Stunner: Volatility of wind energy means wild prices

Accommodating the large amounts of wind energy (PDF) needed to meet Britain’s and Ireland’s carbon reduction targets could mean wildly variable energy prices for both countries, according to a new study from the analyst firm Pöyry Energy Consulting.

The report, “Impact of Intermittency,” provides insights into how the electricity sector in both the UK and Republic of Ireland could look by 2030.

Both countries have set ambitious targets to reduce their carbon dioxide emissions by 2020, and wind energy is expected to be the greatest contributor. But the impact of the dramatic amounts of wind generation capacity needed to meet the challenge has largely remained uncertain.

The year-long study is based on hourly statistics from 36 locations from the years 2000 through 2007, totalling more than 2.5 million pieces of data.

“At the outset we believed that it was vital to inform the debate about the importance of wind in decarbonising the electricity supply, by informed, quantitative analysis,” said James Cox, principal consultant at Pöyry Energy Consulting. “This has proved to be a major challenge but the richness of the information has surprised even the
project team. And, while the answers we now have are often complex, we believe that any debate on the role of wind can now be properly informed.”

The firm has presented its findings to relevant government organisations, including the Department of Environment and Climate Change (DECC), as well as to a number of high-profile energy companies.

Estimates of the amount of wind needed to meet the carbon reduction targets range from 6-8 gigawatts for the Irish electricity market and 35-45 gigawatts for the British electricity market by 2030. The Pöyry study shows that accommodating such large amounts of wind will test those markets in very different ways, and gives the electricity market a rare opportunity to compare and contrast.

Researchers examined the extremes of low and high wind over 2000-2007, and found that — even at an annual level — wind generation output varied by almost 25 per cent in the Irish market and 13 per cent  in the British market.

The study’s models illustrated some dilemmas. For example, they showed electricity demand rocketed on frosty nights when there was virtually no wind and low output but, when the temperature rose in strong south-westerlies and there was less need for electricity, there was almost full wind generation output.

Although it has previously been suggested that such intermittent output could be mitigated by greater interconnection between the British and Irish markets, Pöyry’s analysts believe their finding have underlined the critical importance of the Irish market having interconnection to the British market, although the opposite is not
true.

However, stronger interconnection would also make British market price spikes become a feature of the Irish market. And the study suggests that interconnectors cannot be the golden bullet to solve the intermittency challenge, although they are extremely important.

The study also found that new thermal plants dealing with low and highly uncertain loads could face poor returns on investment.

“If significant wind energy is achieved, along the lines required by the 2020 renewable targets, we predict power stations which are built now will face much more uncertain revenues in the future,” the report states. “For example, any generation built before 2016 to cover closure, under emission regulations, of existing coal-fired power stations, would face a volatile future, uncertain to the point that plant may only operate for a few hours one year and then hundreds of hours the next year.”

With the level of wind energy envisaged on the system by 2030, the variation in prices will be extreme, analysis shows, with periods of negative prices and very short periods with prices at almost £8000 per megawatt-hour.

“Although additional detailed work needs to be carried out to properly model the behaviour of the grid systems in both countries, our worry at the outset of the study that the very dynamics of variable wind output would challenge the system operators, has moved to concern that the economic environment for thermal plant will be highly challenging,” Cox said.

In response to the report, EDF Energy released a statement:

“We believe that renewable energy, including wind power, must make a contribution to the UK’s future energy requirements as part of a diverse mix. The mix should also include large contributions from nuclear and fossil fuel with CCS. This diverse plant mix will deliver greater security and greater reduction in carbon emissions, at lower
cost to consumers.

“The Poyry work provides detailed evidence to substantiate previous assumptions that the level of electricity generated by wind turbines will be highly volatile and unpredictable, and in particular that there is a very poor relationship between wind output and demand. As a result of this ‘intermittency,’ large amounts of fossil fuel
generation will be needed as ‘back-up’ for when the wind isn’t blowing.

“This is illustrated clearly in Poyry’s core scenario which shows that generation capacity will need to increase from around 80 gigawatts today to around 110 gigawatts by 2030 despite only a small increase in demand. Keeping
this backup plant available will be expensive and would have an impact on customers’ bills.

“However, additional cost may not be the only problem. The study casts significant doubt as to whether the market would incentivise sufficient investment in new generation due to the significant increase in commercial risks for all generators that would result from highly volatile, and sometimes negative electricity prices. The result could potentially be a reduction in the security of supply standards we enjoy today.

“A striking aspect about Poyry’s core scenario is that even building over 50 gigawatts of renewable generation by 2030 — which is in itself an extremely challenging target — would still not be sufficient to reduce the carbon intensity of UK electricity generation to the level that the Climate Change Committee believe is necessary. In fact, while the Climate Change Committee recommends 70 grams CO2/ kilowatt-hour, Poyry’s analysis shows that even this scenario would deliver electricity with intensity of about 130 grams CO2/kilowatt-hour.

“Delivering the more significant reduction set by the Climate Change Committee will therefore require a much larger contribution from the other available zero-carbon technologies, specifically nuclear and fossil fuel with Carbon Capture and Storage (CCS), than currently assumed by Poyry in their modelling.

“While the Poyry study is a good assessment of how very high penetration of wind power will cause challenges for the electricity system, from our perspective the real question is not ‘what are the consequences of a high wind path for the UK,’ but ‘what path should the UK take in the first place.’ ”