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Why Renewables Haven't Destroyed the Grid - Yet!

Most supporters of renewable energy development are probably pretty comfortable with the way things are going.  Wind and Solar generation has been increasing both in "nameplate capacity" and in actual production of electricity.  There have not been any significant grid failures that can be blamed on renewables.  Apart from a consolidation within the solar cell manufacturing sector there have not been any notable bankruptcies within the electricity generating sector.  All visible signs are positive for a continued expansion of renewable resources.

When I talk to groups about renewable energy I start off with a Youtube video which demonstrates testing the compression strength of a concrete block. For 2 minutes and 40 seconds this is the most boring video you could imagine. The block shows absolutely no sign of stress. At 2:41 the concrete block fails and is utterly destroyed.  As far as I am concerned we are at about 2 minutes and 30 seconds with respect to the electrical grid.

In order to understand what I believe to be the serious risks facing the electrical generation and distribution system it is necessary to review the structure of the system as it was before renewables began to be developed in a significant way. The chart below shows hypothetical load profiles for a peak demand day during the spring/fall, winter and summer as well as a line that represents the overall generating capacity in the system. 

It can be observed that the system demand/load varies considerably throughout the day and throughout the year. It is also clear that there is a great deal of excess supply available for most hours on most days. In fact, only on the highest peak demand days of the entire year will the demand come close to the supply. That is by design as every well-managed electrical generation system in the world requires a reserve margin of 8-15% above peak demand. This reserve is meant to provide resiliency for the grid to accommodate scheduled maintenance shut-downs at major facilities such as nuclear plants, natural gas-fired and coal-fired plants as well as unscheduled outages due to storms or switching problems or other operational issues. 

(Note: I appreciate that many people will raise objections to the demand curves presented in that their local situation might be very different.  That is one of the challenges facing every Independent System/grid Operator.  Local demand curves can be all over the map due to the mix of commercial, residential, and industrial users.  My point is not that these particular curves are the most typical in all locations.  The point is that demand varies significantly over the course of the day and through different seasons.) 

So before we began to develop renewable energy there was plenty of generation capacity within the system.  In fact, many generation facilities were not running at anything close to capacity most of the time. 

Because of a public policy decision to reduce the burning of hydro-carbons (and the associated production of CO2 emissions) wind and solar generation sources have been subsidized through a variety of financial instruments including capital grants, tax credits, and feed-in-tariffs.  Renewables have also been given preferential access to the grid in most jurisdictions.  

These measures have achieved the stated policy goal.  Wind and solar now make up a significant percentage of generation capacity in a number of jurisdictions and at times provide a large percentage of electrical production. 

For example, Germany has developed over 30 GW of solar power and over 30 GW of Wind.  On a blustery spring day in Germany renewables can meet up to 40% of the total electrical demand for a few hours at mid-day.  There are regular announcements of "new records" for both solar and wind generation.  A similar situation exists in Texas with regards to wind and in parts of Hawaii with regards to solar. 

Remembering that there was already a surplus of generation capacity in the system before the development of renewables it is obvious that when renewables hit their generation peaks most traditional thermal generation plants are unable to sell electricity.  That would not be a problem if the construction of these plants had not been financed based upon assumptions regarding how often they would be used and what wholesale electricity prices would be.  In fact, the economics of running these plants has deteriorated to the point where many utilities, especially in Europe, are on a "credit watch". 

The rational response of companies trying to sell electricity into a market that has a great over-supply would be to decommission some of the oldest and most polluting plants to bring supply and demand into a better balance.  But there is a problem.  Renewable resources cannot be relied upon, particularly at peak demand times. The chart below displays the wind resource available compared to the demand curve for a week in November, 2013 in Texas (this week was not chosen on purpose to make wind look bad. It was literally the first file I found on the ERCOT site when I was starting to write this blog). 

In this situation demand rose throughout the week as a strong high pressure system spread across the state bringing with it colder temperatures while at the same time shorter days required more lighting.  One of the more troublesome realities of meteorology is that large, stable high pressure systems are often responsible for peak electrical demand in both winter and summer because they are associated with clear skies and temperature extremes.  These systems are also commonly characterized by very low winds across a wide area.

