Wind: A Gust of Hope

Wind advocates like to say "The wind's always blowing somewhere" to counter concerns about the variability of wind power. This is true, and it means that wind can always be relied on to produce some power, but that does not mean that wind can always meet demand.

In the United States' Great Plains wind belt, wind is typically anticorrelated with demand, meaning that, unless we can shift demand to times when the wind is strong, either through time of use rates or demand planning, overall energy production from wind will not be able to exceed 25-35% of overall demand without completely overwhelming the system when demand is low and the wind is strong.

However, even getting to 25% will be tricky without careful planning and a more robust transmission grid which will be capable of bringing wind power from where wind happens to be blowing (which could be hundreds of miles away in any direction) to where it is needed, or by investing in more expensive grid-based storage.

Potential for Low Variability

Lena Hansen and Bryan Palminter at the Rocky Mountain Institute, and Jonah Levine at CU Boulder have been doing some excellent work to show that portfolio theory can inform how to optimally combine a diversified portfolio of wind and solar sites to dramatically reduce the overall variability of a combined wind-solar portfolio.

Source of Images: Spatial and Temporal Interactions of Solar and Wind Resources in the Next Generation Utility

This demonstration goes a long way towards alleviating concerns about any unreliability concerns for wind or solar, but answering that one question leads to another: Are we actually getting anything like an optimal wind / solar portfolio?

Overly Concentrated Portfolio

The answer to that question is unfortunately, "no." Current incentives for wind, such as the production tax credit [PTC] and state Renewable Electricity Standards [RES] both reward energy produced, not the true economic value of energy produced. The PTC is functionally a payment of 2.1 cents for each kWh of wind energy produced, while RES's require that a certain percentage of energy produced come from renewable sources. An added complication is that many state RES include added incentives to produce renewable energy in-state, which reduces geographical diversity further.

This emphasis on total energy produced leads wind developers to "optimize capacity factor," according to Jim Himelic, and Associate Analyst at Xcel Energy (NYSE:XEL), the US's largest utility seller of wind energy. Mr. Himelic spoke about Xcel's Wind Integration project to tackle the problem I recently called the "Dumb Grid:" the fact that grid operators do not use much weather forecasting information when trying to integrate wind onto the system. This is not only from a lack of incentives and tools allowing utilities to integrate weather data, but also simply from a lack of good data. Most wind farm operators currently have no incentive to provide even turbine-by-turbine production information to grid operators, data which would be valuable for forecasting of short term wind fluctuations.

According to Himelic, because most Colorado wind capacity is clustered in the Northeast of the state, and the above incentives along with constrained transmission means that new additions to wind capacity will also likely be in the Northeast, meaning that, at least in the short term, geographic diversity is likely to decrease rather than increase over time. This both increases the overall variability of the wind resource, and will also increase the frequency and size of large wind ramp events, when power from wind turbines rises or falls extremely quickly over a very short period. The worst such ramp events from a grid operator's perspective often come when wind speeds rise so far as to require the turbines to shut down to avoid damage. This can cause a large number of turbines to go off-line at once, leading to a quick drop in overall power production.

Concentrating a majority of wind farms in a small area means that such wind over-speed events are likely to affect many farms at once, exacerbating the problem for grid operators.

A Gust of Hope

It's ironic that government incentives for renewable energy are adding truth to wind's only partially deserved reputation for unreliability. Fortunately, recent changes in national policy may help to alleviate some of the pressure to cluster wind farms in small areas.

First, wind developers now have the option to take a 30% Investment Tax Credit (ITC), comparable to the one available for solar, rather than PTC. This has the advantage that wind developers receive a portion of their investment costs back, independent of total production, which will reduce some of the disincentive to build wind farms at relatively low capacity factor sites. Similarly, a national RES would be unlikely to encourage local production of renewable energy, which might improve wind diversity.

DISCLOSURE: None.

Comments

[john s. gordon:]

wind based electricity is wonderful but you still gotta have base-load (coal, uranium, hydro if & when available)
> jack

Apr 30 08:46 AM

[Ferdinand E...:]

"...portfolio theory can inform..." Portfolio theory is as much a mystery as special relativity to most people, while many of those who understand it are so pleased with themselves that they never ask when it is applicable. But as for the so-called research at the Rocky Mountain Institute and CU , since wind and solar production are variable (as are the returns from e.g. two shares), a "portfolio" of the two will of course reduce variability. You can get that result from any intermediate level economics book. Another result might be applicable here is that if the two researchers at RMI had come up with the opposite result, they might have been rewarded with pink slips, since management at RMI is not interested in impartial research.

Apr 30 10:09 AM

[Alan Young:]

Thanks for the info, but I'm perplexed by the headline. Hope for investors, yes, because the tax credit will help. But where's the hope for actually using wind to reduce dependence on fossil fuels? If there's good news in your article, it's pretty well hidden.

Apr 30 02:50 PM

[Gosh137:]

You said: "In the United States' Great Plains wind belt, wind is typically anticorrelated with demand, meaning that, unless we can shift demand to times when the wind is strong..." What about the use of ultracapacitors to store the excess energy. If there is inadequate grid lines, instead of mile long coal trains heading east out of Wyoming, mile long untracapacitors can head east out of the Great Plains wind corridor.

Apr 30 05:34 PM

[Dirk McCoy:]

Without a breakthrough in storage, wind is going to have a couple serious problems- first, it is not correlated with peak demand as solar is, and second, selling power back to the power company when the power company doesn't need it isn't economically beneficial.

Now, if something like Riverbank Technology takes off, then perhaps wind will make sense long term. But I sense a growing movement against large scale "green" energy without economic viability, especially from not-in-my-backyard folks, as the CO2 scare is put in a holding pattern.

May 02 07:16 PM

[Tom Konrad:]

Seeking Alpha always changes my headlines... I'm perplexed too. The original headline was "Our Undiversified Wind Portfolio"
www.altenergystocks.co...


On Apr 30 02:50 PM Alan Young wrote:

> Thanks for the info, but I'm perplexed by the headline. Hope for
> investors, yes, because the tax credit will help. But where's the
> hope for actually using wind to reduce dependence on fossil fuels?
> If there's good news in your article, it's pretty well hidden.

May 10 12:52 AM

[Tom Konrad:]

Ultracapacitors are not particularly useful for large scale enrgy storage... they have excellent power (kW) but not Energy (kWh.) For large scale enrgy storage, look to Pumped Hydro, Compressed Air, and thermal energy storage. Transmission is a cheaper alternative than any of these, though.


On Apr 30 05:34 PM Gosh137 wrote:

> You said: "In the United States' Great Plains wind belt, wind is
> typically anticorrelated with demand, meaning that, unless we can
> shift demand to times when the wind is strong..." What about the
> use of ultracapacitors to store the excess energy. If there is inadequate
> grid lines, instead of mile long coal trains heading east out of
> Wyoming, mile long untracapacitors can head east out of the Great
> Plains wind corridor.

May 10 12:55 AM

[Tom Konrad:]

Base-load power is not the solution, it is the problem:
www.altenergystocks.co...
Dispatchable power is the solution.


On Apr 30 08:46 AM john s. gordon wrote:

> wind based electricity is wonderful but you still gotta have base-load
> (coal, uranium, hydro if & when available)

May 10 12:56 AM