Wind Economics: Costs of managing variability are low

WORLDWIDE: The American Wind Energy Association (AWEA) produced a briefing that asserts that wind's integration costs are lower than those for other energy sources.

Costly… A 2.5GW nuclear plant ups Texas’ need for quick-acting reserve (pic: Nuclearoperatingcompany)
Costly… A 2.5GW nuclear plant ups Texas’ need for quick-acting reserve (pic: Nuclearoperatingcompany)

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It builds on recent data from the Electric Reliability Council of Texas (Ercot) and a 2011 report from the National Renewable Energy Laboratory, Cost-Causation and Integration Cost Analysis for Variable Generation, and written by a number of authors from NREL and the US Department of Energy.

The AWEA briefing argues that the cost of integrating large conventional power plants on to the power system in Texas is more than 17 times larger than the cost of reliably integrating wind energy. This must of course be balanced by the fact that conventional plants on the Ercot system are roughly eight times greater than wind farms in the state. However, MW by MW, this still makes the cost of integrating conventional power plants over twice as expensive than reliably integrating wind energy. This is still unexpected given that conventional output is not variable.

Quick-acting reserve

The reason conventional plants requires more reserves is that the system operator must cater for an instantaneous, sudden loss of output - or trip - of the largest unit on the network. This is the 1.25GW nuclear reactor at the South Texas Generating Station. There are two such reactors at the site, and the fact that Ercot holds 2.8GW of quick-acting reserve suggests that it caters for the contingency that both reactors might trip. Quick-acting reserve is more expensive than other kinds of back-up, which is why the provision of such plant pushes up the cost of conventional plant integration.

There is a wide range in the estimates of the cost of catering for wind variability to ensure power system stability. An International Energy Agency study presented at an international workshop on the large-scale integration of wind power into power systems in Bremen, Germany, in 2009, showed that the estimated extra reserve requirements for 10% wind on an energy basis, ranged from 1% to 15% of the wind energy capacity, and the corresponding cost ranged from EUR 0.2/MWh to EUR 3.5/MWh.

The AWEA/Ercot analysis comes in at the low end of this range, with the extra reserve requirements being about 4% of the wind capacity, and the additional cost about $0.37/MWh (EUR 0.28/MWh).

UK wind on track for carbon cutting

The influential Committee on Climate Change (CCC) in the UK published its Meeting Carbon Budgets - 2014 Progress Report to Parliament report in July. Using a traffic-light system to assess the progress, it gives a green light for wind, noting a strong pipeline of projects until 2020.

Nuclear gets an amber light, due to the projected completion date of the first new unit being put back five years, to 2023. The CCC makes no adverse comments about the nuclear strike price (EUR117/MWh), which has been criticised as being too generous. Carbon capture and storage (CCS) is given a red light, with the programme not due to deliver the first plant until about 2020 - some six years behind schedule.

Support for onshore wind

The committee is strongly supportive of onshore wind, noting that: "If the objective is to bring forward investments on the cost-effective path to power sector decarbonisation, then onshore wind should continue to be supported ... A failure to invest in it is a departure from the cost-effective path, which will ultimately result in higher energy bills at a time when energy affordability is a significant concern."

Offshore wind also attracts support, albeit qualified. The CCC notes it is expensive, but has great large potential and strong evidence to suggest that costs can fall considerably. "There is significant value having offshore wind as part of a portfolio, given the need to decarbonise the power sector, limits on scope for investment in onshore wind and nuclear, together with uncertainties over CCS, and the importance of UK deployment in driving cost reduction", the report states.

The committee is more cautious on solar. Although it notes that "prices have come down considerably in recent years, and even in the UK its generation costs are approaching other mature low-carbon options. However, the economics of solar generation in the UK are undermined because its generation profile is poorly matched to UK demand (solar output is high in summer and demand is high in winter)". it adds that it is appropriate to limit investment in solar power, but does not rule out greater penetration in the future.

Overall, wind comes out of the analysis well, and the doubts about nuclear and CCS are significant. The committee is an independent statutory body, established to advise UK governments on setting and meeting carbon budgets, and preparing for climate change.

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