How Wind Power Holds Down Electric Prices During Extremes, and Every Other Time

February 15, 2014

Nation of Change:

The savings that wind energy provided for consumers last week likely tally in the millions if not tens of millions of dollars, as wind energy reduced consumers’ energy costs in several major ways. Wind energy always provides these savings for consumers, which is why more than a dozen state government, grid operator, and other studies have confirmed that wind energy reduces consumers’ electricity prices.
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However, these savings are further magnified when energy prices are high:

  • Most directly, wind energy provided highly valuable electricity when PJM, the regional grid operator, needed it most. During the period of peak demand on Thursday evening, wind energy was providing PJM with 3,500 MW while electricity prices averaged more than $500 per MW hour (MWh), providing direct savings of $1.5 million to $2 million per hour.
  • A potentially far larger impact is that wind energy helped to drive down the market price for all MWh of electricity that are being sold in the market, not just the wind MWh. Grid operators always use zero-fuel cost wind energy to displace output from the most expensive and least efficient power plants that are currently operating. This drives the electricity price for all market participants down, as the market price is now being set by a more efficient and less expensive power plant. Because the supply curve of generation options is typically extremely steep during periods of peak demand (see the illustration above), even a modest amount of additional supply greatly reduces the market electricity prices. Moreover, because this market price applies to all MWh sold in the market, not just the wind MWh, the savings are multiplied again.
  • Through a similar mechanism, additional wind energy supply also reduces prices in natural gas markets, providing savings for all users of natural gas. During these times of peak demand, wind energy was primarily displacing gas use at natural-gas fired power plants. Many areas in the eastern U.S. were at or near record natural gas prices due to weather-driven demand for natural gas for building heating as well as electricity generation. Because the natural gas price curve is also quite steep during times of peak demand, and because the market price applies to all transactions in the market, wind energy likely produced large savings for all natural gas users by driving down the price of natural gas. So even if you primarily use natural gas to heat your home (in addition to electricity to run your furnace fans) you can thank wind energy for helping to keep your heating bill low.

One compelling illustration of these benefits came in a glowing press release from the Nebraska Public Power District (NPPD), describing how a large amount of wind energy output kept energy prices low for their customers during the cold snap two weeks ago. The utility explained that “Nebraskans benefit from NPPD’s diverse portfolio of generating resources. Using a combination of fuels means we deliver electricity using the lowest cost resources while maintaining high reliability for our customers.” The utility also noted that “NPPD did not operate its natural gas generation because the fuel costs were up more than 300 percent over typical prices.”

Another illustration comes from across the Atlantic in Ireland. As we just noted, the Emerald Isle is now green for two additional reasons, as wind energy reduced pollution and protected consumers’ pocketbooks from near-record natural gas prices by providing 24 percent of Ireland’s electricity for all of December.

The Irish Examiner noted two weeks ago that “the sustained wind volumes forced expensive gas powered plants off the system and this provided downward pressure on wholesale prices.” It quotes an energy trader noting that “the substantial contribution of wind energy helped reduce the monthly average wholesale electricity price by 5 percent.” The article further explains that wind energy played a critical role in driving the price of electricity down despite near-record natural gas prices.

Both recent cold snaps also highlight the value of wind energy for diversifying our energy mix, improving energy reliability and reducing energy costs for homes and businesses. Diversity inherently makes the power system more reliable by protecting against the unexpected failures that afflict all energy sources from time to time. PJM noted that dozens of power plants of all types failed during the last cold snap, and during this cold snap PJM experienced the abrupt and unexpected failure of several nuclear power plants.

The New York grid operator also highlighted that it received very high wind output when it needed it most during the last cold snap, while other forms of generation experienced a variety problems. While wind energy output does change with the wind speed, such changes occur far more slowly than the unexpected outages that frequently occur at large conventional power plants. Moreover, changes in wind energy output are predictable using weather forecasting, while conventional power plant failures are not, making them far more difficult and costly for grid operators to accommodate.

