Wind Is Not Power At All (Part III – Capacity Value) — MasterResource

This three-part series assesses utility-scale wind’s ability to provide reliable power, a necessary qualification for its use in electricity systems. After Part

I’s introduction, Part II dealt with power density, where wind fails to meet today’s standards. This final part will look at the extension to power density,

that is, capacity (power) value, which takes into account wind’s randomness and intermittency of supply. Again wind fails to qualify as industrial

energy.

Electricity capacity is measured in power terms, for example MW. In

this connection it is important to note the importance of the
distinction that must be made between capacity factor, capacity
credit and capacity value. Compared to capacity value, capacity credit
and capacity factor are of small importance. Jon Boone has long
called attention to this as follows:

“Modern society exists on a foundation built upon productivity that

comes from reliable, controllable, interdependent high-powered
machine systems. All conventional units that provide electricity must
pass rigorous tests of reliability and performance; they must produce
their rated capacities, or a desired fraction, as expected whenever
asked–or be removed from the grid. Some are like refrigerators,
doing heavy-duty long-term work; others are like our toasters or
irons, not working all the time but responsive when called upon to do
so. This ability to perform as expected on demand is known as a
machine’s capacity value. Conventional power generators have a
capacity value of 99.999%. Using them for 97% of our electricity, the
country achieves high reliability and security at affordable cost. Wind
provides no capacity value and can pass no test for reliability; one
can never be sure how much energy it will produce for any future
time. Generating units that don’t provide capacity value cannot be
reasonably compared with those that do.

This is a practical way to think about this concept: You don’t drive
your car all the time, with the result that its capacity factor—the
percentage of your car’s potential that you actually use–is probably
15-20%, if that. But when you do wish to drive it, the car works
virtually all of the time, getting you from pillar to post in line with
your own schedule. This is its capacity value. Ditto with your chain
saw–or television, or any modern appliance we all take for granted
because it works when we want it to work. Appliances that don’t do
this are quickly discarded, although this wasn’t the case for much of
our history (look at the early days of television or radio or even the
automobile). Only in the last hundred years or so have we in the West
come to rely on machines with this standard. In fact, it’s the basis of
our modernity and it underlies contemporary systems of economic
growth and wealth creation.”

In other words, for electrical energy to be useful, we must be able to

switch it on and off at the level needed and rely on it being available
during the period of use. To accomplish this, capacity (in this context
capacity and power are interchangeable terms) must be reliably
available on a continuous basis. This is as opposed to wind “activity”
as described in Part I, which is available only randomly and in
continuously varying amounts over time.

Statistical expectations of this are not meaningful. This cannot be

over-emphasized, as electricity is a vital resource for many of our
activities and continued well-being. Further, unlike most resources,
electricity cannot be stored, and in most applications, in its absence,
substitution of some non-electrical power source is not feasible.

For utility-scale wind plants to have value, they must

provide renewable power, not just renewable energy. This means
wind capacity must be reliably available on demand and throughout
the period of use, and it is not. This is why it was separated from
conventional generation sources in Table 1 of my USAEE article, and
is characterized as having no capacity value. Even at the
disadvantageous increased costs shown, it cannot be compared to the
have high capacity value conventional generation sources as
inclusion in the same table implies.
In summary, reliable capacity is the means by which useful electrical
energy is provided. In its absence, the availability of energy,
regardless of the reliability of the energy source, is of very little, if
any, value.

Wind proponents acknowledge wind’s capacity inadequacies and

make the seductive argument, based on the erroneous assumption
that it is “clean” or “green”, that it must be used if, as and when it
becomes available. As such, they maintain that wind makes an energy
contribution that is, in itself, useful. But it is not and does not bear
close examination in any analysis of the claimed benefits of fossil fuel
or CO 2 emissionsreductions, costs, and job creation.

An analogy might provide a further insight on capacity value.

Medical Care Analogy

A good analogy for an electricity system is medical (not health) care.

In both systems the delivered service cannot be stored, or, in general
be replaced with some other resource. In both cases, the consequence
of insufficient capacity is curtailment of services. In the electricity
sector, “The lights go out”, and in medical care, treatment is delayed,
perhaps too late to deal properly with the medical problem, or, in the
worst case, save the patient.

