Tag Archives: economics

More on the Reality of Living with Wind and Solar Energy

A while ago, I discussed that the future has arrived, and that we can see the real cost of ‘green’ energy policies in the case of Germany. If you are a business owner, or just and ordinary electricity bill payer, you should read the earlier post. The sudden retreat in Germany from nuclear power has left the country reliant on renewables, and energy shortages, energy unreliability and skyrocketing energy costs are the result. Just to serve to emphasise the point, Spiegel online has yet another news story that tells of the many problems being experienced in Germany. All the ingredients I long ago discussed are there.

  • Problems concerned with the intermittent power provision
  • High costs associated with connecting renewables to the grid
  • High costs associated with storage of energy
  • Hight costs associated with keeping backup online from conventional sources for when the wind does not blow / sun does not shine, including inefficient use of conventional capacity
  • High costs of investment from the necessity to build conventional plant backup for each renewable sources (capital expenditure)
  • Rationing of power, in this case, having large business energy users being paid to shut down their factories – paid to produce nothing

I may have missed a couple of points, but I am sure you get the picture. The consequences of renewable energy in Germany are now not the bright hypothetical future painted by ‘green’ propoganda, but are now very real and dismal. I have long admired Germany as an industrial power, but even Germany cannot be immune from the consequences of their mad ‘green’ energy policy. If the quotes I give below later are not enough, read the whole article. It is very clear and very simple to see the consequences of moving to ‘green’ energy.

Countries that follow a green energy agenda are putting an economic gun to their own heads, and pulling the trigger. In the case of Germany, the abandonment of nuclear has made the future now. We have yet to see the full consequences of energy based upon renewables; they will be seen in the next few years, but right now, the situation for energy provision is already dire. It is already very, very bad. It is a disaster, and even the ‘green’ Germans are starting to choke on the consequences. I will now quote at length from sections of the Spiegel article and let the quotes speak for themselves.

With the government driving up the price of electricity, Rösler seems to feel an urge to make himself useful by dispensing advice on how to save money and energy. On Monday, grid operators announced a significant increase in electricity prices in Germany, prices that are already the second-highest in Europe.

The price hike is the result of an assessment under the Renewable Energy Act (EEG), a sort of green-energy solidarity surcharge that is automatically added to every consumer’s electricity bill. Under the agreement reached in the last round of negotiations, the assessment will increase from 3.6 cents to 5.4 cents per kilowatt hour.

With the new rates, German citizens will be paying a total of more than €20 billion ($25.7 billion) next year to promote renewable energy. This is more than €175 for an average three-person household, a 50 percent increase over current figures. And then there are the additional charges a consumer pays for the electricity tax, the cogeneration assessment, the concession fee and value-added tax.


The rising cost of electricity is also a burden on businesses. According to Oettinger, energy costs now represent the biggest liability for Germany as a place to do business, especially in light of the marked increase in the number of blackouts and voltage fluctuations in the grid.

Consumer advocates view the electricity price as a social issue, not unlike the price of bread in ancient Rome. The Paritätischer Gesamtverband, an umbrella association for social-welfare groups, estimates that about 200,000 recipients of benefits under the Hartz IV welfare reform program for the long-term unemployed saw their power shut off last year because of unpaid bills. The VdK, Germany’s largest welfare organization, uses the term “electricity poverty” and is sharply critical of what it sees as a “glaring violation of basic social rights.” According to the VdK, it is unfair that citizens are being asked to bear much of the burden of costs and risks associated with the energy turnaround.


Unfortunately, the electricity is not needed as urgently along the thinly populated coast, but rather in the distant southern states of Baden-Württemberg and Bavaria. The two states have large populations and industry, as well as a number of nuclear power plants scheduled to be shut down soon. For this reason, the federal government’s decision to expedite the expansion of offshore wind power means that new power lines will have to be built, at a cost of €20 billion to €37 billion — the most expensive infrastructure project since German reunification.


Franken is part of the so-called cold reserve of the German energy supply. As long as there isn’t enough storage capacity, virtually every solar plant and every wind turbine has to be backed up by a conventional power plant. Without this double structure, the power supply would collapse.

At the same time, however, the boom in subsidized renewable energy is ensuring that conventional power plants are no longer profitable. Since the law requires that preference be given to green energy, if it’s available, gas-, oil- and coal-fired power plants frequently have to be shut down to avoid overloading the grid. This reduces their revenues while increasing costs because powering plants up and down consumes a lot of fuel and inflicts additional wear and tear on the equipment.

