According to the New Zealand Wind Energy Association, there are plans for a further 25% increase in wind capacity at the cost of $250 million. New Zealand is not alone in seeing large investments being made in wind power, and this source of electricity generation is widely associated with the drive to reduce emissions of carbon dioxide. It is a solution widely endorsed by the Green movement. As a result, many countries are now making a dash for ever more wind power, in higher proportions for their total electricity generation.
In light of this, the recent comments by Steve Holliday, the CEO of the UK’s National Grid, are disturbing. In a recent BBC Radio 4 interview he explained a system in which power might be rationed through a smart grid to allow for peaks and troughs in power generation and usage. The key point is at the end of the interview, when he clearly states that, in the context of increasing use of wind power, people will need to adjust their habits, and only consume power when it is available. In short, the people of the UK should just get used to not having power available when they want it, but when the wind is blowing. I suspect that he will come to regret saying this, but nevertheless, this is what he has said.
What he is saying is a point that critics of wind power have long been arguing – wind power is an unreliable form of energy generation that will not, of itself, support a grid electricity system. In fact, wind power is a very, very poor form of power generation for delivering reliable electricity. The experience of Germany, where wind power has an increasingly important role in power generation, is illustrative of the problems. A report by DENA (references given below), examined the capacity credit that would be given to wind power in the overall German power system, and the diagram below is taken from the report.
Dena Wind Power Capacity Credit
The green part of the diagram is the projected capacity of new wind farms in Germany, where wind power has become an increasingly important source of energy generation. I will quote from the report as follows:
‘In the year 2015 the conventional power station pool can be reduced by 2,300 MW. This is 6% of the installed wind power capacity of 36,000 MW.’
They go on to say that energy storage systems are needed and that there would need to be enlargement of grid connections between regions to ameliorate the problems. However, there is no escaping the fact that wind energy requires the back up of a source of power that is not subject to the same variability of provision. With a figure of only a 6% capacity credit, there is a substantial problem that to guarantee supply, every MW of wind energy virtually requires a MW elsewhere, and thereby means that the capital expenditure for each MW of capacity needs to be made twice. The evidence of this necessity comes from Spain, with a recent Guardian article having the following to say:
The utilities also complain that their coal and gas plants, which the government wanted them to build a decade ago after several black-outs, are losing money because they are now only needed for half the time. But the Spanish regulator forces the firms to keep them on standby for times when the wind stops blowing or at night when solar does not generate.
Yet another report comes from the UK, and makes painful reading for supporters of wind energy. The report comes from an environmental charity, and can be found here. Most importantly, the analysis comes from actual operations of wind energy, rather than the sunny projections that are usually made for wind energy. This is a snippet from the charity of some of the findings compared with claims for wind energy:
1. ‘Wind turbines will generate on average 30% of their rated capacity over a year’
In fact, the average output from wind was 27.18% of metered capacity in 2009, 21.14% in 2010, and 24.08% between November 2008 and December 2010 inclusive.
2. ‘The wind is always blowing somewhere’
On 124 separate occasions from November 2008 to December 2010, the total generation from the windfarms metered by National Grid was less than 20MW (a fraction of the 450MW expected from a capacity in excess of 1600 MW). These periods of low wind lasted an average of 4.5 hours.
3. ‘Periods of widespread low wind are infrequent.’
Actually, low wind occurred every six days throughout the 26-month study period. The report finds that the average frequency and duration of a low wind event of 20MW or less between November 2008 and December 2010 was once every 6.38 days for a period of 4.93 hours.
4. ‘The probability of very low wind output coinciding with peak electricity demand is slight.’
At each of the four highest peak demand points of 2010, wind output was extremely low at 4.72%, 5.51%, 2.59% and 2.51% of capacity at peak demand.
5. ‘Pumped storage hydro can fill the generation gap during prolonged low wind periods.’
The entire pumped storage hydro capacity in the UK can provide up to 2788MW for only 5 hours then it drops to 1060MW, and finally runs out of water after 22 hours.
These really are just some snippets. There is enough material about the actual operation of wind power to completely condemn the whole idea. I strongly recommend that you read the full report, in particular if you are an advocate of wind energy.
As if these examples were not bad enough, there are substantial problems with how wind power might be integrated into grids (see above report). For example, when the wind is blowing, what happens to the capacity in thermal plants? A report from the Irish Grid (3) looked at the economics of what happens to thermal capacity in a situation where it is necessary to adapt to the swings in provision from wind power. They point out that, if thermal plants are run on low loadings they become very inefficient, if they are shut down that increases maintenance costs, as well as being very expensive to start and stop and so forth.
