Thursday, June 19, 2014

Despite Heat, Low Electricity Prices in Texas Show How Wind Is Good for Consumers

A vintage windmill in a cotton field in West Texas, with modern wind turbines in the background. (Credit: Shutterstock) Click to enlarge.
Spot prices are the cost of any good or service at a particular time and place.  And, according to Bloomberg, spot prices on the wholesale electricity market jumped drastically on the PJM Interconnection LLC grid yesterday, thanks to a wave of high temperatures.  The grid covers 13 states in the mid-Atlantic region, and by 3pm on Tuesday prices on the PJM’s western hub jumped $44.27 per megawatt-hour to land on an average of $84.82.  On the eastern hub, prices shot up $26.64 — a 50 percent increase — to land on $79.86 per megawatt-hour.

But down south in Texas, spot power actually fell 48 cents to hit $46.09 per megawatt-hour at the same time.  That was despite temperature highs throughout the state that approached or exceeded the sweltering 96°F that Washington, DC saw that day.

Bloomberg reported that the price drop was accompanied by a level of wind power generation on the Texas grid that topped forecasts.

Wind power is already competitive with natural gas and cheaper than coal in many areas of the country, and a recent study by the American Wind Energy Association (AWEA) — an industry trade group — showed states with the most wind capacity actually saw electricity prices drop slightly from 2008 to 2013.  Those prices rose almost 8 percent in other states.  The findings are backed up by a host of other studies.

More specifically, wind power serves as a cushion, protecting consumers from volatility in electricity prices.  Extreme temperatures often drive big swings in electricity demand as people heat or cool their homes and offices, and they can knock out traditional fossil fuel power by freezing natural gas lines or forcing activity at coal plants to halt.  Texas has considerably more wind capacity than any other state, meaning it also has the biggest cushion.  And according to AWEA, the Electric Reliability Council of Texas Inc. (ERCOT) has avoided blackouts on multiple occasions thanks to its wind generation.

In particular, when this past winter’s polar vortex brought ultra-cold temperatures, the power generated by Texas wind turbines allowed the state to avoid any major power outages.  Wind power serves a similar function during heat waves:  coal and natural gas plants rely on water to keep their systems cool.  But heat waves can raise the temperature of the water the plants pull in, threatening their ability to function — and given the enormous amounts of water the national and global energy systems rely on, global warming is expected to threaten more and more fossil fuel capacity in coming years.

Despite Heat, Low Electricity Prices in Texas Show How Wind Is Good for Consumers

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