Iowa brings BigWind ‘negative pricing’ to the mainstream discussion and it is about time! The American people need to understand the TRUTH about what BigWind does to our electricity prices and reliability. Ohioans need to say NO to Cliff Hite and his efforts to increase the number of turbines in our state! What is negative pricing? Here is an excerpt from The NorthBridge Group, “Why wind producers can pay us to take their power – and why that is a bad thing”. If you do not read this entire blog, please review the BOLD typing…
“The federal wind Production Tax Credit (“PTC”) was originally enacted in 1992 to jumpstart the wind energy industry.1 The PTC has since been extended…This paper focuses on one harmful, but often overlooked, aspect of the PTC – specifically how the PTC interacts with wholesale electricity markets to create the phenomenon of distortionary “negative prices.” While the concept of negative prices might at first glance seem to be a money-saver for electricity users, or at best a harmless phenomenon, in fact these negative prices are: (a) funded by taxpayers; (b) distorting wholesale electricity markets; and (c) harming conventional generation and imperiling reliability….
We find that:
The PTC undermines and distorts price signals in wholesale electricity markets by incenting PTC-subsidized wind producers to sell electricity at a loss to earn enormous tax subsidies.
This taxpayer-funded subsidy artificially depresses wholesale power prices, and in hours of the year when demand for electricity is low it can result in negative pricing…
Wind producers can readily turn wind turbines on and off, but have no incentive to do so because they still receive positive margins during negative price hours due to the PTC subsidy they earn when they generate. They have no incentive to curtail their output – which, absent the PTC, would be in their economic interest. The failure of wind generators to curtail output when wholesale prices approach zero has both short term and long term negative consequences. In the short term, the failure of wind producers to curtail output makes it more difficult for system operators to maintain reliability, and also makes it more costly for them to operate the regional electric grid.
In the long run, the PTC destabilizes the market for conventional electricity as generators that are not eligible for the PTC are significantly harmed by negative prices, both in terms of near-term daily operational decisions, as well as long-term decisions to build or retire generation.
America’s continued reliance on the PTC subsidy therefore will invariably deter investments in the conventional power generation needed to maintain a reliable electric system. Conventional generation is critical to reliability because wind generation often does not produce energy during times of peak electricity demand, while producing at high levels (and driving negative prices) when demand is low. In recent years, about 85% of total wind capacity has not operated during the peak hours on the highest demand days of the year, on average. Controllable conventional generation is thus needed to backstop wind and ensure the lights stay on….”
When Iowa utility regulators approved MidAmerican Energy Co.’s Wind VIII project in 2013, Gov. Terry Branstad (R) called the $1.9 billion, 1,050-megawatt build-out a “win-win” for the state.
But two years after turbines began spinning, victory is looking a little bit sweeter on the utility’s side of the ledger, according to the state’s consumer advocate.
The Office of Consumer Advocate, part of the Iowa attorney general’s office, said MidAmerican is unfairly benefiting by seeking to pass through to ratepayers $3.7 million in costs for producing wind energy when wholesale energy prices are negative while keeping the associated federal production tax credits.
“It is not equitable that MidAmerican receive the benefits while its customers’ [sic] bear the costs,” Consumer Advocate Mark Schuling said in a prehearing brief filed earlier this week….