logo
Article

Where wind power is blowing away profits

Business Week Magazine|Jeremy van Loon |April 29, 2010
GermanyGeneral

On some nights in northern Germany, utilities pay customers to keep their lights on. In a country with deep green roots, it's an odd fix for an odd problem: Local distributors have no place to store wind energy and no way to dispatch it to areas that need it.


A surplus in Germany forces utilities to pay customers to use it, that in turn "has an effect on investors" and profit

On some nights in northern Germany, utilities pay customers to keep their lights on. In a country with deep green roots, it's an odd fix for an odd problem: Local distributors have no place to store wind energy and no way to dispatch it to areas that need it.

That's led to so-called negative pricing, where grid operators pay utilities to take the unneeded power. Then utilities like RWE and EnBW of Germany give rebates to customers who use power during periods of excess. Sometimes wind farm operators are even asked to take their turbines offline to trim supply, lowering green operators' profitability.

"We're seeing …

... more [truncated due to possible copyright]
A surplus in Germany forces utilities to pay customers to use it, that in turn "has an effect on investors" and profit

On some nights in northern Germany, utilities pay customers to keep their lights on. In a country with deep green roots, it's an odd fix for an odd problem: Local distributors have no place to store wind energy and no way to dispatch it to areas that need it.

That's led to so-called negative pricing, where grid operators pay utilities to take the unneeded power. Then utilities like RWE and EnBW of Germany give rebates to customers who use power during periods of excess. Sometimes wind farm operators are even asked to take their turbines offline to trim supply, lowering green operators' profitability.

"We're seeing that wind energy lowers prices, which is great for the consumers," said Christian Kjaer, head of the European WindEnergy Assn., which represents RWE, Spain's Iberdrola, and Denmark's Dong Energy. "[But] we as producers have to acknowledge that this means operating the existing plant fewer hours a year, and this has an effect on investors" and profit.

Since 2002, Germany has doubled its capacity to generate wind power and has 21,000 turbines producing 7.5% of the nation's electricity. That compares with only about 1% in the U.S. The use of wind has lowered wholesale electricity prices in Germany by as much as 5 billion euros some years, says a study by Poeyry, a Helsinki-based consultant. Spanish prices fell at an annualized rate of 26% in the first quarter due to surging wind and hydroelectric production.

Since October 2008, the abundance of wind power has led to periods where German customers were paid rates that sometimes reached 500.02 euros ($665) a megawatt-hour, or about as much power as used by a small factory or 1,000 homes in 60 minutes.

One solution: Tying power markets together, allowing temporary surpluses in one area to flow toward electricity-poor zones. That's now done between the Netherlands, France, and Belgium; Germany plans to join them on Sept. 7.

Storing electricity may be another fix. In Scandinavia, Danish wind power pumps water into Norwegian and Swedish reservoirs; the water is later released to drive hydroelectric plants. Until there's more integration like that and better transmission grids, expect more Germans to sleep with the lights on.

The bottom line: As wind power generation grows, it can create regional surpluses of electricity. That makes power prices fall, hurting wind profits.


Source:http://www.businessweek.com/m…

Share this post
Follow Us
RSS:XMLAtomJSON
Donate
Donate
Stay Updated

We respect your privacy and never share your contact information. | LEGAL NOTICES

Contact Us

WindAction.org
Lisa Linowes, Executive Director
phone: 603.838.6588

Email contact

General Copyright Statement: Most of the sourced material posted to WindAction.org is posted according to the Fair Use doctrine of copyright law for non-commercial news reporting, education and discussion purposes. Some articles we only show excerpts, and provide links to the original published material. Any article will be removed by request from copyright owner, please send takedown requests to: info@windaction.org

© 2024 INDUSTRIAL WIND ACTION GROUP CORP. ALL RIGHTS RESERVED
WEBSITE GENEROUSLY DONATED BY PARKERHILL TECHNOLOGY CORPORATION