Does Wind Energy Provide A Good Return on Investment for the Consumer ?

by Owen Martin

When we spend money to have our electricity generated by wind, how much are we saving on not having to import fossil fuels ? One might expect that € 1.00 spent on wind is € 1.00 less that has to be spent on fossil fuels. 

In 2015, wind energy received € 426 million in energy payments. Energy payments are what generators receive daily in the electricity market and are normally set by the price of gas. On top of this, wind receives a subsidy from the PSO Levy. For 2015, this amounted to about     € 85 million. Wind also receives 7% of its revenue in capacity payments so about € 35 million and 5% of wind energy has to be shut down for security reasons for which they receive about € 20 million in curtailment payments.  

 That's a total of € 566 million in direct payments to wind generators. 

According to the SEAI, wind energy displaced € 233 million in fossil fuels for 2015. That means that we have to spend € 1.00 on wind energy to replace 40 cents worth of fossil fuels. If we include the increased grid and system costs to accommodate all this wind, then of course the savings are even less than that. 

It's not the best value for money for the consumer but for greens value for money is not a priority and for the wind companies of course it provides a great return to shareholders.



REFERENCES

1) SEMO total energy payments for 2015 equals € 1.8bn

http://www.sem-o.com/pages/MDB_ValueOfMarket.aspx

Wind provided 23% of electricity according to SEAI, this means wind received € 426 in energy payments.

http://www.seai.ie/Publications/Statistics_Publications/Energy_in_Ireland/Energy-in-Ireland-1990-2015.pdf

2)  PSO Levy for 2015 :

https://www.cer.ie/docs/000967/CER14361%20PSO%20Levy%20Decision%20Paper%20%202014-15%20(New).pdf

Assumed that wind made up 90% of PSO payments to renewables.


3)  "Capacity payments accounted for between 7% (for wind) and 30% (for peaking plants) of generators’ revenue in 2013".

http://ireland2050.ie/questions/what-are-capacity-payments/

426m + 85m = 511 / 93% = 549m  * 7% = 38m

4)  "In Ireland, the dispatch-down energy from wind resources was 348 GWh: this is equivalent to 5.1% of the total available wind energy". 

http://www.eirgridgroup.com/site-files/library/EirGrid/Annual-Renewable-Constraint-and-Curtailment-Report-2015-v1.0.pdf

Based on what wind received in energy payments ( €426m / 6823GW = € 62.40 MW/hr) they received roughly € 21m in curtailment payments ( 348GW * €62.40)

Curtailment Payments to Wind Farms will Increase Over Winter

From Irish Independent

The compensation will be based on the market price per megawatt of power produced, which is currently at around €50. If an operator could not transmit 100MW, they would be entitled to €5,000. "There is no doubt that at some stage over the coming months we will have to curtail," a source said.

The unavailability of the East West interconnector also means that Eirgrid will have to revise their Winter Outlook :

The capacity margin of 3199 shows how much spare capacity we have over and above demand. This can now be reduced to 2699 with the loss of the interconnector. The Danes generally assume that wind has a capacity credit of zero whereas Eirgrid assume a 14% figure for Irish wind. If we get a prolonged period of High Pressure, then the output of wind will be close to zero and will contribute nothing to adequate capacity. So that leaves a capacity margin of 2,266 MW. If the winter takes a sudden cold turn, then that will put added pressure on this margin as demand rises. 

Over 40% of Wind Energy Shutdown Last Night

by OWEN MARTIN

Last night, over 40% of wind energy produced was shutdown or curtailed during a spell of gale force winds across the island of Ireland. This episode clearly shows the limitations of relying too much on an intermittent source of energy like wind. Billions of euros worth of turbine installations become worthless at both low wind and at high wind.   

Figure 1

The reason for the shutdown of so many wind turbines can be clearly seen in the System Frequency charts before and after the wind shutdown. 

