Not content with being one of NZ’s leading climate cranks, energy consultant Bryan Leyland also has views on wind power that are well out of the mainstream. Muriel Newman’s NZ Centre for Policy Research this week gives Bryan a chance to fulminate about the economics of wind energy:
I believe that, given the high cost and operational problems of wind power, no responsible Board of Directors of a state-owned or private company could — or should — agree to â€œinvestingâ€ in windpower. There are better and cheaper alternatives.
Is that so? I thought it might be wise to check Bryan’s take on the business, and so I asked Fraser Clark, chief executive of the NZ Wind Energy Association to take a look at his article and give us an idea of what the real situation is. Here is his analysis…
Electricity generation technology and the way electricity systems are managed are continually evolving. Bryan Leylandâ€™s recent think piece, which criticised wind energy as â€˜foolish energyâ€™, failed to consider many of the factors that are influencing the development of modern electricity systems.
Broader energy security concerns are driving the global shift to renewable electricity generation. Uncertainty regarding the supply and price of fossil fuels increases the attractiveness of wind energy as it has no fuel cost, no supply risk, and will not be affected by the introduction of a price on greenhouse gas emissions.
Leaving aside security concerns, which I have discussed elsewhere, many of Mr Leylandâ€™s recent assertions about wind energy are irrelevant, alarmist and unsupported by other, more robust analysis.
The suggestion that 1000MW of wind energy capacity would lead to swings in generation of up to 500MW in just a few minutes is a case in point. 500MW is the equivalent of several wind farms spread across the country. New Zealand currently has about 360MW of wind energy capacity, with about 265 turbines operating in nine locations.
For a 500MW swing to occur within a few minutes, 200-300 turbines would have to be affected at the same time by the wind increasing from a gentle breeze to a near gale. Data collected for the Electricity Commissionâ€™s Wind Generation Investigation Project shows such a situation is improbable as there is essentially no correlation between the ramp rates (increases or decreases in generation) at different wind farms.
Analysis conducted for the project by Transpower identified that the scenario for wind energy development that would place the greatest strain on the electricity system would be a few large wind farms and high wind generation penetration (1600MW) in the North Island. Within this scenario it was identified that a swing of up to 150MW within a five minute period would be likely to occur at most once a month. Such a swing is significantly less than what Mr Leyland suggests is likely, and is of a similar magnitude to swings in demand that are currently managed in the North Island.
Common sense prevails: the system operator (Transpower) sets aside reserves so supply and demand can be continually balanced. Changes in wind generation are just one of many factors that have to be taken into account. The system operator must also be able to respond instantaneously to fluctuations in demand, a thermal plant going offline with no warning, and transmission faults both small and large. Only a few weeks ago the HVDC link went offline without causing a disruption to supply.
Furthermore, increases in wind generation will not need to be accompanied by costly new, storage-based generation until wind generation increases well beyond its current 360MW.
A study led by Goran Strbac, Professor of Electrical Energy Systems at Imperial College in the UK, for Meridian Energy concluded that the cost of integrating 2000MW of wind energy in to the New Zealand system would be just $2-3 per megawatt hour (or 0.2 cents per unit of electricity). This study identified that this low cost was due to New Zealandâ€™s existing hydro generation.
As for the impact of increased wind generation in the spring, when inflows into the hydro lakes are high, this is really only an issue if it results in water spill from hydro lakes – an increasingly rare event.
This year South Island lake levels are unusually high as a result of unseasonable inflows, reduced demand at the Bluff smelter and transmission constraints. As this situation does not occur on a regular basis, wind generation will typically enable spring water flows to be stored for later use and to displace more expensive thermal generation. The recent low electricity spot prices in the South Island demonstrate that a high level of renewables actually depresses spot electricity prices and emphasise the need for a robust transmission system that can deliver the lowest cost generation to consumers.
Mr Leylandâ€™s â€œstraw manâ€ analysis of the costs of wind generation is totally redundant. No-one suggests that New Zealandâ€™s electricity system should be run solely on wind and pumped hydro storage, or geothermal energy in combination with pumped hydro storage.
His analysis is a paper exercise with no practical application or relevance to the NZ electricity system. NZâ€™s electricity system already includes a mix of hydro, geothermal, wind and thermal generation. This mix should be the basis for any analysis of costs.
Fortunately New Zealandâ€™s generators have a much better understanding than Mr Leyland of the costs and returns of wind farms. These companies look to the future and rely on robust analysis for their investment decisions. They understand the risks associated with thermal generation, and the benefits associated with generation that has no fuel costs or supply risks.
Once the low and well-known life cycle costs of a wind farm are factored in, including the fact that wind farms have no fuel costs, annual revenue provides a good return on the capital outlay. In addition, other benefits of wind energy â€“ such as its synergy with hydro generation – are not apparent from a simple long-run marginal cost calculation. As an example, during the 2008 â€˜dry yearâ€™ Meridian Energyâ€™s White Hill wind farm in Southland generated its annual budgeted revenue in just one month while making a much needed contribution to South Island generation.
Wind energy plays an important role in ensuring a secure and reasonably priced supply of electricity into the future. Electricity systems around the world are evolving to enable this. A recent comment from the chairman of the US Federal Energy Regulatory Commission (which has a similar role to New Zealandâ€™s Electricity Commission), Jon Wellinghoff, reflects the changing times:
â€œI think baseload capacity is going to become an anachronismâ€¦ Baseload capacity really used to only mean in [terms of] an economic dispatch, which you dispatch first, what would be the cheapest thing to do. Well, ultimately windâ€™s going to be the cheapest thing to do, so youâ€™ll dispatch that first.â€
Wind energy is not foolish. It is sound and sensible. What would be foolish would be to ignore the wins wind energy delivers to both our environment and economy.
[Fraser Clark will be watching the comments here, so if you have questions, please chip in.]