Wind energy output has been very strong throughout both recent cold spells in the Eastern U.S., keeping the lights on and saving consumers millions of dollars by keeping both electricity prices and natural gas prices in check. Wind power diversifies our energy mix during both extreme weather and normal conditions, providing consumers with more reliable and lower cost energy.

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106 Responses to “How Wind Power Holds Down Electric Prices During Extremes, and Every Other Time”


  1. […] 2014/02/15: PSinclair: How Wind Power Holds Down Electric Prices During Extremes, and Every Other Ti… […]

  2. daveburton Says:

    In case anyone here is interested, there’s an extremely informative and comprehensive ongoing discussion of the costs and benefits associated with various sources of electric power in the comments on this article:

    http://wattsupwiththat.com/2014/02/16/the-levelized-cost-of-electric-generation/

    • dumboldguy Says:

      In case anyone here is unaware, anytime daveburton says “there’s an extremely informative and comprehensive ongoing discussion of….”, you can count on several things.

      1) It will be a link to a right wing-nut, denialist, horsepucky throwing site.
      2) It will be cherry-picked or, as Cy H says, finely “sliced and diced” so that a straw man can be built on some very small pieces of it.
      3) Dave will be among the commenters, and his comments will be “typical Dave”, adding little to the “information” but much to the confusion.

      Go look at it and tell me if I’m wrong.

      • daveburton Says:

        Per your request: You’re wrong, old guy.

        • dumboldguy Says:

          I didn’t mean you, Dave. We all know where you stand—–you’re the guy driving the wrong way on the interstate and complaining about “all the morons” trying to kill him. I was speaking to those Crock visitors who are not consumed by their ideology, and are able to apply rational analysis to facts—that’s obviously not you.

          • daveburton Says:

            I’m probably the only one here who’ll actually read it. Most climate campaigners are uninterested in reading anything that might not confirm their prejudices.

          • dumboldguy Says:

            “I’m probably the only one here who’ll actually read it”, says Dave. I seriously doubt that, Dave, since you’re a cherry picker who only reads far enough to find swell-sounding but fallacious horsepucky. But if you do, I would be willing to bet that you will understand less of it than anyone on Crock except for Oknownada and a very few other ill-informed trolls.

            Have you no response to what I said can be discovered by digging into just the first paragraph or two? You know, that you’re putting data out there that basically contradicts your position? Or will you again NOT admit to such a failing?

            With a small change or two, this can become a very true statement—-“All AGW deniers are uninterested in reading anything that is based on scientific truth rather than ignorant ideological belief”.

          • daveburton Says:

            Old guy asks, “Have you no response to what I said can be discovered by digging into just the first paragraph or two?”

            You mean your complaint that the article uses old 2013 data, instead of non-existent future data?

            How about reading more than the first paragraph or two, old guy? Make yourself a cup of hot cocoa, get comfortable, and read it, and see what you can learn. If you read at average speed, it’ll take you a couple of hours to get through the whole thing.

          • dumboldguy Says:

            No, Dave, that’s not what I mean. I was not complaining at all that the article “used old 2013 data”. You obviously have reading comprehension problems and missed my point entirely. I will address what you failed to respond to in my reply to your other comment.

            As to your smug and condescending comments about my reading, be aware that both my reading speed and comprehension have tested out at the 99th percentile. If that were not true, I could not afford to waste the time to read your inane horsepucky, but would merely ignore it as so many others do here on Crock.

            I did scan the whole thing, but focused on the very beginning once the contradictions became obvious (as well as that it was mainly just a collection of self-congratulatory BS among denier fools). Again, I will address that in my next comment


          • dumboldguy – OMG. I thought this thread was dead. Dave, the energizer bunny indeed. I thought you were going to pick up on the “in case here anyone is interested” line. Almost. LOL. I really had a good laugh, no joke. Its a testament to Dave’s lack of emotional intelligence that he is taiking to an audience of three part time hecklers while thinking he has the national limelight and concluding that if he can just convince you that the ocean only rises in the center, those little red lines can be drawn in the ocean so he can sell underwater property. Lets just shorten that. Lets just call it Dave’s BS from now on. I need not add that Dave reading is irrelevant. We want him to “comprehend” what he reads, too. That seems to be a bit too much to expect. Subtle humor, irony, and sarcasm are a bit too deep, also.

