Subject: For portal re Ormazabal?
From: "Eric Schwerin" <[email-masked]>
To: "Michael Muldoon" <[email-masked]>, "Devon Archer" <[email-masked]>, "Neil Callahan" <[email-masked]>, "Hunter Biden" <[email-masked]>
Date: Fri, 10 Sep 2010 15:47:19 -0400

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PERSPECTIVES |  GRID OPTIMIZATION
HERMAN K. TRABISH: SEPTEMBER 10, 2010
Wind’s Future Ally: Better Transmission
Grid interconnections will let turbines compete with coal plants.

The recent fossil fuel-funded attacks on wind power in the media make a lot of sense, given what wind energy has begun doing to the fossil fuels.

To understand the impact ofwind power on the U.S. electricity supply, it is necessary first to understand transmission and electricity markets.

"That's because of the interconnected nature of the markets and the way transmission enables generation in one region to replace generation in another region," said J. Charles Smith, the Executive Director of the Utility Wind Integration Group (UWIG) and a national authority on transmission and power systems.

Largely divided by geographical regions and run by theIndependent System Operators (ISOs), the power markets are defined by Federal Energy Regulatory Commission (FERC) rules.

"Each one of those ISOs has a series of markets," Smith said. "They're locational marginal price (LMP) markets. Each has a website that shows what energy is traded for in the day-ahead, hour-ahead and real time markets."

The more transmission there is, the more wind power becomes available in the various markets. Because wind requires no fuel, its marginal price is nearly negligible. When there is wind on the markets, it displaces the most expensive energy source that would otherwise be consumed.

"Let's say your wind plant is putting out a megawatt of capacity," Smith explained. "So you back off a megawatt of your coal plant."

Where there is transmission to deliver wind, the power producer can hold the coal-fired power in reserve, increasing the capacity factor of wind and decreasing the capacity factor of the coal plant. (The capacity factor is the annual average percent of the plant's nameplate capacity actually generated.)

Looking at a graph of annual capacity factors in the Midwest for the (typical) 2005-06 period, Smith explained that "the wind fleet that year had a capacity factor of 30 percent." In the same year, nuclear plants produced 75 percent of their nameplate capacity and large coal plants ran at a 60 percent to 70 percent capacity factor.

"But then you look on the other side," Smith pointed out. "You've got all this gas- and oil-fired, steam turbines, combustion turbine and combined cycle capacity running at around ten percent capacity factor. And that's fairly typical," he said. "In a power system, you'll find that you've got base load capacity that's running around 70 percent or 80 percent, you've got some intermediate-duty cycling capacity that's probably in the 20-to-40-percent neighborhood, and you've got peakers that are running between one percent and ten percent."

The fact that wind's variability keeps it at 30 percent is no more a problem than the less-than-100-percent capacity factors of the other sources.

"You're not relying on any single plant for your electricity," Smith said. "You're relying on a system and you need all the pieces of the system working together for it to work right. Wind is one piece of the system. It's not like you're tied to a particular wind plant or nuclear plant or gas turbine plant to get your electricity. You're tied to a system that has a mix of plants."

This is what makes wind so potentially disruptive to markets -- when transmission is available.

"The way the markets work," Smith explained, "is you look at what the marginal price is of energy across your market and your neighbor's markets. If your marginal cost of production is higher than your neighbor's, then typically what you'll do is back down your capacity and buy from your neighbor to minimize the total cost."

In a market situation, wind is what market-watchers call a "price taker."

"The marginal cost of wind, once you've got the plant built and running," Smith said, "is basically zero. There is a penny or so per kilowatt-hour for maintenance." 

Wind power producers can, therefore, take whatever price is offered. "If the marginal price is at $40, and the wind plant is operating, it will get $40 per megawatt hour for wind. If the market's at $30, you'll get $30," Smith said. "It's a price taker."

This has a remarkable impact. "When wind comes in," Smith said, "it basically depresses the locational marginal price because it bumps off the highest-priced energy in the market."

This is surely why the fossil fuel industries have revived attacks on wind, such as a spate of recent essays containing misleading half-truths based on inaccurate and/or insubstantial documentation by energy writer Robert Bryce. According to Michael Goggins of the American Wind Energy Association (AWEA), Bryce's funding comes from the Manhattan Institute, a foundation underwritten by oil and gas industry billionaires the Koch brothers.

There is a lot to get excited about in transmission today. The clogging of interconnection queues is beginning to clear as regulators, pushed by FERC, revise and streamline interconnection procedures. New technology is upping the carrying capacities of the systems.

Smith was especially excited about the potential of new High Voltage Direct Current (HVDC) technology. These systems "offer some very interesting control capabilities for the future," Smith said. "There are three big vendors in the world," he added. "Alstom Grid, ABB, and Siemens. It's a very expensive, very complicated technology. It requires a company with deep pockets and staying power, and those three companies each have it."

The importance of building new transmission has not diminished. "The transmission system today is probably the limiting constraint on interconnecting new generation," Smith said. "You've got to move that energy to load and you've got to do that over transmission."

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Eric D. Schwerin
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