As the gales gathered in strength on Sunday evening, maintaining the frequency of the grid became more difficult :

Figure 2

The zig zag patterns in the Figure 2 show how frequency fluctuated between 49.9 and 50.1 Hz. The dips represent periods of too much wind when system inertia drops (due to lack of conventional generation such as coal or gas). Should frequency drop below 49.7 Hz then a blackout may occur, so Eirgrid rectified this by shutting down some of the wind and allowing more conventional generation into the system. The frequency then rises again to 50Hz. Gas turbines are forced to ramp up and down more often to maintain system stability during such periods thus pushing emissions up and negating some of the benefits of  having all the wind in the first place. 

Figure 3

Figure 3 shows what happened when over 40% of the wind output was shutdown and there was more manageable levels of wind, in this case about 1,500MW. The frequency is very stable and there is little risk of blackouts. This has been normality in the grid for many years. Compare it with Figure 2. This is the future. It will certainly test engineering skills to it's limits. Gas turbines will have to function under greater strain than before. It will cost a lot of money. There can no longer be a guarantee that the electric kettle will boil when you want it to. 

The other option Eirgrid have to maintain a stable frequency in these situations is to cut demand - which is in effect a blackout under another name. The future is renewable. The future is green. I'm at a loss to figure out how this is "progress".

The evidence that Ireland cannot become Denmark

And why Curtailment of Wind Power will become substantial by 2020

We currently have over 2,000MW of wind. Theoretically, we are at the stage where it should be easy to export some of our excess wind energy, which we can't use, to the UK as curtailment levels are still relatively small (in 2013 we curtailed about 3.5% of our wind) and should not pose problems to the UK system which is 11 times greater than ours. When we reach really high levels of wind, we will want to export a lot more surplus wind energy to our neighbours.

When you extract the data from Eirgrid's website (See here) for the year 2014, electricity exports to the UK amounted to just 6.5% of what we imported.  So for every 1MW of electricity that we import, we export just 0.065 of a MW. So what is going on ?

Days like the 23rd February 2015, give us a clue because large levels of wind penetration occurred. Figure 1 shows wind output which remained unusually high throughout the day - between 1,500MW and 1,969MW which is a record for Ireland (A similar analysis was done for 30th March here).

Figure 1: Wind Generation 23/02/15 - output was very high throughout the day

The shortfalls between the blue line and red line gives an indication of the level of wind 
curtailment that occurred.  Demand was about 4,000MW, so if we take 1,700MW of wind 
and 500MW of imported power that gives  us total non-synchronous generation of 2,200 - 
over half of demand. This means Eirgrid had to curtail approx 200MW of wind to keep 
within the 50% non-sync limit. 

So the logical thing to do would be to instead of curtailing this wind, export it through the interconnector 
to the UK. Figure 2 shows that we were actually importing electricity about 70% of the time, and 
close to the maximum permitted by the interconnector which is around 500MW. 

If we assume that average demand was around 4,000MW, then this meant that just circa 1,500MW of 
wind could be accepted by the grid (4,000*50% less 500 for the interconnector) at any one time because
we were importing electricity. 

Figure 2: EW Interconnector Flows 23/02/15 - we were importing close to 500MW of electricity from UK from 8am till 10pm

So the fact is that we are not able to export wind energy except at night. This means that a large proportion of our wind cannot be exported and the situation is exacerbated by the fact that high wind speeds tend to occur during daylight hours (as wind is a function of heat).

 When we get to higher levels of wind at 4,000MW or more, we will be at a stage where wind will sometimes exceed even the daily demand.   Taking into account all the constraints in the system - baseload plant that must be running, 50% limit on wind and interconnection etc - this means substantial amounts of wind will have to be curtailed (i.e wind farms will be shutdown) unless it can be exported - currently this is not the case for around two thirds of each day on average and we have no reason to believe this will change in the future.

This presents a problem for the Irish renewable experts because Denmark is often held up as an example of what Ireland can do. But Denmark has 6GW of interconnectors and can export wind at any time to Sweden and Norway. These countries have a lot of hydro which can be switched on and off at the flick of a switch to facilitate the intermittency of Danish wind. This then, perhaps, gives us a clue as to what is going on in the UK.

