Negative Prices for Clean Power

How do you know that congestion on high-voltage transmission grids is stranding valuable renewable energy? When the price of electricity goes negative. American Wind Energy Association power industry analyst Michael Goggin delivers a snapshot of the phenomenon in a recent column for Renewable Energy World.

Goggin points to data from the Electricity Reliability Council of Texas or ERCOT, the state's grid operator, showing an increasing incidence of generators paying buyers to take their power. According to Goggin, such conditions track the explosive installation of wind farms in West Texas -- and are very bad news for their operators.

Prices fell below US -$30/MWh (megawatt-hour) on 63% of days during the first half of 2008, compared to 10% for the same period in 2007 and 5% in 2006. If prices fall far enough below zero that the cost for a wind plant to continue operating is higher than the value of the US $20/MWh federal renewable electricity production tax credit plus the value of other state incentives, wind plant operators will typically curtail the output of their plants.

Worse still, consumers in adjacent areas are paying top dollar for power because the transmission lines between them and the excess wind power are overloaded.

Texas is running into trouble because it pushed wind power harder and faster than other states, but it is also leading the way to address what is really a nationwide problem. This summer the Public Utility Commission of Texas approved a scheme called the Competitive Renewable Energy Zone (CREZ) process to incentivize construction of new transmission lines to evacuate stranded wind power. Earlier this month a consortium of major utilities including MidAmerican and AEP announced their intention to do so.

For a detailed yet accessible look at Texas' renewable energy transmission challenge and efforts to clear out the bottlenecks, see this overview from the State Energy Conservation Office.

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