In the past, power plant operators were able to charge higher electricity prices around midday. But now there is more competition from solar plants at this time of day. On days when there is a lot of wind, the sun is shining and consumption is low, market prices on the power exchange can sometimes drop to zero. There is even such a thing as negative costs, when, for example, Austrian pumped-storage hydroelectric plants are paid to take the excess electricity from Germany.

The prospects are so poor that energy providers have little interest in building new power plants. Under current conditions, even the most modern and efficient combined steam and gas power plants are not recovering billions in investment costs.


With extremely cold temperatures gripping large parts of Europe, there was a spike in power consumption. Hamburg was on the verge of a blackout, says plant manager Lutz Bandusch. To keep the lights from going out in the city, he shut down the blast furnaces and rolling mills in Finkenwerder.

Instead of making money by producing steel, the plant operator was compensated for not producing it. It was a profitable arrangement for the steel mill. “It has to be worthwhile from an economic standpoint,” Bandusch admits, even though he felt that it was somewhat odd to be getting paid to do nothing.


Batteries are also part of the government’s plans, and €400 million in public funds have already been earmarked for related R&D. The industry also has high hopes for battery technology. But it this realistic?

For the fun of it, Florian Schlögl, director of the regenerative power plant department at the Fraunhofer Institute for Wind Energy and Energy System Technology (IWES) in the central German city of Kassel, calculated how large a battery would have to be to supply a city like Munich (pop. 1.38 million) with electricity for two or three days.

The answer, says Schlögl, depends on which battery technology is available. A cube-shaped lithium ion battery, such as the ones used in cell phones and laptops, would be 53 meters (174 feet) long on each edge. This would make it as tall as the roof of the Allianz Arena, where FC Bayern Munich plays its home games, and it would weight 250,000 metric tons. The dimensions would be even larger in the case of a lead acid battery, such as those used in cars. A cube-shaped battery would be 93.3 meter long on each edge — and Munich would have a new signature landmark.


In the next few years, electricity consumers will pay for more than €100 billion in subsidies for solar power. Additional billions will follow. Like its predecessor, the current CDU/CSU-FDP government has also bowed to the solar lobby. The latter’s business model is still based on collecting as many subsidies as possible rather than on feeding as much usable electricity as possible into the grid.

This is not the future. It is the ‘now‘ in Germany. It is the future being embraced by most of the major political parties in New Zealand. They are embracing economic decline, and telling you the future is bright. It is not bright, but a future of darkness in which the lights go out, and you pay ever more for an ever less reliable energy system. It is job losses, a lower standard of living, and energy poverty. It is time to wake up. We can now see the future. When you hear ‘green’ platitudes and arguments, point their attention to Germany. When you hear a politician wittering about the benefits of going ‘green’ point the politician’s attention to Germany. When you hear the ‘green’ platitudes and arguments for the wonders of renewables, paint the picture with the now of Germany.


Wind Energy: The Future Has Arrived

One of the sites that I visit quite regularly is the Global Warming Policy Foundation (GWPF). As of late, there have been a deluge of articles and links on the subject of wind energy, many of which are focused on the UK and EU. Whilst this blog is primarily looking at New Zealand, the experience of the UK and EU may be seen to be useful in understanding wind energy in general. This latest story grabbed my attention and prompted the post:

THE amount of electricity produced from “green” energy sources in Scotland fell by almost half for a period earlier this year – because it was not wet or windy enough.

• Murdo Fraser voices concern despite 13 per cent rise in green power over first half of year

• 35 per cent of Scottish electricity demand met by renewables

• Renewable energy down 20 per cent in second quarter

The figures prompted opposition concerns that Scotland could be left in the dark if the “wind isn’t blowing”.

First Minister Alex Salmond wants to pioneer a “renewables revolution” by generating the equivalent of all the country’s electricity needs from “clean” sources, such as hydro, wind and wave power.

But, according to government figures, renewable electricity fell to 2,498 gigawatt hours (GWh) between April and June from 4,596 GWh the previous quarter, the most dramatic fall in mainland Britain. There has been a 600 GWh drop from the same quarter last year.