The UK has only around 900MW of hydro which is kept running as baseload power regardless of what wind is doing.  Figure 3 shows an example of a day with large levels of wind penetration in the UK system. Like Ireland, it is CCGT (gas plant) which is ramped down to accommodate the wind. The CCGT fleet in figure 3 has very low output which means they are running very inefficiently, like a car running in 1st gear. The UK do not want our wind at this time because, frankly, they do not have space for it. Nuclear must be kept running at baseload level and cannot be ramped down. There is a little more freedom with a coal plant but they too are designed mainly for baseload. An interconnector to France won't alleviate the situation as 80% of their electricity is powered by nuclear which cant be ramped down either.

And I might add that windy days in UK tend to occur at the same time as windy days in Ireland (see previous articles on this blog).

Figure 3: The UK system on a windy day

It will become all too clear in the coming years as to how this situation pans out but the phrase "badly thought out" springs to mind. Denmark, we are not, and can never be.

What this means is that it will be very difficult for us to achieve our renewable targets. The only way the UK will take our wind is if we compensate them for their CCGT running more inefficiently. This might sound like a mad idea (and yes it is) but the regulations already facilitate for such an arrangement - see here, its called negative pricing.

What this means for consumers is higher bills - either more payments to shutdown wind farms or payments to compensate the UK grid to take our wind (negative pricing).

By the looks of it, most likely Ireland will overtake Denmark in one aspect - as the country with the most expensive electricity in Europe by 2020.

Five Reasons why we have reached saturation point with wind energy

To any impartial analyst, Ireland has reached saturation point with wind energy and it should now be time to put a pause on new wind development and consider our options. No damage was ever done down through history by pausing before deciding what to do next. Think of how many billions of euros we could have saved if this was done in 2006.

1. Dumping of wind power and the 50% limit on wind - recent evidence shows that during periods of high winds we have to dump more and more of available wind energy to maintain a safe secure supply of electricity.  On the 30th March, at least 26% of available wind energy was dumped. 
2. Over capacity - We now have generation capacity equivalent to double our peak demand and three times that of our average electricity demand needs. Let's use up this excess capacity before we start building any more. No new generating units (including wind) need to be built unless they are replacing retired units.
3. Baseload plant minimum load requirements - there is a requirement for 5 large generating units to be running at all times for "dynamic stability". These comprise combined cycle gas turbine plants and Moneypoint coal plant. This means they can never be completely switched off. Increasing wind penetration further will exacerbate the inefficiencies inherent in running these plant on low loads, thereby negating any additional savings due to adding more wind.
4. Electricity bills are one of the highest in Europe - government policy has locked society into high electricity prices with the preference towards subsidized forms of generation meaning savings from falls in wholesale prices can never filter down to consumer's bills. Another factor is that an over supply of generation capacity results in units requiring subsidies and capacity payments to recover their high fixed costs as payments for energy generation become insufficient and staggered due to low demand and more intermittent wind on the system. There are also extra costs due to new infrastructure required to carry the wind power.
5. Impacts on other sectors - The tourism and equine industries are two of the largest industries in Ireland supporting many direct and indirect jobs. Chances are if you live outside any of the main cities, your job is dependent in someway on either of these industries.  Planting wind farms and associated pylons near scenic and horse breeding locations will have a negative impact on these important industries.  The Irish Hotels Federation recently warned that the location of energy infrastructure should not diminish the natural beauty of the landscape because this is an important element of the Irish tourism product. Already, this impact is being felt with one castle owner recently saying "The tourists can't believe it. They said we're mad. They said we're ruining our heritage. They say it's disgusting to go around Ireland now"

One of the windiest nights of the year sees Ireland dependent on UK coal

With storm like winds hitting Ireland tonight, lets see how our electricity system is coping.



Between 9pm and 10pm wind speeds rose all around the country apart from 4 locations (click on picture to zoom in) :

So how efficient are our € 4.4 billion worth of wind turbines (2,200MW) at converting this energy sweeping across our country into power ?

