Thursday, 31 January 2013

What Lessons From Germany and Denmark? Conclusion

Denmark has demonstrated to the world that a substantial amount of wind generation capacity can be supported in an electricity grid operating feasibly  -  provided there is ready access to large quantities of hydro-electricity.  Germany has yet to demonstrate the feasibility of its own unique mix of wind power and solar generation with the damaging impact these have in combination on the operation of the electricity marklet, and of grid.  To date, it has narrowly avoided disaster - but only by dint of massive imports from sources that make a mockery of its own 'green', anti-nuclear policies; and by redoubling its efforts to build new coal and lignite-fuelled capacity.

In this concluding post we consider the costs of operating in the Danish and German ways.  Did anyone say it was going to be cheap ?

Denmark doesn't have to answer charges of outright infeasibility.  It should, however, be called to account (if only by its electricity consumers) for the cost of operating as it does.  Advocates of wind-power are inclined to state that every unit of wind-based energy generated is a (largely) carbon-free and (almost) marginal-cost-free contribution to the total amount required, even if they acknowledge that something needs to be on standby for when the wind doesn't blow satisfactorily (roughly 75% of the time).  Those claims are highly misleading.  When considering an entire grid-system as a whole, factors must be taken into account such as the material downgrading of efficiency suffered by gas and coal plants when placed on standby for intermittent deployment; and increased power losses arising from decentralised generation.  These factors erode the magnitude of the benefits claimed, sometimes very significantly (though rarely nullify them altogether, as some ill-judged armchair criticism of windpower asserts).

The other main source of whole-system cost derives from the import-export dynamics required to balance the Danish grid.  When imports are required, Denmark pays full price for hydro-sourced electricity from Norway.  By contrast, when Denmark has a wind-powered net surplus, it must effectively dump this into the Nordic market at close-to-zero prices.  Thus, the balance of trade by value goes heavily against the Danes.

Proponents of wind should be made to recalibrate the benefits they assert: but the full data required to make a comprehensive empirical assessment - even in as small a market as Denmark's - are not made available by the grid operators. One is inclined to assume there are political influences at work: but whatever, we know beyond a doubt that the facts tell negatively against the economics of wind.  The Danes have decided - hopefully in a democratic, if not transparent or quantified manner - to pay for the privilege of their chosen generation mix.  With enough money given to good engineers (and Norwegian hydro-generators), most things are possible.  Having met the engineers, however, I may tell you they tear their hair.

The German situation has all of the opaque Danish issues and much more besides.  We have noted before how solar and wind generation distort price-formation in the German wholesale market - solar in a predictable way, wind in a random manner.  Specifically, and much to the (ignorant) joy of green advocates, they trash the wholesale price (the 'day-ahead' spot market for electricity), being bid into the market at very low prices reflective of their marginal cost, the owners being paid anyway at guaranteed high rates.

But the resultant low (sometimes negative!) market price in no way benefits the average consumer.  What happens next is instructive.  As soon as the day-ahead market closes, perhaps at very low prices, the grid operators must then quickly come up with a supply plan for the day in question that is actually going to satisfy demand.  As a starting-point for this exercise, what the day-ahead market generally gives them to work with is a supply-demand match that is more-or-less balanced in terms of global amounts, but can be horribly out of balance in detailed terms; (a) geographically - there is frequently far more generation committed from windfarms in northern Germany than can be accommodated (the centre of gravity of demand is south of a median line); and (b) in terms of reliability - wind cannot be predicted with sufficient certainty 24 hours ahead.

So the grid operators must revise the despatch schedules, and call on imports and various costly sources of short-notice balancing, in order to keep the show on the road.  Of course, they mostly succeed (good engineers, enough money, etc) - but at a cost.  The key is this: they are entitled to charge the extra costs - and they will always be extra, there is never a cheaper way of doing it - across their customer base.  It doesn't appear in the record of wholesale market prices, but it shows up tangibly enough on the bill.  In consequence, Germans pay the second-highest electricity prices in the EC.

So much for direct cash costs.  As mentioned several times, the elephant in the room that threatens to roll over and crush the other occupants is that, unlike the Danish situation, this costly and dishonest state of German affairs is not stable.  Already, voltage in the grids is unreliable to a degree that many high(ish)-tech manufacturing processes cannot tolerate.  They are having to fend for themselves, either by generating their own electricity, or installing costly modulation equipment - quite a commentary on Europe's greatest economy.

To this second category of unwanted (and unforeseen?) costs we may in future need to add the catastrophic consequences should part of the German grid fail, as is widely anticipated.  The prime candidate for the epicentre of a rolling blackout is the region between Karlsruhe and Munich, from where it would cascade outwards to the whole of southern Germany, eastern France, Switzerland, Austria and the Czech Republic.  A week of this in winter will cost lives - many lives - and if the cash cost even matters against that backdrop it will be very large, too.  In case this is thought to be scare-mongering, the reader should be aware that the German Networks Regulator (Bundesnetzagentur) has spoken out on the subject from the moment the nuclear power-plant closures were announced; and the grid operators have contingency plans in place for outright disaster scenarios.

Thankfully, so far, the good engineers and the money have prevailed.
*  *  *  *  *  *  * 
Civilisation is energy-intensive (Lovelock).  What, then, are the lessons for (e.g.) the UK ?  Beware large-scale unintended consequences:  the renewables lobby will leave us to find out the hard way.

No-one has gone as far down this road as Germany, and we may be destined to learn vicariously from them - at their cost.  In terms of basic physical feasibility (never mind the cost) there is a practical maximum proportion of power that can ever be sustainably had from wind until electricity storage can be made cheap and very efficient: and this is not yet a prospect that may be relied upon.  The precise maximum proportion that wind can (physically) contribute will vary from market to market - hydro is critical - but we cannot all tap into Norway as Denmark has done.

If politicians insist on going for wind-power (and solar power) in as blind and grand a fashion as has Germany, (a) the direct cash costs will greatly exceed what we have been led to believe; (b) indirect costs will mount in parallel; and (c) eventually it becomes positively dangerous to life and limb.

I haven't even touched on whether there are any actual benefits accruing to anyone other than investors and manufacturers in the wind and solar industries.  They would need to be very big, and certain ... 


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1 comment:

jason haris said...

Hi Nick,
I loved reading this piece! Well written! :)

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