          • dumboldguy Says:

            Actually, at my age, dealing with Dave is a mild form of anti-Alzheimer’s therapy. Like doing crossword puzzles, reading books, and playing electronic Scrabble with my wife, albeit less taxing than any of those. I read fast, think fast, and type fast, so it is no great loss of time for me to whip something out when I wander past the computer during the day and see Dave inviting a beating.

            Yes, Dave has NO comprehension of irony and sarcasm, and is too freakin’ stupid to realize that he has no audience except for those of us who heckle him. Also, I am fascinated by all the “abnormal psychology” he displays—I have been retired for 20+ years now and he takes me back. One of the reasons I respond to him on very old, very dead threads is that I am curious to see if he ever does quit with his foolishness. I haven’t written it down and tried to quantify it, but he does chase new bones after a while.

            “Dave’s BS” is good, but part of my anti-Alzheimer’s game is to dredge out words I haven’t used in years and lay them on Dave—good therapy and good fun.

            (and the only thing that’s NOT “too deep” for Dave is the water on the NC coast)

            dumboldguy – OMG. I thought this thread was dead. Dave, the energizer bunny indeed. I thought you were going to pick up on the “in case here anyone is interested” line. Almost. LOL. I really had a good laugh, no joke. Its a testament to Dave’s lack of emotional intelligence that he is taiking to an audience of three part time hecklers while thinking he has the national limelight and concluding that if he can just convince you that the ocean only rises in the center, those little red lines can be drawn in the ocean so he can sell underwater property. Lets just shorten that. Lets just call it Dave’s BS from now on. I need not add that Dave reading is irrelevant. We want him to “comprehend” what he reads, too. That seems to be a bit too much to expect. Subtle humor, irony, and sarcasm are a bit too deep, also.

          • dumboldguy Says:

            Oooops—the anti-BIG A is not working tonight. I had copied your comment to the reply box for reference and forgot to erase it after I composed my reply. I guess it’s OK, though. Dave repeats himself a lot, just seldom in the same comment, and no one complains.


          • Unless it’s a “classic” post, traffic on the second day is half the first. After that, the old coots hang around to argue about how to solve the world problems, and come up with pearls of wisdom like the “driving the wrong way on the interstate while complaining about all the morons” metaphor.

          • dumboldguy Says:

            Actually, that “metaphor” is stolen from an old joke that recycles in my circle of old coots every year or so when someone sees it, does a CRS, and reposts it. It goes something like this:

            Wife calls husband on cell phone to warn him:

            “Dear, I’m watching TV right now and some moron is driving the wrong way on the interstate. I know you’re going that way, so be careful”.

            Husband replies:

            “Thank you, dear. I’m on the interstate right now and it’s actually full of morons driving the wrong way. I don’t understand why they give these people drivers’ licenses”.

            I think it converts into an excellent metaphor for morons like daveburton, and I like it almost as much as “demented roosters strutting and crowing in the barnyard”, which fits Dave even better.

    • daveburton Says:

      Warning: Be prepared to spend a lot of time on it. The article and discussion are exceptional, but there is a lot of information there. It’s currently at over 35,000 words, which is around the 28th percentile point on the scale of book lengths, according to Amazon.

      • dumboldguy Says:

        You’re wrong as usual, Dave. Anyone wanting to see the significance of this exercise by the members of the circular firing squad need go no further than the first paragraphs, and doesn’t have to spend a lot of time watching deniers pat themselves on the back for being ignorant. The article Dave cites uses 2013 figures to project the cost in 2018. The author invited everyone to look at his previous article on this topic, which used 2011 figures to project the cost in 2016.

