Location: Pantego, Texas, United States

Wednesday, November 26, 2008

I ran across a Canadian blog (small dead animals) that has a story about wind power generation in Texas. It seems that the wind power generators are paying people to use the power generated by wind turbines. It cosy them money to stop and start the turbines, but the reason they pay customers to use the power is because of the subsidy that they get from the government. It is curious that I have seen nothing about this in newspapers here in Fort Worth, but read about it from Canada. This suggests that the MSM filter the news and feed the peasants only what they need to know.

Y2Kyoto: Wind Power Prices "Below Zero"

Before reading on, just consider for a moment what the term "negative pricing" might mean in plain English.


During these negative price periods, suppliers are paying [Electric Reliability Council of Texas] to take their power. Consumers (at least at the wholesale level) are getting paid for using power, and the more power consumers use the more they get paid. These prices are a big anti-conservation incentive. You could, as a correspondent put it to me, build a giant toaster in West Texas and be paid by generators to operate it.

Infrequently, a power plant might choose to bid below the short term marginal price in order to stay in the market and avoid shutting down. It can be economically rational for operators of less responsive generation units to offer negative prices in order for it to avoid the costs of shutting down for just a few hours and then start up again when load increases - think coal-fueled or natural gas steam turbine. When energy load is very low, near zero or negative prices can result.

This isn't the case in West Texas. Instead, the negative prices appear to be the result of the large installed capacity of wind generation. Wind generators face very small costs of shutting down and starting back up, but they do face another cost when shutting down: loss of the Production Tax Credit and state Renewable Energy Credit revenue which depend upon generator output. It is economically rational for wind power producers to operate as long as the subsidy exceeds their operating costs plus the negative price they have to pay the market. Even if the market value of the power is zero or negative, the subsidies encourage wind power producers to keep churning the megawatts out.


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