Well at 9pm, they were producing 1,631MW and approx 218MW was curtailed. In otherwords, we shut down 218MW of wind power, about 12% of the potential power:

In the next hour, wind speeds rose in most areas around the country, notably in Cork and Donegal where most of the wind farms are (see Met Eireann data above).

Well, it turned out that our wind farms could not make use of this additional wind. Instead, wind generation dropped to 1,374MW, a drop in output of about 16%. Curtailment of wind rose significantly from 218MW to 483MW, an increase of 220%.  So 26% of available wind generation had to be dumped. Wind farm companies that have "Firm Access" will be compensated for this.

At 9pm we were importing 378MW from the UK (EWIC in the above graphs). By 10pm, we were importing slightly less - 340MW. Demand dropped in the same period from 3,790MW to 3,464MW, a drop of 326MW. As wind and UK imports do not provide the same type of power as that produced by conventional sources  - they are termed non synchronous generation sources - there is currently a cap of circa 50% on their use in the system at any one time (more explanation here). We can work out that total non synchronous generation (wind plus imports) at 9pm was 53% of demand, while at 10pm it was at a safer 49%. 

So part of the reason for all this curtailment of wind was to bring wind generation down to a safer level for system stability. But they had another option - switch off the UK imports and replace with the excess wind. But instead it seems that commitments made to the UK National Grid, or some other reason, meant that we were using power generated in the UK for 10% of our needs while at the same time shutting down 26% of available indigenous wind power. And what was this UK power made up of ? Well, the largest share was dreaded coal at 30% (which we are all taught to despise) and behind that was the even more dreaded nuclear (which we are all taught to fear) at 23% :

One can only wonder. Is there anyone left who actually thinks the people in charge know what they are doing here ? 

Why are we building more wind turbines when we are dumping more and more wind power ?

Putting the brakes on

Example of brakes on a wind turbine

As I write on a very windy night in Ireland, we are curtailing 220MW of wind to keep non-synchronous generation under 50% of total demand (at times it reaches 51%).

But the remarkable thing is that we are still importing 150MW from England. Imported electricity is a form of non-synchronous generation, just as with wind. So in effect, it is competing with wind to get in on the grid in the restricted non-sync slot. So surely we should be allowing that additional 150MW wind in and exporting the surplus to the UK. But instead we are importing coal and nuclear power, when we could use up all our wind, and paying wind farms to shut down.

So we need to get the message. UK does not want our wind energy during the day and at peak times. They are generating enough of their own - 5.5GW at the moment and have no intention of ramping down their CCGT gas plants any further to allow Irish wind in. If they ramp them down any further, they will most likely use up more fuel and create more emissions than if they were running at full load (it results in inefficiencies like driving your car in first gear).

We cannot sell our excess wind to England whenever we want, only when they want, which is during the night when demand is low and they can pay us a low price.

The trouble is that Eirgrid and the authorities now know this so why are there still plans for exporting wind energy after 2020 ?

What's in Your Electricity Bill : Part 2 - Constraint Payments

Constraint Payments

Summary:

• Constraint payments are paid when a plant is forced to run differently to schedule.
• These payments have risen since 2009 from €101m to €175m in 2014.
• Years with good wind output (high capacity factor) coincide with those years that had high constraint payments
• This is because wind is intermittent and must be taken by the grid when available (priority dispatch). This results in plant running differently to schedule more often than in a system with little or no wind.
• The cost of constraints in 2014 was roughly equal to the claimed fossil fuel savings by SEAI for 2012.
• Older plant have been replaced by modern efficient plant which require longer start up times but should result in more efficient use of fuel. But because wind is running in and out of the grid intermittently, the new modern plant are running less efficiently than they are designed to. This adds to constraint costs.

