Of far more consequence for wind power going forward is a much broader failure of electricity market policy. Common sense dictates that once a wind turbine is built, all the energy it harnesses should be used to offset the burning of gas and coal. In that way, money on fuel purchases is saved, depletion of finite resources is slowed and carbon emissions are reduced. Yet the commercial structures of today's power systems frequently confound the imperative to use all wind energy ahead of other generation. Two main dynamics are at work to prevent that happening.
First, a fundamental market failure is the missing commercial incentive for needed investment in transmission capacity. Thousands of megawatts of wind projects are stymied for lack of transmission in places where it makes good economic sense to build it. Missing, too, is the market stimulus for resolving congestion points on electricity networks. In specific areas where wind power is plentiful, there are times when there is no available capacity on the wires to take up the electricity produced. "Available" is the operative word. The wires may have enough capacity in practice, but that space can have been booked for fossil fuel generation, meaning that clean wind power goes to waste.
That brings us to the second dynamic at work: the order in which diverse generation is dispatched to customers around the clock. In the old days, when power plant were owned and run by the state, the "merit order" was based on marginal cost and centrally controlled. Liberalisation of the business of electricity supply has handed that job to market forces. Provided the market structure is correctly geared for the common good, those forces will put wind power first in the merit order. Yet the examples of that not happening are increasing as the volume of wind energy grows. A typical case is when a power system operator has contracted and paid for a specific volume of fossil fuel generation. As many electricity markets are structured today, there is no economic incentive for the operator to cut its losses on the fossil fuel purchase when unscheduled wind energy comes flooding in. Instead of fossil fuel plant output being reduced to allow wind power onto the wires, wind turbine generation is being curtailed, from Germany to Spain to Japan, in defiance of common sense.
Close regulation of market structure is required. Market forces must work to achieve most electricity for least cost, not at lining the pockets of utility owners, or not more than is necessary to stimulate steady investment. When it comes to optimal use of wind power, however, regulatory control leaves a lot be desired.
The focus on short term profit is such that potential investors in the utility sector are now wondering if money can be made by storing wind power when market prices are low -- and selling it again when prices are high -- well knowing that the cost of storing wind energy roughly doubles its generation cost. Such is the poor commercial structure of power markets, that charging consumers up to twice as much for their electricity than it costs to produce it, rather than charging them a deal less for extra transmission capacity so that wind energy can be used as it is produced, is being seriously considered. Shell is contemplating whether by storing wind energy as air pumped underground it could make money from pumping it up again to help drive gas turbines, given the particular situation in Texas (page 55).
The right market forces
The more efficiently that wind power is used, the greater its environmental benefit and the cheaper its cost. Turning off wind turbines, or storing wind energy for later use, is not efficient while fossil fuel is still being burned. Curtailment or storage should not be on the agenda until the day wind energy is meeting a sizable proportion of electricity demand over a year, when a genuine surplus will occur at times. What's more, storing the surplus only becomes economic for investors when market prices for electricity and its transmission are higher than the cost of generating, storing and reusing it locally. Conventional power plant, already built and paid for, or other new renewables, are likely to provide electricity for less money than the cost of storage for a good while yet.
In the distant future that may not always be so, but a focus on building expensive storage systems now, rather than on increasing transmission capacity -- in most cases at much less cost -- is daylight robbery of consumers. Storage of wind power must not come to pass because greed is channelled in the wrong direction by poor market structures. Transmission must come first.