Posted on 04/28/2005 10:14:20 AM PDT by WayneLusvardi
Is Regulated Electricity Anti-Green? Solar power makes more sense if electricity is market priced - the political ramifications of solar power
Severin Borenstein of the University of California Energy Institute has come up with a sophisticated study that proves common sense. Solar energy doesn't make much economic sense in a system where the retail price of electricity is socialized (i.e., costs averaged over every hour of the day per season and then spread across all customers or classes of customers) such as in California. But if electricity was real time priced by the hour of the day, as is being currently considered in San Diego by SDG&E, then solar power would make more economic sense because it generates most power during peak load hours on hot sunny days.
Electricity can't be stored like water or natural gas. It takes only 1/10th of a second for electricity to get to your house from Hoover Dam or from a coal plant in Utah for instance. This causes the price of electricity to fluctuate rapidly based on time of day, season, etc. California's electricity demands can be envisioned as two concentric circles. On "non-peak" days the demand for electricity can be reflected by a small circle that "pulses" or expands and contracts according to the time of day. However, on "peak" days the demand for electricity can be reflected by a much larger outer circle that also expands and contracts following peak hour loads. Thus California has to have energy plants that generate non-peak power and have reserve capacity to generate peak time power; or have what are called "peaker plants" that generate power only during peak days and hours. Or it must import power from out of state, typically from hydropower plants along the Columbia River in the State of Washington. However, if cheap hydropower is not available due to a drought as has happened recently, energy producers must shift to natural gas to generate power which causes the price of natural gas to spike. Peaker plant power is very expensive compared to non-peak power. We, the customers, never feel these price shocks because the retail price is "regulated" or averaged across all customers. However, if electricity was real time priced then solar would make more sense than paying for expensive reserve or "peak" power.
One of the major impediments to solar power is that it still requires a backup conventional power plant in the event the sun doesn't shine. So the real price of solar power must include the cost of redundant power plants. However, if electricity was real time priced solar power becomes potentially competitive. If I remember correctly, there are typically only about 20 to 30 peak load days in California.
Most political liberals are afraid of anything to do with "markets" and electricity. Much of the rationale for electricity regulation is to regulate the retail price so that customers don't have to suffer from real time price shocks experienced at the wholesale level. Thus, there is political capital and votes to be "bought" in electricity regulation. Shifting to a real time pricing system for electricity would thus have to overcome this entrenched political obstacle. Politicians won't give up socialized electricity pricing easily. But oddly, real time pricing would be friendly to "green power" while the conventional socialized pricing system would not. This might create a schism between environmentalists on one hand and entrenched political interests on the other hand. So we ultimately must ask the question: has the status quo of socialized retail electricity pricing system really been the culprit that has been holding back the adoption of "green power" all along?
Below is the link to Borenstein's study which can be downloaded as a PDF file.
University of California Energy Institute CSEM WP-142 Valuing the Time-Varying Electricity Production of Solar Photovoltaic Cells Severin Borenstein Download this paper in Adobe Acrobat format: http://www.ucei.berkeley.edu/PDF/csemwp142.pdf
Free-market to decide if we prefer fossil fuels, solar power, or nuclear power? I think it's a great idea.
Whatever happened to that company?
Making energy more affordable is counterintuitive to the Green's cause, which is to strangle evil America's prosperity.
Whether solar is economically viable is likely to be situational. For example, the economic viability of solar electricity in rural areas would improve if stationary fuel cell generators ran on propane negating the need for batteries to cover night time. The combination would eliminate expensive line maintenance costs where trees are a constant problem (about $1000 per year per parcel in some places).
If and only if each technology incorporates an objectively determined charge into the price of the good to mitigate the risks and externalities (both positive and negative) associated with its use.
I've read a few articles in Home Power magazine about people who went the solar electric route and were able to get a time-of-day meter for both their own use and what they sold back to the utility. The price for peak vs off-peak on that meter was a multiple of two or three.
I think that consumers should have the option to "buy" electricity from whichever source they want. A household could choose solar, wind, hydro, fossil, etc and pay a rate based upon their decision. That money would then be used to develop those sources of electicity.
This would allow environmentalists to put their money where their mouth is.
Hence "Free-market"
It will also be expensive as all hell since the price mechanism will be "liberally" used to allocate scarce supplies.
There's hydro plants that have auxilliary reservoirs that are used for exactly that. The use off peak surplus power to fill the reservoirs, and then release it to power the turbines during peak hours.
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