Fact check: Correcting math errors leads back to original finding: Wind power is affordable, reliable

Editor's note: The Bozeman (Mont.) Daily Chronicle recently carried a column by Jeff Fox of the Renewable Northwest Project about the affordability of wind power generated by the Spion Kop wind farm in Montana. Shortly thereafter, a column appeared in the Chronicle from John Bushnell of investor-owned utility NorthWestern Energy, disputing Mr. Fox's statements about the economics of wind.  In this article, AWEA Senior Electric Industry Analyst Michael Goggin discusses errors in Mr. Bushnell's calculations.

I’d like to thank Mr. Bushnell for his positive words about wind energy, including that wind “is a strong viable component of NorthWestern’s energy portfolio.” However, Mr. Bushnell’s criticisms of how wind energy is integrated onto the power system contain three salient math errors that cause him to greatly overstate the challenge. Correcting for those errors leads back to the original conclusion expressed in Jeff Fox’s article that wind energy is being reliably integrated at lower cost than coal generation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. All power plants fail to produce from time to time, which is why grid operators use statistical tools to evaluate how much they can rely on various power plants to produce power on demand. As a notable example, the 740-MW Colstrip 4 coal-fired power plant Mr. Bushnell holds up as a resource that “can be called upon when needed and can be counted on at time of our customers’ peak need” is actually out of service for six months, including the summer peak demand period, after it unexpectedly and abruptly broke down on July 1 due to the failure of a critical component of the electrical generator. Colstrip #4 was also down for nine months in 2009, also including that year’s summer peak demand period, after another component failure at the plant.

Accommodating the failure of large conventional power plants is a significant burden for grid operators, as these typically occur instantaneously and without warning, requiring grid operators to keep hundreds or even thousands of megawatts of fast-acting reserves on standby at all times. In contrast, changes in wind output occur gradually and predictably, allowing grid operators to accommodate them at lower cost. In reality, grid operators are able to rely on a significant share of wind plant capacity for meeting peak electricity demand. While that share is higher for fuelled power plants like Colstrip #4, it is still well short of 100%, as evidenced by the fact that in 2 of the last 4 years the Colstrip #4 plant was totally unavailable during peak demand periods. This is not to say that fossil-fired power plants are unreliable, but rather to illustrate that the power system is operated reliably even though all individual power plants, including wind plants, do not always produce when needed.

2. Adding wind plants does not increase the need for power plant capacity, but rather actually decreases the need for power plant capacity. Because of reduced electricity demand and increased use of tools like demand response, most power systems in the U.S. have no need for additional power plants to meet electricity demand, so the value of capacity is very low or zero. Even if a power system does need additional capacity, adding a wind plant makes some contribution to that need. If the system does need more capacity, that need is caused by electricity demand and entirely unrelated to wind. Regardless, that need is often much more cost-effectively met through energy efficiency or demand response than by building a new power plant. For that reason, it is incorrect to assume that the economic value of new capacity is equal to the cost of a new gas power plant, as that capacity typically already exists on the power system for free or can be obtained at much lower cost through energy efficiency or demand response.

3.  Even if one incorrectly assumes the need to add a new gas power plant (1 and 2 above explain why that is incorrect), Mr. Bushnell compounds that with the further error of adding the fuel cost for natural gas power plants that are added to provide capacity. Because such a gas plant is only needed to provide capacity to meet peak demand by virtue of being built, only the capital costs and not the fuel costs should be included. Mr. Bushnell’s argument is comparable to claiming that biking to work won’t reduce your family’s spending on gasoline, because you still have a car sitting in your garage at home. It is well-established in Federal Energy Regulatory Commission ratemaking that when natural gas power plants are needed to provide additional reserves, only the capital cost of those power plants should be recovered. Charging for fuel costs would be double-counting the energy that was already provided by the wind plant, and double-charging consumers for that energy.

After correcting for those three errors, the original conclusion that wind is more cost effective than Colstrip still stands.
 

Photo credit: First Wind