Could Wind Power Cool New England’s Price Fever?

Source: By MATTHEW L. WALD, New York Times • Posted: Tuesday, February 19, 2013

As I reported in Saturday’s paper, New England is experiencing a remarkable spike in electricity prices brought on by high heating demand and rising natural gas prices for electric generators.

What role, if any, could renewable energy play in solving this problem?

At the Union of Concerned Scientists, the senior energy analyst Michael B. Jacobs, who has a blog called the Energy Roller Coaster, has been sounding the alarm about over-reliance on natural gas in New England and Texas. The solution, he said, would be to turn to more renewable energy sources like wind so that the demand for gas would be smaller at clinch times.

“You don’t have nearly so much of a price spike if you have more renewables in your portfolio,” he said.

Wind advocates made a similar argument when the price of natural gas was high about five years ago: that even if wind energy was expensive, it could have a major impact on the price of gas by cutting demand slightly. In the commodity markets, small shortages or surpluses can result in huge price swings.

Jim Gordon, who has been working for a decade to start up the project known as Cape Wind, said in an e-mail that the price spike “highlights why offshore wind power can be an increasingly important component of the North East’s energy future.”

In a telephone interview, he added that offshore wind was particularly well suited to production when gas demand was at its peak.

“When it’s really cold outside, the wind is whipping across Nantucket Sound,” he said. A $2 million offshore solar-powered wind monitoring station has already demonstrated that, he said.

And that would in turn suppress demand for gas for home heating, he said.

The suppression phenomenon is related to the odd way that electricity is priced in competitive markets like New England. Companies that own the generators offer to supply electricity at a price that is usually based on the cost of production, and wholesale users like Northeast Utilities offer to buy it.

The buyers start with the cheapest power and work their way up. The last megawatt-hour that the buyers agree to take will be the most expensive, and that megawatt-hour sets the price for every megawatt-hour used, no matter what the bidding price was.

If more power is offered at a lower price, the last megawatt-hour accepted will be at a lower price, and all the producers will be paid less.

In New England, however, that implies the introduction of vast numbers of new wind machines because the weather there recently has not been very windy and each individual machine is producing at a small fraction of its capacity. A value of 10 percent has been typical in the last few days. (All of the region’s wind machines are onshore at the moment, though, and offshore wind might do better.)

To get a quick idea of how much wind is now on line, check out this Web page operated by ISO-New England, the grid operator.

The pie chart shows various sources of fuel, and a separate tab breaks down the renewables into wind, wood and refuse. If wind makes up one-third of the renewables total, and the renewables total is 10 percent of the complete electricity mix, then wind is providing about 3 percent of the total energy.

Bearing in mind that New England has about 700 megawatts of wind capacity installed in the six-state region, look at the total demand, in megawatts, on the same page, and match that up against the amount being produced by wind. It changes hour by hour, but it is generally a small fraction of what would be produced when the weather is more favorable to wind machines.

Of course, using wind to solve the problem would require either the capacity for massive energy storage or a transmission system that could bring in energy from distant regions that are experiencing different weather.