For those who view wind as a source of power as near to useless, this may come as no surprise. However, it is a story that only serves to emphasise the problems inherent in wind power. How is it possible to plan power supply with such huge variability? Despite such a stark example of the risks of reliance on wind energy, I can confidently predict that this will not derail the Scottish dash for more renewable energy. The mounting evidence pointing to the problems of reliability of wind energy just seems to have no impact. And then there are the real costs of wind energy, which is starting to be felt in one of the homes of wind energy; Germany. When Germany shut down its nuclear industry, it found out what a ‘green’ future starts to look like. This from Reuters:

Germany must rein in the runaway costs of subsidising electricity from renewable sources or risk overburdening consumers, European Energy Commissioner Guenther Oettinger said on Tuesday.

“We need a speed limit,” Oettinger said, referring to the accelerating cost of funding electricity produced from sources such as wind and sun at above-market prices – a course Germany has chosen to become a low-carbon economy.

And for ordinary consumers, there are the costs of the subsidies for renewable electricity:

The rise to above 5 cents will work out as an additional 70 euros on the 900 euros ($1,200) average household power bill paid in 2012, of which 150 euros already go towards green power.

And then there is this from Christopher Booker on renewables in Germany:

Now the problem for the German grid has become even worse. Thanks to a flood of subsidies unleashed by Angela Merkel’s government, renewable capacity has risen still further (solar, for instance, by 43 per cent). This makes it so difficult to keep the grid balanced that it is permanently at risk of power failures. (When the power to one Hamburg aluminium factory failed recently, for only a fraction of a second, it shut down the plant, causing serious damage.) Energy-intensive industries are having to install their own generators, or are looking to leave Germany altogether.

Die Welt has reported the risk of blackouts in Germany, with the following a summary from GWPF:

Last winter, on several occasions, Germany escaped only just large-scale power outages. Next winter the risk of large blackouts is even greater. The culprit for the looming crisis is the single most important instrument of German energy policy: the “Renewable Energy Law.” The economic cost of a wide-scale blackout are measured in billions of Euros per day.

This is from Spiegel:

At other industrial companies, executives at the highest levels are also thinking about freeing themselves from Germany’s electricity grid to cushion the consequences of the country’s transition to renewable energy.

Likewise, as more and more companies with sensitive control systems are securing production through batteries and generators, the companies that manufacture them are benefiting. “You can hardly find a company that isn’t worrying about its power supply,” said Joachim Pfeiffer, a parliamentarian and economic policy spokesman for the governing center-right Christian Democratic Union (CDU).

And there is more from the same article:

The problem is that wind and solar farms just don’t deliver the same amount of continuous electricity compared with nuclear and gas-fired power plants. To match traditional energy sources, grid operators must be able to exactly predict how strong the wind will blow or the sun will shine.

But such an exact prediction is difficult. Even when grid operators are off by just a few percentage points, voltage in the grid slackens. That has no affect on normal household appliances, such as vacuum cleaners and coffee machines. But for high-performance computers, for example, outages lasting even just a millisecond can quickly trigger system failures.

This is exactly what people, including myself, predicted would take place. As it is, in Germany, there is now a boom taking place for companies to have back-up systems for an unreliable power supply. I have found no figures for the cost of this, but it would be reasonable to expect that it is very high. The cost that is not so visible will be the companies that might consider packing their bags and moving to a country that can provide reliable energy. It is bad, very bad, and I will quote at length from another Spiegel article (emhasis added):

Energy prices are rising and the risk of power outages is growing. But the urgently needed expansion of the grid, as well as the development of replacement power plants and renewable energy sources is progressing very slowly. A growing number of economic experts, business executives and union leaders are putting the blame squarely on the shoulders of Merkel’s coalition, which pairs her conservatives with the business-friendly Free Democrats (FDP). The government, they say, has expedited de-industrialization.


In macroeconomic terms, the impending demise of heavy industry is all the more worrying, because the job losses will not be offset elsewhere. There is no sign yet of the green economic miracle that the federal government promised would accompany Germany’s new energy strategy.


The price of electricity is moving in only one direction: steeply up. For the Krefeld plant, the cost of a kilowatt hour of electricity has tripled since 2000.

And there is no end in sight. When Merkel’s new energy policy was introduced last year, says plant manager Behmenburg, planning for the future became virtually impossible. Behmenburg says that it is impossible now to know what will happen to the supply situation and the price of electricity in the coming years. The mill, steeped in tradition, didn’t stand a chance of surviving, he says.

Voltage Fluctuations and Power Outages

Other companies could suffer a similar fate. Berlin’s energy policy affects all classic industrial sectors, from the steel and aluminum industry to paper and cement manufacturers, as well as the chemical industry. The metal industry, long an important sector in Germany, is already migrating to countries with cheaper electricity.