As a result while demand continued to climb wind energy faded away to almost nothing.  At this point most of the thermal generation assets available within Texas had to come on-line in order to meet demand.

So it is impossible to decommission even the oldest and least efficient thermal generation plants in the system regardless of how many wind farms have been built and solar panels deployed.  German utility E.on came face-to-face with that reality in the spring of 2013 when they were instructed by the local grid operator to keep an old plant operational even though it would rarely be needed.

But a new day is dawning in the U.S. and it could be a darn cold (or hot) one.

The EPA announced regulations in December 2011 that will require coal-fired thermal generation plants to clean up or shut down.  The reality is that for many of these plants it will not be feasible to clean them up.  In fact, in some cases the EPA will not even allow them to be updated with modern pollution controls.  As a result more than 30 GW of firm generation capacity will be decommissioned over the next several years.


Plans to replace this loss are in some cases vague and have been changing often.  Increased conservation and better utilization of existing plants are frequently included in Integrated Resource Plans.  In other cases greater reliance upon renewables is explicitly identified.  These are not really replacements for firm capacity.

A number of new Natural Gas fired plants are also under construction.  While current low gas prices make this an attractive option the threat of future significant price hikes as well as the EPA's stated goal to regulate CO2 emissions are worrisome and are impacting the ability to secure financing of these plants in some cases.

As more and more coal-fired plants are retired it is likely that total system firm generation capacity will drop resulting in smaller reserves.  This, in turn, will make the system more susceptible to storms or other unplanned outages. 

The degree to which grid security is compromised will vary from region to region depending upon the penetration of renewables, number of coal-fired plant retirements and the health of the local economy which has a major impact on electricity demand.  Based upon those factors I believe Texas and the Mid-west are the areas most at risk.

It may be that the reduction in coal-fired generation will do nothing more than cull excess capacity out of the system with no negative impacts.  But groups such as the Institution of Engineering and Technology in the UK have issued warnings about the progressive stress on a system that has taken decades to evolve and is now faced with unprecedented challenges. 

Like the concrete block in the Youtube video the system is not displaying any outward signs of weakness. The question is this - will the North American electricity system encounter its own version of second 2:41?

Davis Swan's picture

Thank Davis for the Post!

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Ferdinand E. Banks's picture
Ferdinand E. Banks on Jan 14, 2014 7:00 pm GMT
I've Heard this story Before, but never so clear: and congratulations to me also, for Reading this excellent article, which I probably would have ignored a year ago.
Jack Ellis's picture
Jack Ellis on Jan 15, 2014 7:00 pm GMT
Davis, I enjoyed the article, which is written very clearly and can be easily understood by policymakers with little or no technical background. My only quarrel is with the concrete block analogy. I think a video that shows a steel rod under tension would be more appropriate because it shows progressive signs of stress (necking) before finally failing.

One reason thermal plants are unable to compete is because policymakers have turned the economic foundation of the generation business upside down without first understanding and dealing with the economic implications. Unless renewables are forced to recover most of their costs from the energy market and price controls are relaxed accordingly, thermal plants will continue to struggle, and that point of failure will draw ever nearer.

Jack Ellis, Tahoe City, CA

Michael O'Donnell's picture
Michael O'Donnell on Jan 15, 2014 7:00 pm GMT

I like the Article, however, even understanding the strains that the renewables could put on the grid, I think it makes me want to seek out renewables for my own home. I think given the likelihood of the grid malfunctioning would make it wise to protect my home, my food etc. by putting in a combination of geothermal and solar to ensure that I have decent temperatures and can preserve my food for a good portion of the time the grid is down. Of course this could add to the likelihood, but I doubt my reduction from the regular demand will be missed that much. What do you think about the eleviation of pressure on a grid during peak outages, and if we could build a high speed rail that could soar along side massive transmission to allow ease of transporting excess creation from state to state or coast to coast? This is of course unthinkable due to cost and time, but it could allow for a better management of the grid as well as a faster mode of transportation for goods and people to compete with trucks and airlines.