        I suggest that everyone do just that. Comparing the two sets of data will yield the “inconvenient truth” that the projected costs of fossil fuels and more conventional sources is going up or staying the same, whereas the projections for solar PV, wind offshore, and solar thermal have dropped, in the case of solar PV, by over 1/3 in two years. I can’t wait for the next “update” article in two years.

        Also interesting is that the two data sets differ in that the projected cost is broken out by “capital cost” and “fuel, operation, and maintenance” for the older data but not the newer. Is someone attempting to obfuscate there? Are we trying to hide the high costs for the second set of factors because they will become very important once the capital costs of SPV and other renewables declines further?

        I will repeat—-cherry picked, sliced and diced, straw man horsepucky from WUWT via Dave—look at it again and tell me I’m wrong.

        And similar to the old joke about a DI informing a recruit of the death of his mother—“Everyone who has a functional brain take one step forward. Not you, Burton”.

        • greenman3610 Says:

          EIA is notoriously bad on projecting renewable penetration and costs.
          I’ll post on this some time in the future.

        • daveburton Says:

          Old guy complains, less than eight weeks into 2014, that, “The article Dave cites uses 2013 figures to project the cost in 2018.”

          Have you looked at a calendar lately, old guy? 2013 just ended, so 2013’s data is the newest data in existence.

          Wind power is old technology, much older than, for instance, nuclear, or combined-cycle gas turbines. The reason wind hasn’t caught on, except where governments mandate or incentivize it, is that wind power just doesn’t work very well. There are unlikely to be any great breakthroughs between now and 2018 which would drastically change the costs associated with wind power.

          I’d love to be wrong about that. For instance, a really major battery breakthrough would make all the difference. But I’m not holding my breath.

          • dumboldguy Says:

            Will Dave EVER bother to read and understand others’ comment before he runs his mouth? I was not “complaining” about anything other than your stupidity and duplicity, Dave. You have missed the point yet AGAIN. Let’s try to help you find your way in the world of rational analysis of facts. I know that’s difficult for you, so I will lay it out in #’d steps.

            1) The EIA data used in the article showed 2013 data to look ahead and make a five-year projection to 2018. FACT
            2) The author invited readers to look at his previous article on the same topic—this article was an update. I did so. FACT
            3) The prior article referenced 2011 data to look ahead and make a five year projection to 2016. FACT
            4) I was merely pointing out that a comparison of the author’s two articles revealed some interesting FACTS—-that projected costs for renewables were declining, some rather precipitously.
            5) When the next followup article comes out in early 2016, it will presumably follow the same pattern of using 2015 EIA data to project costs in 2020. (Of course, if renewables keep looking better, this fool will probably not write a followup—deniers don’t like inconvenient truths and don’t publicize them)
            6) That’s just OBSERVING and THINKING, Dave—-not “complaints”

            Dave shows that he too can play the demented rooster and strut and crow with these statements—-“Old guy complains, less than eight weeks into 2014, that, “The article Dave cites uses 2013 figures to project the cost in 2018.” And “Have you looked at a calendar lately, old guy? 2013 just ended, so 2013′s data is the newest data in existence”. Idiot Dave can’t tell the difference between a simple statement of relevant fact and a “complaint”. And Idiot Dave taxes his brain coming up with what he thinks is a snark about “looking at a calendar” and “newest data in existence”. That last rates no more than a DUH!

            Dave then goes of on a small gallop with opinions about wind power, rather than address the overall trend I pointed out in the data. Dave loves to deflect and distract. Something else Dave needs to address. I went back and looked at the raw EIA data. It’s in tabular form. Were the graphs in the article constructed by the author?—-I won’t waste any more time on it, but it looks as if he has played games with the raw data as he drew the graphs.

            And in closing. “But I’m not holding my breath”, says Dave?. Please, Dave, DO hold your breath for us! To help in that, you might put a couple of plastic bags over your head and wrap them tightly with a brand new full length roll of duct tape around the neck. Enjoy that CO2 euphoria as it builds—remember, you said CO2 was good for us!


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