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Frozen: The Cost of Electricity Soars as Wires and Pipelines Fail to Meet Demand

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The cold weather has pushed demand for energy very high. In our energy markets, demand rising faster than supply translates into higher prices. Electricity prices in the Mid-Atlantic and natural gas in the Northeast are showing this today, and this isn’t new or unique.  Supplies to meet demand are limited by the capacity of the delivery systems.

While this shortfall can be seen in higher prices for natural gas and electricity, these higher prices are not just an energy market issue. These shortages are a threat to the reliability of the electric system.

Gas boom, are you there?

Windfarm in Winter (credit: Vermont Environmental Research Associates, Inc.)

Wind farm in Winter (credit: Vermont Environmental Research Associates, Inc.)

There is a boom in U.S. natural gas production, but that does not get the gas to markets. Natural gas delivery is limited by the capacity of the pipelines that move gas from production areas to consumers. The supply and demand for natural gas has outstripped the infrastructure to deliver. Electricity generating plants would like to have more gas, but all that gas isn’t available. In the current market system, electric generators using natural gas are counted on to run when needed to supply electricity, even if they have not made arrangements for a firm supply of their fuel. Without access to fuel at reasonable prices, the generators won’t run. And we are seeing that in the cold weather.

The electricity transmission lines, the natural gas pipelines, even the oil pipelines are always slower to expand than the potential for energy production. This is a problem that has plagued the development of wind energy for years. Because wind farms, like any large power plant, need transmission wires to connect to customers, there can be no wind farm built if there is no transmission. But in many remote areas, there has been no reason to build transmission. In this way, building wind farms where it is windy is held back by the lack of transmission to those production areas. With wind, it is a “which comes first, the chicken or the egg?” kind of problem.

The electricity sector, and the wind farm development in this country, has been slower and more cautious than the natural gas industry when it comes to building generation and using temporarily uncommitted capacity for transmission. Without access to transmission, wind farms don’t get built. That is not how it happens for the gas-fired plants that are built, expected to run by the reliability coordinators, but did not make the expenditures to secure gas pipeline capacity.

Windy and cold

Wind output in megawatts, on PJM system, 1-22-2014. From www.PJM.com

Wind output in megawatts, on PJM system.
1-22-2014. From www.PJM.com

The cold weather performance of wind power this winter has been impressive. As I write, the PJM powerpool, stretching from Chicago to Virginia, is receiving the equivalent of a nuclear power plant’s worth of power from wind. A summary of earlier performance can be seen in a fine blog by Michael Goggin at the American Wind Energy Association.

Waiting for space on the wire

The expansion of wind to meet energy demands is waiting for the expansion of the transmission system. A variety of policies and sometimes even a poorly done study can limit how much transmission is planned and built for wind. A few recent examples of inadequate transmission planning for wind show that the planning process has been hamstrung.

  • In the Eastern U.S.-wide planning effort run with state regulators and the U.S. Department of Energy, the transmission planning effort did not make a comparison of the savings on fuel over the lifetime of the assets from a large wind build-out, and instead just compared the cost of the transmission to one year’s fuel savings. (See this summary from Allison Clements, Project for Sustainable FERC.)
  • The governor of Vermont asked why Vermont’s newest wind farm was curtailed during the July 2013 heat wave. The New England system operator explained that existing transmission was inadequate, and that the transmission planning does not anticipate building all the transmission necessary to make maximum use of that wind farm.
  • A survey of transmission operators completed in 2010 shows that curtailing wind is a regular practice across the U.S., reflecting the standard planning assumptions that the transmission system need not be built to accommodate all of the energy that a wind farm can produce.

We have a long way to go to make the energy supply clean, renewable, and reliable.  When the weather stresses the system, and exposes the assumptions and shortcuts, we can see what needs to be done. This is a specialized effort. It is the work I do at UCS. You can help support this work by joining as a member.

Posted in: Energy, Fossil Fuels Tags: , , ,

About the author: Michael Jacobs is a senior energy analyst with expertise in electricity markets, transmission and renewables integration work. See Mike's full bio.

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  • http://www.ucsusa.org/about/staff/staff/michael-b-jacobs.html Mike Jacobs

    Annette- Thank you for reading our materials, and watching conditions on the ISO-NE wbsite. Natural gas shortages are continuing to cause havoc with prices and threaten grid reliability. (http://www.pjm.com/~/media/about-pjm/newsroom/2014-releases/20140123-pjm-asks-consumers-in-bge-pepco-to-conserve-electricity.ashx ) The ISO posts public information in real-time http://isoexpress.iso-ne.com/guest-hub and over time http://www.iso-ne.com/genrtion_resrcs/reports/index.html that give more details on the power supply.
    UCS has a bias in favor of rigorous research and analysis in support of a healthy, safe and sustainable future. We cannot ignore the tremendous threat to environment and society from climate change. Replacing fossil fuel with clean and safe alternatives is a priority that I believe we share. Consider two more perspectives to the points you raised.
    First, Energy Information Administration reports that oil was used in New England to produce 408 thousand megawatt-hours of electricity in 2013, and wind in New England produced 1686, more than double that amount(using data released yesterday, which reports through November http://www.eia.gov/electricity/monthly/pdf/epm.pdf). So for your goal of wind offsetting oil burned in New England, wind has already solidly accomplished that on an annual basis.
    Second, to prevent truly significant environmental and societal impacts, alternatives to fossil fuel must be deployed now. UCS has reported on the transformation of our environment, with the real risk that our New England climate will become what has been typical of Washington, DC.
    http://www.ucsusa.org/assets/documents/global_warming/The-Changing-Northeast-Climate.pdf
    UCS is not ignoring the local impacts of wind turbine development. UCS posted a review of the latest study of wind turbine impacts on society this week. http://blog.ucsusa.org/effect-of-wind-turbines-on-property-values-384
    The point of my blog entry is that our rush to burn more natural gas is not well-thought through, in the short-run or in the long-run. We need to see the more complete picture, and adopt solutions. Doing nothing will lead us to a climate disaster.

  • Annette Smith

    I’ve been watching the ISO-NE real time website during the recent cold spell in New England and most of the time there has been a lot of oil in the mix and hardly any wind. The wind resource is running at about 1-5% of a total renewables in the mix of 6-8%. Right now there is 24% oil in the mix, renewables are 7% of which 30% is wind. That’s the best I’ve seen. That’s with $2 billion invested in 750MW (nameplate capacity) of wind energy in New England. With our limited wind resource and the tremendous environmental and social damage done by wind turbines in New England, it is simply not reasonable to expect to offset that 24% of oil with wind energy.

    I know UCS really wants to believe wind will make a difference, but pointing out moments in time when wind is performing well does not overcome the enormous problems with this particular technology. Given UCS’ bias, I will be surprised if this comment is posted.

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