Michael Keller's picture
Michael Keller on Jan 15, 2014 7:00 pm GMT
... and if pigs had wings, they could fly.

While you are free to use your money as you see fit, I trust you will not be asking the long suffering taxpayer to help you out with your approach to creating your own energy.

Another well done article by Davis. I suspect he can now expect audits from IRS agents determined to get even with those who dare question the emperor.

Michael Hogan's picture
Michael Hogan on Jan 16, 2014 7:00 pm GMT
A couple of inconvenient facts need to be interjected here. First, nearly all US power markets have a significantly higher reserve margin than implied by this article. ERCOT (Texas) is the sole exception, with ISO New England, PJM, CAISO and MISO (representing collectively about 85% of US power consumption) all having reserve margins well north of 20%. This is even more noteworthy given that power demand has been rising and is forecast to rise at only about 1-1.5% per annum in most of these markets. (PJM has recently downgraded its load growth forecast for the next decade to about 1.1% per annum.) Therefore (as has been pointed out any number of times by mainstream industry analysts as well as the market operators themselves) the vast majority of the coal plant that has been and will be shuttered was surplus to requirements and would have closed anyway for purely economic reasons. Secondly, the term "baseload" is widely misused in these discussions - it traditionally means not plant that is always available (effectively, since no plant is always available) but plant that is and, for economic and technical reasons, needs to be effectively always on. Most coal plant (though not all) meets that description, because it takes a long time to start up once shut down and, to be available to the system operator as needed, therefore needs to be run round the clock at some stable level of output. This is precisely what is not needed. What we have in front of us is in fact a once-in-a-generation opportunity, which is to clear the system of plant that is surplus to requirements and is poorly suited to the emerging power mix, leaving a conventional plant fleet much more fit for purpose, and as the need for new investment emerges sometime toward the end of the decade, to add new more flexible thermal plant resources to the system. Some refer to this as "flexible baseload" - as an old-line power systems engineer I tend to recoil at that term, preferring to say that we will have a conventional generating fleet dominated by traditional mid-merit plant that earns its living on a roughly even mix of selling energy and selling system services, but whatever you want to call it that's where we need to be headed to avoid Davis's rather melodramatic and entirely avoidable scenario. Getting rid of the surplus and inflexible coal-fired capacity is an excellent and necessary first step.
Davis Swan's picture
Davis Swan on Jan 17, 2014 7:00 pm GMT
@Michael Hogan - good comments providing extra color to the discussion - thanks for taking the time.

No argument that we have excess capacity and might not need the coal generation capacity due to be lost. I track every unit in a database and there have been public announcements regarding more than 40 GW of capacity. There are another 15-20 GW of older plants where no concrete plans have been announced. So that could be a fairly large loss. Although some regions can probably take the hit others, such as the Dakotas, Ohio, and Indiana may feel a pinch. We'll have to see out it turns out. I just feel the need to point out the risk and the fact that there does not seem to be a well constructed plan for the transition.