Constraint payments are a form of compensation for a plant when it runs differently to its scheduled production. I will explain this in further detail below but first of all I need to clear up a few things. There are different forms of constraint payments. The type of constraint payments discussed in this article are paid to conventional plant, mostly gas.  According to the Department of Energy, curtailment payments in the region of € 7.5 million were paid to wind farms in 2013. Curtailment and constraints are, confusingly, when talking about wind energy, two separate things - one is when wind farms are shut down due to local constraint problems, the other is because of national constraints e.g. when the SNSP 50% limit is breached. As far as I can discern, wind farms do not receive the type of constraint payments discussed in this blogpost, as they are not given daily schedules - instead, they get priority dispatch, if and when the wind blows (between cut in and cut out speed). However, wind energy does contribute to higher constraint payments for conventional plant as we will see.

Let's look at the annual constraint payments for the last few years :

Annual Constraint Payments paid to conventional plant
(from SEMO http://www.sem-o.com/pages/MDB_ValueOfMarket.aspx)

2010 and 2012 were years with relatively poor capacity factors for wind. The other years had average to high capacity factors. In these years, we see higher levels of constraint payments as there was more unpredictable wind interrupting the scheduled generation for conventional plant . By 2014, the payments hit a peak of € 175 million due to two factors -  saturation of wind in the system and the new interconnector which provided power from cheaper sources such as coal.  We can see which direction the payments will go when we add more wind into the mix. To put the € 175 million into perspective, SEAI claimed that wind energy resulted in € 177 million in fossil fuel savings in 2012.

EirGrid and SONI foresaw these increased constraint costs in this report :

Wind is inherently a variable resource. The UUC market schedule [done after the event], with perfect foresight, can schedule the most economic generation to balance this variability as it knows exactly the level of wind output in every period. The TSO, on the other hand, since it is not always aware of the timing or extent of these variations, must balance them using a combination of part-loaded plant and more expensive fast-start plant. This less optimal schedule will cause an increase in constraint costs. 

They then go on to say :

The generation portfolio has changed in recent years due to closures of mid-merit plant such as Poolbeg Units 1 and 2 [blogger note - these are the two plant which used the famous, now redundant, chimney stacks in Ringsend, Dublin pictured above], and the long-term forced outages of a number of other mid-merit and flexible generation units, such as North Wall 4 and Turlough Hill. In addition, transmission constraints limit output from Aghada Unit 1 and the Aghada Gas Turbines at times, further limiting the available generation portfolio. This deficit of mid-merit units that can start with relatively short notice periods has resulted in a reduction in portfolio flexibility for reacting to unexpected changes in generation and demand. Previously, when these units were available, uncertainty over generation, wind and load could be managed within 1 to 2 hours using these flexible mid-merit generator units.

At present, any potential capacity shortages due to generation, wind and load uncertainty in the future require commitment decisions to be made a number of hours in advance due to the long notice periods required by the generator units available to meet these shortages. Operators are required to call units with long notice periods further from real time when there is greater uncertainty about forecast accuracy, thus increasing the likelihood that dispatch diverges more from the optimal solution.

These commitment decisions are made to mitigate against the risk of a capacity shortage
and to ensure that sufficient replacement reserve is maintained to deal with any further
changes to generator availability or forecast demand or wind. Availability of generation with shorter notice times would mean that such commitment decisions could be made nearer to real-time and with better information. 

A provision of €3.8m has been included to account for divergence of dispatch from the
optimal solution due to generation portfolio changes. The return of Turlough Hill is expected to have a positive impact on the flexibility of the generation portfolio and the return of these generator units has been incorporated in the provision. So in otherwords, due to wind forecasting problems, there is further unpredictability in the system for conventional generators

So plant that could start up quickly (but were inefficient) were closed down and replaced with slower starting more efficient plant. This shouldn't be a problem as it should lead to more efficient use of fuel. But because it gets more difficult to forecast the wind accurately, particularly when at high penetration levels, you have to compensate these plants when they are forced off the grid by wind (which has priority dispatch) and forced to run differently to schedule.

Each plant is given a production schedule for the day. The older plants were given a schedule an hour or two before production because they could switch on quickly. But the slower modern plants have to be given their schedule up to 8 hours or more before production. The problem is that with high levels of variable wind in the system, this schedule is bound to change and plant must be compensated for these changes. Otherwise, they go out of business (which is not a good idea if you want to keep the lights on).

