around 2005, however, even though the US population and economy have continued to grow. This is due to the increasing efficiency of electrical devices, which in turn reflects a combination of technological advances and government policies designed to encourage energy conservation. ED Report, p. 54.

Between 1970 and 2005, total U.S. electricity generation to meet customer demand grew at a compound annual growth rate (CAGR) of 2.7 percent. But since 2005, generation growth has stalled with a CAGR of only 0.05 percent from 2005 to 2015, even as the Nation’s GDP grew by 1.3 percent per year over the same period.

#CHANGING PROFILE – Many power units have been retired and/or converted to a new energy source as part of substantial net changes in the energy source profile for electric power generation. Coal power and nuclear power plants are being retired, while natural gas and W&S plants are being added. ED Report, fig. 3.2.

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And here’s a chart showing the rapid expansion of W&S power (which the Energy Department report refers to as Variable Renewable Energy or VRE) from bit player status in 2002 to a considerably more prominent role today, i.e., wind power now exceeds hydroelectric power. ED report, figure 3.25.

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Why are these changes taking place?

The decline of coal has been primarily due to lower natural gas prices as a result of the fracking boom, which makes coal power plants less competitive. Stringent environmental rules issued during the Obama administration contributed to the shutdown of coal power plants.

The shutdown of some nuclear power plants again reflected the profit-reducing implications of lower natural gas prices, compounded by rising capital requirements to keep these aging facilities in operation. Conflicts with regulatory authorities in certain states have also been a factor.

The growth of W&S power has been largely driven by government mandates and subsidies, not any inherent economic advantage – or at least that’s how we see it. For their part, W&S fans envision a dynamic, constantly adjusting profile of power suppliers replacing the traditional baseload + temporary use of supplementary sources model. US number one in the world in wind energy production, American Wind Energy Association,
2/29/16.

“The U.S. is blessed with world-class wind resources,” said Tom Kiernan, CEO of the American Wind Energy Association. “We’re tapping into this homegrown resource more than ever thanks to American innovation and U.S. workers building some of the most productive wind turbines in the world. Now more than ever, low-cost, stably-priced, zero-emission wind energy is keeping our air clean and cutting costs for consumers. American wind power is well on its way to supplying 20 percent of U.S. electricity by 2030.”

And some W&S fans want to go further and faster, as shown by a recent announcement of the St. Louis government. Renewable energy – by royal decree, Paul Driessen, townhall.com,
11/4/17.

In 2016, Missouri generated 96.5% of its electricity with fossil fuel and nuclear power, 1.6% with hydroelectric, and just 1.5% with wind and solar. The St. Louis Metro Area did roughly the same. But now, [St. Louis has decreed that] by 2035 the city will somehow, magically be powered by 100% “clean, sustainable” electricity. The Board of Aldermen unanimously passed a resolution calling for this to happen – via tougher energy efficiency measures and a transition to wind and solar power.

C. Policy options – Are wind and solar fans right that everything will work just fine as W&S becomes an increasingly important factor in the electric power sector. Probably not, for the following reasons:

•Experience elsewhere, e.g., in Germany after the decision to shut down nuclear plants in the wake of the Fukushima, Japan nuclear plant disaster, has shown that the electric grid doesn’t operate well without an adequate base of reliable electric power. No wonder that Germany, which wasn’t blessed with cheap natural gas, suddenly started building coal power plants. Germany’s new “renewable” energy policy, Kelvin Kemm, netrightdaily.com,
9/4/12.

Yes, you read that correctly, twenty-three new coal-fired power plants are under construction in Germany, because Germany is worried about the increasing cost of electricity, and because they can’t afford to be in the strategic position of importing too much electricity. *** [The] actual cost of Germany’s wind and solar electricity is far and away higher than its cost of coal and nuclear power. So much for “free” solar and wind. So much for all the German jobs that depend on reliable access to plentiful and affordable electricity.

•Stable or falling electric power prices in recent years aren’t due to the economic merit of W&S, they reflect the low price of natural gas in the US (which may not continue indefinitely). The AWEA statement ignores this factor. US number one,
op. cit.

As the U.S. increasingly has generated more of its electricity from renewable energy, electricity rates across the U.S. have remained 5.5 percent lower than they were in 2009 according to the Business Council for Sustainable Energy (BCSE) and Bloomberg New Energy Finance's recently released fourth annual Sustainable Energy in America Facebook.

•Fossil fuel and nuclear power plant operations are already being impacted by the priority given to W&S power when it is available (as distinguished from when extra power is needed). ED report, p. 13-17.

-Since 2007, the contribution to total generation from wind and solar has grown quickly, accelerated by government policies and mandates. *** Because these resources have lower variable operating costs than traditional baseload generators, they are dispatched first and displace baseload resources when they are available.

-The design of traditional baseload power plants assumed operations primarily at a constant output level with limited cycling (see Appendix C). As the electricity system continues to evolve and market conditions change, these plants are increasingly being moved into load-following operations, or are required to more frequently adjust the load and the on/off dispatch of their units. The extra costs incurred to do so can affect a retirement decision.


So what policy changes should be made to head off the problems that seem to be developing? There are two general possibilities.

#PROP UP COAL AND NUCLEAR PLANTS – Given the extensive government support that has been given to W&S, a case could be made for providing subsidies for vulnerable coal and nuclear power plants.

For example, two states have been experimenting with so-called Zero Emission Credits for nuclear plants. Why, after all, should W&S get all the love? ED report, p. 36.

In New York and Illinois, Clean Energy Standards and associated Zero Emission Credits (ZEC) for nuclear plants are being used to help maintain the economic viability and continued operations of nuclear plants, in part to help meet the states’ GHG-limiting goals. Modeled after existing RPS and Renewable Energy Certificates (REC), these ZEC payments have been established to direct additional funds to existing nuclear power plants that are no longer cost-competitive.

Energy Secretary Rick Perry proposed another idea in the wake of (but not based on) the staff report, a new regime of subsidies to power plants (e.g., coal and nuclear) capable of storing up to 90 days of fuel supply on their premises. This idea is arguably appropriate from a national security standpoint, but it has stirred up a firestorm of opposition. Why is Rick Perry’s Energy Department proposing an anti-conservative reform? Devin Hartman, Washington Examiner,
10/17/17.

The Trump administration is right to be concerned with heavy regulatory burdens on coal and nuclear and subsidies for competing power sources. But counter-distorting subsidies is not the answer. Bill Peacock of the conservative Texas Public Policy Foundation sees the proposal leading to more subsidies, when the correct response is to eliminate subsidies and reduce regulatory burdens.

#STOP SUBSIDIES FOR WIND AND SOLAR – We’re with the TPPF! Subsidizing coal and/or nuclear power plants is not appropriate, and if existing plants aren’t cost competitive they should be shut down. By the same token, wind and solar facilities should stand on their own feet. That means no more mandates, subsidies, or special tax breaks.

As though by magic, the share of electric power generated from W&S would level off (or perhaps start to decline) – with beneficial results for electric power consumers and taxpayers. There would also be some solace for global warming alarmists, in that gradual displacement of coal power by natural gas power (and eventually new types of nuclear power plants) should lead to continuing reduction of US carbon emissions.

**********FEEDBACK**********

#The government incentives for wind and solar power are simply a ploy to get taxes on carbon. – SAFE director

#The blog entry was excellent and worth the read - by policy wonks like me. But for the average layman, WE need to work harder to make a connection. – SAFE director

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