The question then arises as to the acceptable level of curtailment. In

the electricity sector, existing operating standards are that this is
effectively zero. This has been achieved by planning to have sufficient
capacity available at all times. Where this has failed in practice, the
result is brown-outs or black-outs. The presence of sufficient, reliable
generation capacity is the insurance against lengthy or frequent
curtailment, which as a society we cannot withstand. It is vital to our
general societal needs, including the operation of business, industry,
government, and institutions. Medical care is also a societal need, but
is delivered at the individual level, and there appears not to be the
same level of planning standards (zero curtailment). The underlying
issue in both cases is the price (in terms of rates, or premiums, and
subsidization) that users are willing to pay to avoid curtailment of
services. In both systems the level of planning, management and
funding provides the resulting competent capacity.

In summary, in the electricity sector we are very risk-averse, and

place a high value on reliable power. This excludes wind as a viable
source of electricity. As discussed, wind can provide some level of
energy averaged over long periods, but this does not meet the
requirements of customers, which is reliable electricity supply as
needed, just as the medical care customer requires necessary services
at the time of injury or illness, not on average over some relatively
long period of time.

Now consider the portion of the analogy relating to the unreliable

nature of wind power within the medical care example. This would be
represented, for example by secondary medical resources rushing in
unneeded and causing the primary resource treating the medical
problem to step aside, after spending some time describing the
medical problem and treatment being conducted, which introduces
process “friction”. The displaced medical resource cannot be used for
other purposes, because it must be available to step in again when the
capricious resource suddenly changes in intensity or effectiveness or
fails, which it does frequently. Again a hand-over would have to take
place, adding to process “friction”. Now add government mandates
for increased levels of this secondary medical resource for which
premium rates are paid. Does this result in a better medical care
system, and what is the impact on costs?

The degree to which reliable medical care capacity is available

determines its value to our society. The availability of capricious,
interrupting medical resources does not provide value at all. The
same is true for wind power in electricity systems.

Yet another way to view this is a very general look at how pricing is
set in electricity markets.
Electricity Markets

There are two components for pricing electricity in wholesale

electricity markets: capacity and energy payments. Capacity
considerations and payments, for which reliable capacity is a
requirement, are a form of insurance against curtailment as
described by McMullough.[1]

Capacity payment is intended to provide financial support for the

fixed costs of a project, development costs, and the equity return on
the project sponsor’s investment. An important underlying proviso
is that electricity can be reliably produced at agreed-upon
levels. Energy payment is intended to cover the variable operating
costs, such as fuel and variable operating and maintenance expenses,
and is based on the electricity delivered.[2]

Clearing prices in the spot, or real-time balancing, market vary but

tend to reflect variable operating costs and here wind has a major
cost advantage over other market participants, for example gas
turbine plants, for which operating costs include gas consumption. As
the clearing price is paid to all successful bidders below it, which
tends to be at the level of gas plants, wind plants can obtain energy
prices that also contribute to fixed costs. Separately, they may even
be able to receive their full power purchase agreement prices, which
can be at a substantial premium above the clearing price.

So, wind plant developers attempt to appear to be electricity market

players by focusing on (and publically emphasizing their contribution
to) the only aspect available to them, the energy component. As a
result, wind project owners will likely chose to participate only in the
spot electricity market, in part because of their greater inability to
ensure delivery in the larger day-ahead market, in which failure to
deliver incurs penalties, except in cases where, unlike other market
participants, wind non-delivery is not penalized.

Because of wind’s unreliability, even in the spot market they would

not be a player without mandated acceptance of their production by
electricity system operators, on an “if, as and when” available basis.

Here are some final insights into the doubtful value of wind-
generated electricity:

In Germany there are times when customers are paid to

take unneeded wind production. Note the questionable comment
that this lowers rates to customers. For more information on this
see a comprehensive analysis here.
In the UK wind plants are paid to shut down when wind
electricity surges cannot be managed. Note the debatable
comment from a wind industry spokesperson that likens this to
other generation plants output being reduced for balancing
purposes.

The major conclusion is clear: Only reliable energy sources can

make any valuable contribution to electricity supply. This requires
reliable capacity or power capability. Without any capacity value,
and with extremely low capacity density as described in Part II,
wind generated electricity fails to meet the essential requirement of
electricity system user needs and should not be included in the
electricity generation portfolio for the foreseeable future.

[1] McCullough, Robert (1998). “Can Utility Markets Work Without

Capacity Prices?” Public Utilities Fortnightly.
http://www.mresearch.com/pdfs/275.pdf McCullough is also the
source of the medical analogy.

[2] Hoffman, Scott L. (2008). The Law and Business of International

Project Finance. Third Edition. Cambridge University Press. Section
19.07

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