The Düsseldorf-based conglomerate GEA closed its zinc plant in nearby Datteln. Aurubis, the Hamburg-based company that is Europe’s largest copper producer, is critical of higher energy costs and has announced plans to invest abroad, especially in Asia and South America. According to a recent survey by the DIHK, almost one in five industrial companies plans to shift capacities abroad — or has already done so. The study also finds that almost 60 percent fear power outages or voltage fluctuations in the power grid, because wind and solar power are still too unreliable.

“The promotion of renewable energy has led to substantial displacement effects on employment in the conventional energy production sectors, as well as in downstream industries that are particularly energy-intensive,” concludes the report on a conference held at the Federal Ministry of Education and Research last year. The political opposition has also recognized the importance of the issue. Some believe that the green economy is everything, warns Sigmar Gabriel, chairman of the center-left Social Democratic Party (SPD). “But they forget that they can’t make a wind turbine without steel, plastic, mechanical engineering and electrical engineering.”

Welcome to the world of renewable energy. Germany has followed this path towards its conclusion, and words like ‘deindustrialisation’ start to appear. This is the future of the countries that stake their future on renewable energy. For years we have had the ‘green’ advocates, politicians and pressure groups promising and promising that ‘green’ energy would create jobs, and that all would be good with the world. Well, the experience of Germany is not a forecast, not a hypothetical scenario, not an imagined future; the future has arrived, and it is high prices, deinstrialisation, and a grid that does not work.

Germany is an economic powerhouse. It is an economy that has even managed to survive relatively unscathed whilst much of the world economy has been in a dire state. However, for the German economy to prosper, it needs reliable and affordable power. No wonder to find then that Germany is rapidly reversing course and is building 23 coal power stations.

Here in New Zealand, as I have discussed in previous posts, there is similar enthusiasm for wind and renewables as in Germany. It is an enthusiasm that is promoted by a narrow group of green fanatics, and a renewables industry that has enjoyed subsidy and growth on the back of building useless and expensive energy.

Throughout the last few years, claims for wind energy as a solution have been made, and we can read argument after argument from the ‘green’ advcacates proclaiming a bright future for those who pursue the renewables future. Well, if a bright future is sky-high energy prices, companies fleeing from expensive and unreliable energy provision, rising unemployment, and the most vulenerable living in energy poverty, then the future is indeed bright. It is no longer an imaginary ‘bright’ future, but a future that has come to Germany.

How long until we see it in New Zealand? It is a question of politics. It is a question of when politicians finally stand up to the green lobby. Renewable energy is not the foundation for economic prosperity, but is instead a policy of economic decline. We can see the results in Germany. Quite frankly, I am simply baffled that nobody has the guts to stand up and say ‘enough’.

The Madness of Wind Energy

It did not take me long. Typing ‘wind energy’ into the New Zealand Herald search box produced a string of ‘hits’, including this from a piece about Genesis Energy:

While Genesis began seeking resource consents for a major new wind farm in the Wairarapa, called Castle Hill, during the period, it considers the market is currently “saturated” with new generation proposals that will more than meet weakly growing electricity demand in the near future.

Yes, like many others in the world, New Zealand is rushing down the wind energy route, and doing so in the face of a mounting body of evidence that this route is  a complete waste of money.

One of my earliest posts on the blog was a discussion of the utter uselessness of wind energy, and you may want to take a look at it. It gives an analogy which explains the uselessness of this method of energy production in simple terms. More recently, I posted on a Civitas (a UK ‘think-tank’) report on wind energy, which slammed both the economics of wind power, and the ‘green’ credentials of wind power. As it is, a new report has been released by the Global Warming Policy Foundation (GWPF). It is written by an Economics Professor, Gordon Hughes, and points out the same problems with wind energy that can be found in my earlier post and the Civitas report. I will quote from the forward of the report:

The total consumer bill for wind subsidies by 2030 is estimated to amount to a staggering £130 billion. A recent analysis of UK wind farms revealed that a dozen of the biggest landowners will between them receive almost £850 million in subsidies, a huge amount of funding that will be paid by ordinary
families through hidden taxes on their household electricity bills.

The forward notes that these huge expenses and subsidies have been hidden from the consumer. As is always the case, Hughes identifies that the fundamental problems with wind (and many other sources of ‘renewable’) energy is the intermittent nature of the generation, which means that back-up generation capacity is needed for the wind farms. The report also questions whether the use of wind farms will even reduce CO2 emissions, which is one of the fundamental reasons that wind energy has been promoted so heavily, and is in receipt of so much subsidy. If you have ever wondered about the economics of wind generation, I strongly recommend reading the report in full, or at least reading the summary.

