Vail goes Green
Good news from Colorado, Vail resorts will purchase wind energy credits to cover its electricity consumption. Though they aren't purchasing as many credits as Whole Foods, this will be a significant amount. Some of the wind farms selling Vail credits are based in Minnesota.
I am thrilled at this news but I really wonder if these sorts of actions even matter. Does action like this actually solve the transmission problems we are facing with wind? Or is it just a feel-good hey-we-tried approach to cleaning up our grid?
I guess the question is whether there is any substitute for good public policy on the matter? Would we have wind investment with libertarians running the joint?
posted by shadoweyes @ 11:26 PM
7 Comments:
Hello. Stumbled upon your blog and enjoyed seeing that more people are becoming interested in energy and energy policy. Just curious, what transmission problems you are referring to regarding wind energy?
The problem I was referring to is that (at least in MN), we do not have enough transmission capacity to get electricity from places generating it with wind to the places that need it.
Part of the issue relates to LMP or locational marginal pricing and I was wondering, given that some of the bloggers on this site are energy policy students (or former students) from Humphrey, whether or not you guys are able to delve into how the wholesale electric markets function.
I have some experience trading in the energy markets and while I work in Houston now I’m from Minnesota originally and I’d be interested in talking about how the markets work with anyone (especially from ‘sota) on the policy side who thinks they might benefit from any perspective I can lend…and vise-versa.
If not that’s cool too. Anyway,like I said I’ve enjoyed reading some of the posts and keep it up.
I've been delving into how wind functions with LMPs for my summer job. Currently, on the MISO system wind is a price taker. Utilities are required or obligated to buy it based on policy.
The ongoing MN Wind Integration Study is the most comprehensive of its kind and will decide how LMPs will be set for wind. From talking to the study manager, wind should be very competitive on the MISO markets. LMPs are set by 3 factors:
1. marginal energy cost (i.e. fuel)
2. marginal energy loss (a function of how far from the load the generator is)
3. marginal congestion
So, since wind has zero fuel cost, its marginal energy cost is 0, or -1.8 cents/kWh with the Production Tax Credit. This will make it very competitive on the market.
Also, on a levelized cost basis, wind is very competitive compared to other technologies. The downside is there is a system operating cost impact that increases as more wind is added. For the Xcel system, they estimated it at 0.5 cents/kWh for 15 percent wind. That's roughly 0.1 percent the cost of generation. The cost is primarily due to unit commitment costs, which are greatly reduced through forecasting. Current forecasting accuracy is roughly 85 percent.
In New York State, they estimated that 10% wind would actually save ratepayers money, even accounting for the operating costs. So to answer the original question in a long winded way, yes, wind can be competitive even ignoring the environmental benefits.
I would be interested in learning about the energy markets. You can email me by appending @gmail.com to my username.
A traditional power plant that is build to serve load in a region is eligible to receive 'capacity payments' from load servers (Xcel, MP, etc.). The capacity purchases ensure that there will be adequate generation to serve peak demand plus a reserve margin. Capacity markets are under reform everywhere and MISO is considering going to an LMP only market, but as the market stands today do you know if wind projects are entitled to capacity payments given that they can not be counted on to be available on peak demand days.
Every regional market is a little different with respect to capacity payments and I don't profess to be an expert on them, but it might be something to consider in your research on the cost effectiveness of wind compared to traditional sources.
My understanding is that can be awful tough for wind to get capacity payments. Some of the Windustry folks might be able to give more details...
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