Michael Keller's picture
Michael Keller on Jan 21, 2014 7:00 pm GMT
Replacing dependable energy (coal plants) with unreliable energy (renewables) is unwise. The two energy types are fundamentally different in terms of function and purpose. Renewable energy is more akin to peaking generation and may have economic merit in some regions, provided the capital costs can be significantly reduced.
Ferdinand E. Banks's picture
Ferdinand E. Banks on Jan 22, 2014 7:00 pm GMT
Well, Michael Hogan, I call myself the leading academic energy Economist in the World, and when I read your comment I realized that I was correct. The arrangement here in Sweden - which is based on conventional economics and engineering - worked marvelously until ignorant academics and politicians started 'messing' with it in an attempt to be popular with morons in Brussels. As for the concept base load, I dont Think that it needs any adjusting, although of course even in a Swedish classroom I would never bring coal into the discussion. Or let me put it as following: base load in Sweden is/was nuclear running 24-7, with hydro or gas taking care of the peaks. That meant....
Michael Hogan's picture
Michael Hogan on Jan 22, 2014 7:00 pm GMT
Fred, humble as ever. Nuclear is, of course, the poster child for baseload, since its financial profile and technical limitations make it such that only a fool would build one on the assumption it's not going to run at full capacity whenever it's available to run. Areva and your "morons in Brussels" (at least the ones who shepherd the nuclear industry - I would include the "morons in Paris" at the IEA's nuclear arm) are lamely trying to put across the story that the new generation of nuclear technology can be "flexible" but their definition of flexibility passes muster only in the alternative universe inhabited by so many nuclear enthusiasts. There is certainly an important role for baseload nuclear in the evolving energy mix, but that transition needs to be carefully managed. Careful management, informed by independent expertise and devoid of vested economic interests, is currently sorely lacking. To that extent I would agree with what seems to be one of Davis's main points.
Malcolm Rawlingson's picture
Malcolm Rawlingson on Jan 23, 2014 7:00 pm GMT
Unfortunately Michael you are wrong about nuclear only being suitable for base load. If you are not aware a very large percentage of French electricity is generated by nuclear power stations. The number is over 80% far above base load power requirements of France. By a very innovative (brilliant I would call it) fuelling regime the French are indeed able to operate their plants to meet grid fluctuations. As far as economics goes the French power plants paid for themselves years ago by the avoidance of coal oil and gas imports which would otherwise have been required to fuel the French economy. France has no coal or oil or gas to speak of therefore the imported fuel savings more than outweigh the cost of construction of these facilites.

So plants that can meet grid demand all paid for and you have an economic bonanza that has allowed the French Government to support many social programs.

Now along comes Ms Merkel and shuts down all the base load power plants in Germany and the French are easily able to pick up that demand with their nuclear plants which points both to the amazing success of the French program and the complete hypocrisy of Merkel who is still running Germany on Nuclear power - just French plants instead of German ones. As long as they are not on German soil the "European" Ms Merkel could care less.

So sorry to say that you are not correct on either count.

In the US and Canada where methane gas is plentiful peak load combined cycle gas plants are a better choice than fiddling with the fuel in the reactor. So blanket statements about base load nuclear are highly dependent upon where you are in the world and what fuels are available. Generalizations are not very useful.


Bradley Schneider's picture
Bradley Schneider on Jan 25, 2014 7:00 pm GMT
When I started to read the article I was set to dismiss it assuming it was going to attack renewables in general, but my compliments to Davis. He has presented a clear and well though out article. What I might add to the other comments here is that with the advent of renewables being added to the grid at all levels from massive solar farms to individual homes and windmills as far as the eye can see it really is time for the utilities to reexamine their asset base.

There is without doubt many old coal fired plants that have reached their end point. However, with an asset that is well paid off it is hard for the utilities to shut it down and assume the debt of a new more advanced generating asset such as gas fired generation. As has been said this may be a time to sweep away some of the excess generation capacity in favor of newer and cleaner generation.

The struggle I believe is within the utilities themselves, they are facing revenue threats from many sides and much, and I hope that I am not speaking out of turn here, of the senior management of the major utilities are struggling with change. They do not want to give up control, they do not want to lose any revenue and they do not want to change their business. However, just as the desktop computer reduced the need and control of a mainframe computer, and change is now from the desktop to the tablet and the control is in the hands of the individual user, the same is happening within the utility sector.

Consumers, and not just at the residential level, are finding ways to produce their own power and reducing their reliance on the public utility companies. This is going to continue, and probably at an increasing pace as the economy gains strength, and it will not be stopped.

So I support the precept that the amount of renewable is going to change the demand are reserve curves. Though I doubt they are going to bring down the grid, only if the utilities fail to respond with resources that are more nimble.

Don Hirschberg's picture
Don Hirschberg on Feb 1, 2014 7:00 pm GMT
I remember when most of those very productive farms of Illinois did not have electric utility service.

They had large steel windmills to pump water from wells for live stock, sanitation and other uses.

They had small wind driven generators to provide limited lighting and to charge batteries to power their radios.

The day they got electric service the water pumps were hooked up to electric motors and the wind generators were no longer needed and people were elated.

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