Equally, a consortium of energy providers in Germany have written a report (4) in which they point out that switching off capital intensive plants makes the cost effectiveness of these plants very poor (obvious really). Finally there is the cost of attaching these widely distributed plants to the grid, which requires substantial investment, with problems of the economics further hindered by the variability of the units generated versus the capital cost and maintenance of the infrastructure. As one of these reports pointed out, some of these problems can be ameliorated, but the amelioration involves even greater investments, so does not rectify the substantial additional costs of wind power.
The key point in the diagram shown above is that there is a large potential capacity from wind, but the actual capacity to ensure grid integrity is miniscule. The principle of all of this is very simple, if we use an analogy to describe the problem. It is easy to forget that electricity provision is the delivery of a product, just like any product, with the exception that it is so central to modern living that it is essential that it is always available. Although analogies are imperfect, I hope that the following analogy will illustrate the problems of wind power in principle.
I will therefore use the example of ready meals as an analogy, and for the sake of analogy, we will imagine that the ready meals have to be sold to the supermarkets within hours of manufacture (they are delivered hot and genuinely ready). Now, if we have demand for 100 units of ready meals a day, then we will normally build a factory that allows us to manufacture those 100 units per day. However, as we know, demand for products such as ready meals can vary. As such we build storage into the system (warehouses that will keep the product hot), but keep that storage to a minimum, as it increases our costs significantly. We also build a factory that will manufacture with enough of a safety margin sufficient to maintain supply of the ready meals in peaks of demand, perhaps a capacity of 110 units per day.
Now instead of this perfectly normal arrangement, how would we think of a proposal that we build our ready meal factory in an out of the way place, where the workforce were an unusual bunch of people who would only turn up to work when it suited them? Whatever you did, even asking them their views on their plans to arrive for work the next day, you could never be sure whether they would come into work, or how long they would stay. Now these rather odd workers are a vital input into to the production process, but you never know how many are going to arrive on any given day. You know that, on average, maybe 30% of the workforce will arrive for work, but some days none arrive at all. The one advantage of these workers is that they are very, very. very cheap. So cheap that they are nearly free of cost.
There is a problem with many of these very, very cheap workers. Many live in remote locations with no roads. As such, you will need to build roads to the remote locations so that they can be connected into the existing road system. This is extremely expensive.
The problem that arises from all of this is that you have a contract with several large supermarkets to provide them with your ready meals. As part of that contract, you must provide them with as much of your product as is required, when required. If you do not provide your product, they will de-list you as a supplier. In other words, your business relies upon providing the product reliably. How are we going to manage this problem?
The first solution is to build lots of factories to supply our ready meals because, on average, at least one of the factories is likely to have enough workers available. The trouble is that we are then in the position of having to build lots of factories in which we know that there is going to be idle capacity. This makes the cost of capital for our factories very high. Now, the second problem is that most of these factories need a road to be built to transport the ready meals onto a main highway. This increases our capital costs significantly.
However, because we have to distribute the factories over many locations, we have the problem that each factory is relatively small. Whilst this makes our factories more reliable in aggregate, it makes the relative cost of the roads even greater. Another problem lies with distribution from the factories. We are never sure which factory will produce how much, which means that we need to have a complex system of logistics to cope with never knowing which factory will produce what when – this is also expensive.
The company decides that, whatever the problems, the attraction of the cheap workers is enough justification to build all of these factories. After a while however, they notice that the variability of workers coming into the factories is such that they appear to have wild swings in their capacity to make their ready meals. One of their operations people analyses the problem and concludes that, the probability is that, on a bad day, only 6% of the workforce will show up for work. This poses a problem because, on a bad day, there will only be 7 ready meals made. This is a guarantee that the contract will be lost.
Someone then comes up with a bright idea. In addition to the factories on the mountains, they can keep a conventional factory as well. Whilst the workers in this conventional factory are quite expensive, they know that they will be coming to work reliably every day. Whilst they have holidays every year to recuperate, they can plan for these.
Furthermore, the conventional factory can be built right next to the highways, making distribution of the ready meals very easy and cheap. They go ahead with this solution, and build a factory with the ability to manufacture 103 ready meals per day (110 – 7). They then have a problem. What happens when there is a good day at the many mountain top factories, a day when all of the workers turn up. It makes sense to send the workers home in the conventional factory and shut the factory down. The trouble is that, when they shut the factory down, they have to switch off all of the heaters for the cooking equipment and the equipment takes a while to run up. This causes several problems:
The first is that bringing the heaters up to temperature is expensive and the other machinery needs more maintenance when it stops and starts. The trouble is that, even when the mountain top workers do show up for work, they occasionally get bored and go home anyway. In this event, the normal factory will have to restart production.
The second problem is that, whilst the normal factory is idle, it is still expensive because it utilised so much capital. Whilst the investment in the factory makes sense when it is producing between 90-103 units, if the capacity drops below this it becomes very expensive for each unit produced.
