Category Archives: Windpower

It is alarming that the UK is on the verge of plunging into third world status because the political class are so set on eliminating carbon emitting electrical generation facilities and replacing them with renewable energy  (read windmills) generation facilities.   The Telegraph (UK newspaper) carried an article on March 2nd saying that UK electrical customers were going to have to get used to black-outs or brown-outs based on the replacement strategy just mentioned.   Lets look at the article:

Here we have Steve Holliday, Chief Executive of the National Grid telling the Brits that the days of permanently available electricity may be coming to an end as wind farms become bigger suppliers of electricity.  He is quoted as saying “We are going to change our own behaviour and consume it when it is available and available cheaply.”  The National Grid is the electric power transmission network connecting power stations and substations and ensuring that generated electricity can be used to satisfy demand.  The Grid is where the “rubber meets the road” so to speak.  The grid system in the US has the same function.  But many industries cannot function profitable with intermittent power.  If you were a manufacturing company in the UK and you were to hear that power would become intermittent in the future, would you consider moving your business to someplace where zealots did not control the sources of electricity?

Is this the direction we want for the USA?   I think not.  But we have our zealots here as well.  Fortunately they have not gotten the degree of “say so” that is the case in the UK.

cbdakota

The Treasury Department has been blocking many requests for renewable energy project subsidies.  They are doing this because there are so few that are technically or financially viable in their opinion.  The DOE has been complaining that the Treasury Department should back off.  So the President’s requested that his advisors look into this.  On 10/25/10 a memo from Larry Summers, Carol Browner and Ron Klain was sent to the President with their take on this squabble.

The memo was summed up in The Wall Street Journal (WSJ) posting “Wind Jammers at the White House” on 11/12/10.

“The trio walks through an interagency dispute about Energy Department subsidies for wind, solar and other forms of “renewable” power, which DOE claimed were being held up by the joint Treasury and White House budget office (OMB) reviews.”

The WSJ notes that the DOE has a lot of moneys it wants to spread around.

“Recall that the stimulus transformed the government into the world’s largest private equity firm. The many tools now at DOE’s disposal include $6 billion to guarantee loans and another dispensation so that the department can convert an energy investment tax credit equal to 30% of a project’s cost into a direct cash grant to green developers.

The Summers memo notes that these two provisions alone reduce “the cost of a new wind farm by about 55% and solar technologies by about half relative to a no-subsidy case.” So taxpayers are more than majority partners in these private projects, except they get no upside.”

The last sentence is the kicker here,  “So taxpayers are more than majority partners in these projects, except they get no upside.”

The taxpayers not only get the downside because they pay  the capital cost but they then have to pay for the higher cost of electricity.  Now that’s a double whammy if I have ever heard of one.

The memo says that there are few viable projects to fund.   They said they found severe problems with “the economic integrity of government support for renewables.”  The WSJ continues with an example of the problem according to the  memo:

“Treasury and OMB singled out an 845-megawatt wind farm that the Energy Department had guaranteed in Oregon called Shepherds Flat, a $1.9 billion installation of 338 General Electric turbines. Combining the stimulus and other federal and state subsidies, the total taxpayer cost is about $1.2 billion, while sponsors GE and Caithness Energy LLC had invested equity of merely about 11%. The memo also notes the wind farm could sell power at “above-market rates” because of Oregon’s renewable portfolio standard mandate, which requires utilities to buy a certain annual amount of wind, solar, etc.”

“But then GE said it was considering “going to the private market for financing out of frustration with the review process.” Anything but that. The memo dryly observes that “the alternative of private financing would not make the project financially non-viable.”

“Oh, and while Shepherds Flat might result in about 18 million fewer tons of carbon through 2033, “reductions would have to be valued at nearly $130 per ton CO2 for the climate benefits to equal the subsidies (more than 6 times the primary estimate used by the government in evaluating rules).”

“So here we have the government already paying for 65% of a project that doesn’t even meet its normal cost-benefit test, and then the White House has to referee when one of the largest corporations in the world (GE) importunes the Administration to move faster by threatening to find a private financial substitute like any other business. Remind us again why taxpayers should pay for this kind of corporate welfare?”

Any questions?

cbdakota

Many readers of these posting are familiar with the Boston Consulting Group (BCG). During the years I was active in a business management role, we used BCG to provide consultancy for some of our business ventures.  BCG describes themselves as:

BCG is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses.

I cannot speak to their specific claim to be the “world’s leading advisor on business strategy” but I believe that they are among the world’s best.