With wind energy now embedded in our electricity system and indeed in our energy policy, constraint payments are something we will all be paying for long into the future. It is another example of how wind adds complexity to the electricity system. A general rule in economics is that complexity costs money. You can imagine the level of office staff required to calculate the above for each and every plant in the country each day of the year. While nobody begrudges anybody a job, surely a limit needs to put on these added complexities if we want to remain competitive.

The Limit on Wind and Interconnection in the System

Graph for 18th October, 2014:

At present, the maximum amount of power from wind generation and interconnection that can be accommodated into the grid at any one time is 50%. This was confirmed by Eirgrid in their System Operational Constraints update back in March this year. In March, when the capacity factor of wind was 33%, this limit had been reached, with the excess wind power "constrained" off.  In December 2013, when wind had a capacity factor of over 50%, this limit was met on twelve different days.   Given this situation, it is curious that the current Irish energy policy revolves around more interconnection and more wind.

The problem is that wind and imported power provide "non synchronous" power which is incapable of providing the type of stable power produced from conventional sources. Exceeding this limit of 50% will alter the frequency of electricity sent to houses and factories damaging equipment and tripping the switches on the grid causing a blackout. There are efforts underway to change what is known as the "rate of change of frequency" (RoCoF) to try to accommodate more non synchronous generation but it is still not known if conventional plant can withstand these fluctuations or operate at the ranges required. Conventional generation operators claim that it could take several years before these questions can be answered. They are also worried about the costs involved with no additional benefits for them. Presumably, the consumer will eventually pick up the cost for this potentially disastrous experiment.

Eirgrid are now using a new computer tool since May called WSAT (Wind Security Assessment Tool) which monitors the amount of non-synchronous generation in the system at any one time. An example of the limit being reached recently can be seen on the 18th October (see graph above). At 14.45 during the day, wind generation was hovering around the 1,500MW mark. It had begun to rise further as demand had begun a downward trajectory. At this point demand was 2,985MW, Wind 1,561MW and the East West interconnector was exporting 54MW to the UK. The net non-synchronous power was 1,507MW, 50% of demand. Eirgrid then "shut off" 200MW of wind to bring back stability to the system. The new Great Island CCGT gas plant (presumably on testing mode) saved the day ramping up quickly to fill the gap. North Wall and Aghada OCGT also provided some additional peaking power from a more inefficient gas source.



So the next time you hear someone talking about powering the electricity grid with 100% wind or a politician talking about the need for more interconnection, you will know they are talking beyond their expertise.

Slieve Rushen Wind Farm

The Slieve Rushen wind farm, formerly owned by the Quinn Group, was recently sold for £ 100 million to Platina Partners, a London based company. This is a 54MW wind farm in Fermanagh that sells electricity to Northern Ireland in the single electricity market.

In 2008, it was revamped with 18 new Vestas V90 wind turbines and its capacity factor has been over 30% ever since. This is not surprising since it is in one of the windiest locations in the country on top of Slieve Rushen mountain.  

Records from SEM-O show that it received € 10.7 million euros in 2012 from the market in energy and capacity payments. The accounts of the company (Mantlin Ltd) are available for download in the UK companies office. These show a turnover of £ 15.6m for 2012. This converts to about € 19.3m when using the average conversion rate during the year. This means that the company receives renewable obligation credits, levy exemption certificates and curtailment and constraint payments (payments from UK grid to stop producing power) in the region of € 8.5m in total. This is quite a vast sum for activities unrelated to the generation of electricity. However, accounts show that the wind farm would have made an operating loss of £3 million as opposed to an operating profit of £3.8 million without these sources of income.

There is one more notable thing that sticks out when you read the accounts. On Note number 7, it states that the company had no employees during the year. The wind industry makes lots of claims about the number of jobs it creates, but here is one of the largest wind farms in the country employing the grand sum total of Zero employees.