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Study Finds Wind Power Cost Competitive with Natural Gas

April 7, 2014

World Wind Energy Association Publishes Small Wind Report

April 7, 2014

EPA Publishes On-Site Renewable Energy Generation Guide for Local Governments

March 24, 2014

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Stakeholder Engagement and Outreach Webinar: The 2014 Farm Bill's Renewable Energy for America Program

May 21, 2014

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The Statewide Economic Impact of Wind Energy Development in Oklahoma: An Input-Output Analysis by Parts Examination

March 26, 2014

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Technical Challenges

Wind power is by its nature variable, and as a result, it differs from the majority of generation supplying the electric grid. Aspects of this variability are often cited as shortcomings. For instance, the fact that wind power will not be as regularly and reliably available at system peak times as most other generators is sometimes used to argue that wind power requires additional backup resources by other generation on a one-to-one basis. And wind's relatively low capacity factor (a ratio of the total energy output relative to the theoretical sustained peak output) is sometimes used to characterize wind generators as inefficient. It's been stated that other generation will have to be operated in such an inefficient manner to react to wind that it will not reduce fossil fuel usage or emissions. Here we address concerns that wind power's variability will eradicate any expected benefit.

It is critical to understand two aspects of the electricity grid and the generation mix connected to it. First, the grid operates on a basis of shared reserves. The quantity of capacity or operating reserves needed is determined by the grid operators on an aggregate basis, based on the variability of load and the scale and characteristics of resources on the grid. Rules for operating the electricity market compensate generators for the benefits they bring and ensure that enough reserves exist to keep the lights on. Second, the electric generation resources in the region contribute in different ways to cost minimization and reliability, as well as resource diversity and environmental factors. They also have a wide range of capacity factors. Baseload generators (coal, nuclear) have capacity factors of more than 80%; at the opposite extreme, peaking generators (diesel generators and gas turbines) throughout the region are prepared to support the rest of the grid, but at an extremely high cost. Some of these may operate only a few hours per year (capacity factors from 0%-10%). Other "intermediate" generators provide spinning operating reserves, ramping up and down quickly to balance load and generation, reacting to the variability of load and stepping up in the event of unscheduled generation outages. In fact, the average capacity factor of all generation in the New England Power Pool in 2006 was approximately 43%1. In comparison, wind generators' average capacity factor falls in the 20% to 40% range depending primarily on their location. Every generator connected to the New England Power Pool grid receives a different combination of revenues for contributing energy, capacity, and "ancillary services" (which includes operating reserves). Baseload generators will receive substantial revenues for energy and capacity, but many provide no operating reserves. Peaking generators may receive most of their revenues in capacity and ancillary service markets and little for energy generated.

Seen in this light, wind generation is not inefficient, as sometimes argued, just because it has a lower capacity factor than baseload generators. By that standard, the grid as a whole would be deemed inefficient. Rather, like other resource-limited generation (such as the run-of-river hydroelectric generators that have contributed to the regional supply mix for nearly a century), wind contributes less to meeting peak demand. The critical question as to the economic efficiency of any generation plant is how much value it contributes relative to what it costs. Wind is primarily an energy resource, getting paid for the energy it contributes to the grid which does not need to be generated by fossil fuel combustion; wind also receives modest capacity value recognizing its statistical contribution to reliability. In practice, wind displaces fossil fuel usage whenever the wind blows in exchange for a very small increase in system operating costs. Studies of the actual or potential impact of wind at high penetrations have shown that this increase in system operating costs — which may include a slight increase in quantity of generation "idling" in the system at less than its optimal efficiency — constitute a very small fraction of fossil fuel displaced. Greater use of wind forecasting will allow system operators to have greater confidence about when wind will generate and will further minimize generating "idling."

A recent interview with Karl Pfirrmann of the PJM Interconnection (the entity charged with operating the largest electric operating system in the country) provides an excellent, detailed, objective, and accurate point-by-point explanation of the role of wind on the electric grid (PDF 107 KB) Download Adobe Reader. The description provided in the interview is applicable in general to the New England grid, although the fossil generation displaced by wind will vary depending on where a wind plant is located (in PJM it is mostly coal that is displaced; in New England, it's mostly natural gas). The interview addresses many of the most common topics of inaccurate information regarding wind power's contribution to the electric system.

1. Calculated from data in the NEPOOL 2007-2016 Forecast Report of Capacity, Energy, Loads and Transmission (April 2007).

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