alt Hacker NewsUK offshore wind prices come in 40% cheaper than gas in record auction
Comments
1) Introduce a lot of intermittent generation into energy grid without sufficient amount of storage capacity.
2) Use marginal pricing model which effectively guarantees windfall profits for those sources.
3) Utilization of peaking power plants falls, but you still have to keep them because there is not enough storage capacity.
4) Peaking power plants rise generation costs to offset the lower utilization, further adding to the windfall profits.
5) You need more grid capacity to handle energy transfers from distributed generation sources.
5) ????
6) Act surprised when people loudly complain about electricity bills despite abundant "cheap" generation.
Intermittency of generation is an externality (same as CO2 emissions) and should be priced accordingly. People are willing to pay premium for supply stability, but the current pricing model does no account for that. Trying to change consumption habits (like smart grids, dynamic pricing, etc.) works poorly, especially for such vital resource as electricity.
I think there should be some kind of price penalty for intermittent sources dependent on total ratio of intermittent generation in the mix. At least until grid-scale energy storage technology will be advanced enough to store approximately week of total energy consumption.
Related:
UK secures record supply of offshore wind projects
This is poor reporting by Elektrek. The article compares wind and gas costs but completely fails to explain:
* the gas price in the article includes the government’s self-imposed carbon tax. The actual cost of gas (£55) is FAR lower than the £91.20 strike price Milibad has set for wind. And Miliband has locked in this terrible pricing for 20 years!
* there are huge extra costs for wind power that are not accounted for in this quoted strike price. The grid must be upgraded. Expensive new power generation capability will need to be built to compensate for the intermittency of wind
* the stated power capacity of wind generation is a theoretical maximum, and the actual capacity will be much lower in practice.
Thank fuck I am 100% off grid.
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Now if only the UK didn't have an insane system where all electricity is purchased at the highest cost in the mix.
i.e. if you're buy 99% cheap RE, 1% expensive gas then you're paying for 100% at the higher gas price.
The entire sector will need government bailouts within a decade. The executives running these wind power companies are going to run off with huge bonuses, the company is going to default on its debts, and the government is going to force the taxpayers to make the banks whole because "we need power!"
The article talks about strike prices but doesn't provide much context.
The context: this is about bids from wind farm operators to win "contracts for difference" with the Low Carbon Contracts Company, an entity owned by the UK government. It's essentially a subsidy scheme where the wind farms can lock in a specific price per MWh for all the electricity they will produce over a certain period. But only if they bid low enough to be among the winners of the auction.
https://en.wikipedia.org/wiki/Contracts_for_Difference_(UK_e...