The report goes against one of the great green causes, and it is therefore no surprise to see the limited coverage of the report in the press. I found no coverage in a search of Stuff, but a Google news search found coverage in several countries, also including this from The Australian:

The British study warns of the rising cost to consumers of wind power subsidies on the grounds that governments could achieve the same environmental benefits by other means at much lower cost.

Comparing a pound stg. 13 billion ($19bn) outlay on a combined-cycle gas plant against a pound stg. 120bn outlay on wind farms, Professor Hughes found the renewable energy option was too expensive by any standard.

Wind power would cut emissions at an average cost of pound stg. 270 a tonne, he estimated, but meeting Britain’s greenhouse targets in this way would cost about pound stg. 78bn a year or 4.4 per cent of the nation’s GDP.

Note the last figure for the cost in GDP. To say that this is complete madness would be an understatement. As the report in the Australian points out, wind characteristics may vary between countries, making direct comparisons difficult, but the principles of the study carry over. I therefore have several questions about wind power in New Zealand:

  1. What is the real cost of wind energy in New Zealand, including indirect subsidies of wind power?
  2. How much is this going to cost businesses?
  3. How much is this going to cost consumers?

It may come as no surprise to find that the New Zealand Wind Energy Association has given a report arguing that wind power is a wonderful solution to New Zealand energy requirements. However, as is always the case with such reports, and as is pointed out in both the Civitas and GWPF reports, the pro-wind energy reports all have in common that they make completely unrealistic assumptions. As it is, the report was criticised by the New Zealand Climate Science Coalition, in a press release that can be found here:

“The report uses an economic model of New Zealand which is totally unsuited to analysing the effect of 20% energy generation from wind. Any model that does not take into account the intermittent and seasonal nature of wind and its effect on power prices and the fact that, in a dry year, hydro cannot backup wind, is worthless. The model makes no allowance for the fact that over peak demand periods, only about 10% of the wind generation can be relied on. It also does not consider the need for extra transmission lines and the poor efficiency of the gas fired power stations that must be built to back up wind. For example, one study in the United States showed that, in Texas, a large amount of wind energy results in a tiny reduction in carbon dioxide emissions.

“This flawed report reflects little credit on the Infometrics and on the New Zealand Wind Energy Association. It does not alter the fact that wind is expensive, requires backup, and has only a small effect on reducing emissions of carbon dioxide–which is, in any event, an entirely beneficial gas that causes plants to grow,” Mr Leyland concluded.

Notwithstanding this critique, where is the debate on wind power in New Zealand? Where is the equivalent of Civitas? The UK is slowly waking up to the idiocy of wind power, with this from Matt Ridley in the UK’s Spectator:

Even in a boom, wind farms would have been unaffordable — with their economic and ecological rationale blown away. In an era of austerity, the policy is doomed, though so many contracts have been signed that the expansion of wind farms may continue, for a while. But the scam has ended. And as we survey the economic and environmental damage, the obvious question is how the delusion was maintained for so long. There has been no mystery about wind’s futility as a source of affordable and abundant electricity — so how did the wind-farm scam fool so many policymakers?

One answer is money. There were too many people with snouts in the trough. Not just the manufacturers, operators and landlords of the wind farms, but financiers: wind-farm venture capital trusts were all the rage a few years ago — guaranteed income streams are what capitalists like best; they even get paid to switch the monsters off on very windy days so as not to overload the grid. Even the military took the money. Wind companies are paying for a new £20 million military radar at Brizlee Wood in Northumberland so as to enable the Ministry of Defence to lift its objection to the 48-turbine Fallago Rig wind farm in Berwickshire.

Wind energy is not a small issue. It is, in fact, an issue that can have profound and serious impacts upon every New Zealand family, and every New Zealand business. Look again at the figures for the cost of wind power in the UK, as measured in GDP. If the cost of New Zealand’s wind energy is even as low as half of the UK figure, it is an issue that impacts the whole of the New Zealand economy.When is New Zealand going to wake up from this madness that is so economically ruinous?

What really worries me is that there appears to be no will to take on anything which has a ‘green’ label attached to it. It is a situation in which no politician dares to go against anything that might be seen as anti-green. As such, rather than taking on a ‘green issue’, I suspect that the New Zealand politicians will remain silent, and allow this economically mad and economically ruinous policy of encouraging wind energy to continue.

Windpower? Really?

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