One person suggests a solution that, with the variability of the mountain top workers, it is possible to alter the output of the normal factory. In other words keep it running most of the time, but adjust the output according to the numbers of workers who show up in the mountain factories. The trouble is that, whilst this is possible, the costs of the normal factory go up, as there is less output but all of the heaters for the food, and production lines, consume a similar amount of energy, regardless of the capacity running through the factory, thereby increasing the cost per unit of ready meal.
Another solution is proposed, and that it to build a huge warehouse, which will keep the ready meals hot and ready, and this would create a sufficient buffer for when the mountain top workers failed to show up for work. The trouble is that building this kind of warehouse would cost a huge amount of money, making this a very, very expensive solution.
In the boardroom of our ready meal factory, they are very worried. They have already spent a lot of money on the factories for the cheap workers, having been told about how great it would be to utilise the cheap workers. They have tried it out, and yet they can not make sense of how to use these cheap workers. If only they were reliable, and turned up to work every day, it would be wonderful. Instead, what they find is that they are using more than twice the amount of capital to have the capacity to provide a capacity of 110 ready meals to their supermarket customers.
Even when there is reasonably good day, when a good number of the mountain top workers arrive for work, they are not making the gains they expected, because of the increased costs in the conventional factory offset many of those gains. They note that stopping and starting the factory increases maintenance costs, and that the cost of bringing all their heaters up to temperature is surprisingly high. On the other hand, if they leave them on, and run their factory at low capacity, then the cost per unit is painfully high. But they must have the full capacity if they are to stay in business…..it is no good asking the supermarkets to allow for days when there will be few ready meals available. They demand that they are always supplied reliably with the ready meals…
The only conclusion that the board can come to is that, whilst those cheap workers looked so enticing, it is not possible to use them when they are so unreliable. Any savings on worker costs are largely offset by the costs that this loads on the normal factory, and with the high cost of capital, the capital allocation to each ready meal unit has doubled. This is making their ready meals much more expensive per unit, not cheaper. If they could only find a cheap way to store the capacity of mountain top workers, it might just work, but even then the additional capital costs of having so many small factories will still make it questionable as to whether this will be cost effective.
As I have said, no analogy is perfect, but I hope that the point is clear. No sane business person would ever use these virtually free workers in these remote locations. As long as there is an expectation of supply always meeting variable demand the virtually free workers are useless due to their unreliable behaviour. The only way to make the system work is to spend monstrous amounts on either storage or back-up for the unreliable workers, both of which prove to be hugely expensive and defeat the object of using the unreliable workers.
This is the fundamental problem with wind power. It is an unworkable solution. The New Zealand Wind Energy Association does address this problem, and I will quote them in full (sorry, it is lengthy) with my comments included as [...my comment]:
The need for reserves, or back up generation, is not unique to wind generation [true, but it is the amount of reserve that is needed due to the extreme variability of wind]. Electricity supply must be continually matched to demand. Reserves are required to meet fluctuations in demand and to cover all forms of generation, as demand varies constantly and no one power station or form of generation is totally reliable [true, but wind is about as unreliable a source of energy as can be imagined, thus the requirement for so much reserve generating capacity].
The system operator sets aside reserves to cover a range of events, such as a thermal plant going offline with no warning, daily fluctuations in demand, and variability in wind generation. It is highly unlikely that shifts in wind patterns will cause either:
- instantaneous power changes as large as those currently managed when a thermal generator goes offline without warning because of a fault [these are extremely rare events, but with wind the capacity regularly disappears as a matter of routine, meaning that there is a need for nearly 1:1 backup, as was found in the case of Germany]
- changes in power supply over an hour or two that are as great as currently managed every morning when demand increases several hundred megawatts.
Wind energy is naturally variable, however this does not necessarily mean new thermal stations are required to provide electricity generation on calm days. Wind speeds can be predicted days [reliably?] and hours ahead [hours ahead, great! see next comment], and the output of a wind farm can be forecast in advance. Generation from other, existing sources can be planned to accommodate expected fluctuations in wind generation [huh? This makes no sense. Where are these alternatives, for when the wind does not blow? Is this capacity conjured into being on the days the wind does not blow. Note how vague this is. What capacity exactly is there, and what is happening with the capacity when it is not being used as a back up for wind?].
New Zealand’s existing storage-based hydro generation is particularly good for balancing wind generation as its energy can be stored (in the form of water in a hydro dam), and electricity output can be altered quickly [This is true up to a point. However, see my previous comment. Why not use this hydro all the time - the system would require investment in additional turbines to cover the requirements for additional power reserves - cost? Why build additional capacity for wind energy? What happens if the hydro is at full capacity, and the wind is not blowing at all - what happens then?].