Why am I qualifying their expertise?   Because I want to use the report they issued in March 2010 as a reference: 1) to increase the reader’s understanding of the issues and 2) for demonstrating that without electricity storage, wind and solar can never make a real impact on electrical supplies.   Their report is titled “Electricity Storage—Making Large-Scale Adoption of Wind and Solar Energies a Reality”.   This report may be seen in total by clicking here.

A prior posting in this blog, “WINDPOWER WITHOUT ENERGY STORAGE DOES NOT COMPUTE” makes the case that these alternative energy sources are unreliable and thus cannot be scheduled as necessary to provide reliable transmission to customers.   Our government is offering large subsidies to make these alternatives “competitive”; however, the alternatives will never be truly competitive without energy storage.

These energy sources require something to compensate for the times when the wind doesn’t blow or the sun doesn’t shine.   To compensate, the BCG report discusses four approaches for electricity storage:

• Grid Extension
• Conventional Backup Power
• Demand Side Management
• Large Scale Storage

Grid Extension “involves linking electricity grids from different regions and transferring power from one to the other to compensate for fluctuations” BCG discusses the problems with this approach and conclude that it “will likely make an important contribution. ……But grid extension is not a standalone solution for the long run.”

Conventional Backup Power is the use of primarily fossil fuel powered generation plants that are brought on line or taken off line to compensate for the swings in Wind and Solar power generation.  BCG’s report presumes that fossil fuel power is the backup and concludes that”…we do not believe conventional backup capacity will be sufficient on its own or sustainable as we move toward a renewables-dominated electricity system in the long term”. (My emphasis added).   There is great momentum for the replacement of fossil fuels, particularly in the political class, as they lust for the attendant taxing and regulating which the removal of fossil fuels from general use would entail.   There is great uncertainty in the science of man-made global warming and thus any taxing and regulating is premature in particular because we are beginning to see an unraveling of this concept at present.

BCG continues by saying “Still we believe that conventional backup capacity will be indispensable for achieving the integration of renewable energy sources into the current power system in the coming years.”

Demand Side Management is described as having customers that are willing to scheduling their production or drying their clothes or what ever around the availability of electricity.   BCG states that this will have limited value and cites studies carried out in Germany and the US  ”found that Demand Side Management offers a demand reduction potential of only approximately 2 percent of peak load.”

Large Scale Storage is the collection of excess power generated, for example, when the wind and sun are peaking.  BCG states the positives for storage “Unlike interregional compensation, storage provides a self-sufficient solution for one specific region and hence is not affected by increases in penetration of fluctuating renewables across the board.

As BCG says,  “The approach is not perfect, however.  All electricity-storage technologies are inefficient to a degree: part of the energy fed into the system cannot be discharged later on and is lost. “ BCG notes that the range of efficiencies ranges from 45% to 80% and BCG states this is a key weakness for storage.  BCG lists the following as possible candidates for commercial storage.

• Mechanical storage which encompasses pumped hydroelectric               storage, compressed air, and flywheel energy.
• Thermal storage encompassing hot water, molten-salt, and phase change material storage.
• Electrical storage including supercapacitors and superconducting magnets
• Electrochemical storage including flow and static batteries.
• Chemical or hydrogen storage

BCG looks at the pros and cons of these candidates and you can read the full report and make your own judgment about which ones, if any, will be the winners.

BCG further says:  “While the business case for investing in storage is currently weak, that situation will necessarily change.  Today’s fluctuations in generation are compensated for relatively easily and cheaply by flexible conventional power plants, but the march toward a fossil-fuel free energy landscape continues:……”  and “Wind and solar PV are the most competitive and widely available renewable sources and will certainly account for the lion’s share of the renewable energy produced—-and they require storage to be viable.”

The report is a good source for background information and, and in my view, it supports the obvious conclusion that wind and solar are, at the current time, largely an unnecessary expenditures that the ratepayer must endure.  Two issues are yet to be resolved.  Firstly, to be technically and economically viable electrical storage facility will have to make their way into the system.  Hopefully not, as the BCG report supposes, through yet more subsidies but rather at a time when the market forces are such that these energies are the logical, economic way to go on their own merit.   The second issue is that question of man-made global warming (AGW) theory and the part it is playing.  In my view the time frame for these renewables to make their way into the market should not be predicated on being supported by such a slender reed as AGW.   I believe these renewables will take a hit that will set them back many years when the rate payer revolts against the high price and unreliable delivery brought about by non-economic, government mandates.

cbdakota