The role of reserves in the electricity system
In order to maintain electricity supply, a second-by-second balance between generation and demand must be achieved. An excess of generation causes the system frequency to rise, and an excess of demand causes the system frequency to fall. The electricity system is designed and operated in such a way as to cope with large and small fluctuations in supply and demand.
To balance supply with demand, the system operator (Transpower) sets aside reserves to provide the capability to respond to the variations expected over different timescales. The system operator pools reserves for the whole electricity system, rather than backing up each power plant with a second plant.
The range of factors considered when setting reserve levels include changes in demand, fluctuations in wind generation and the risk of a large generator going offline unexpectedly because of a fault.
Frequency-keeping reserves are used to respond to instantaneous imbalances. The system operator buys sufficient reserves such that system frequency remains near to 50Hz for the continuous demand and generation fluctuations, and within set limits following any sudden tripping of the largest generating units, or any sudden disconnection or reduction of demand.
The system operator also requires reserves to meet daily fluctuations in demand. Reserves are particularly valuable at times when large power stations are connecting (or disconnecting) from the system or when demand is changing rapidly. For example, on a typical morning, electricity demand can increase by several hundred megawatts over two or three hours.
It is really interesting to see how they frame the problem in this discussion. They accept that reliability is essential, but you will note that there are no figures on the comparative capacity credits given for wind generation, as was the case in the German report. The principle is very simple. They look at the system as whole, and must be able to meet the peaks. They have to consider the relative reliability of each form of power generation, and ensure that in aggregate there must be enough power to meet demand. If you have a power source which can only be given a 6% capacity credit, then you must have sources to cover that 94% shortfall. This is why wind requires nearly a 1:1 backup. Perhaps the most worrying aspect of wind is this proposal from the New Zealand Wind Energy Association:
Technically it is feasible to run an electricity system with 100% wind energy, however this may not be the most cost effective solution. The amount of wind generation that can be integrated depends on the nature of the electricity network or grid, as well as the other types of generation in an electricity system.
Some countries are already incorporating large amounts of wind generation into their electricity systems. At times wind provides up to one-third of Spain’s electricity. In Denmark, wind provides 20% of annual generation.
Currently, wind generation provides around 2.5% of New Zealand’s electricity. Given the strength of New Zealand’s wind resource there is no reason why this can not increase to the proportions being achieved by countries like Denmark and Spain.
What they are not explaining is that, all of these countries that are used as exemplars are problematic, and have been forced to import electricity when the wind does not blow. For example, Denmark has a massive capacity, and you can imagine the problems when their 6000 turbines failed to produce any power whatsoever in February 2003 (see here for summary of some of the problems). They have the benefit in this case of having next door neighbours that can supply power, which is not an option for New Zealand. Rather than listen to this advocacy, read the report linked to earlier, which deals with the actual operational history of wind energy.
Quite simply, wind power is an absurdity. When Steve Holliday discussed the outcome of wind energy as a power source, he was simply stating the reality of what will take place if wind energy is used as a major element of capacity without significant conventional backup. On a day when the wind is not blowing, he is suggesting that the UK will have mechanisms to enforce rationing of electricity. On the other hand, if there is backup, it makes wind energy so ridiculously expensive that it is an economic joke. This will reflect in your electricity prices, and the price of electricity for businesses. Keeping massive amounts of capacity idle (or on standby) to allow for the days when the wind does not blow must have a cost, and everybody will pay for it.
As I stated at the start of this post, wind energy is expanding in New Zealand. The position is quite simple. The more the wind energy capacity expands, the greater the cost of electricity. The only alternative is that you will find that your access to electricity subject to rationing in the future. I am not sure either option is something that most people would accept. Fortunately, this rather questionable form of power generation is still limited enough in size to not make a significant difference yet. However, the more capacity that is installed, the more likely that either costs will increase, or rationing systems will be needed.
Note: I will take a look at the proposals for using hydro-power as a back up more closely in the future. New Zealand is unusual in the relatively high proportion of power that comes from hydro, and this means that, in some respects, New Zealand presents an unusual case. However, in all cases, the economics of wind power are at the very least questionable.
(1) Gunn, C 1997, ‘Energy efficiency vs economic efficiency? : New Zealand electricity sector reform in the context of the national energy policy objective’, Energy Policy, vol. 25, no. 2, pp. 241-54.
(2) Tiedemann, A 2006, Grid Integration of Wind Energy – Results of Dena’s Gridstudy, IEA Workshop on ‘Integration of Renewables into Electiricty Grids’
(3) ESB National Grid 2004, Impact of Wind Power Generation in Ireland on the Operation of Conventional Plant and the Economic Implications
(4) DEWI, E.On, EWI et al (2005), Planning of the Grid Integration of Wind Energy in Germany Onshore and Offshore up to the Year 2020