The general impact of renewables on the utility industry was discussed in Part 1, using Diagram 2.
While the Duck curve displays the over generation caused by renewables, the effect of renewables can better be seen by examining a load curve. Load curves actually vary by time of year and location, however this generalized load curve depicts the theoretical impact renewables will have on utility revenues … and the vital need for storage.
Conceptually, renewables displace electricity generated by fossil fuels during the day, so the area above the red line is no longer served by fossil fuel generated electricity. It’s displaced by renewables.
The position of the red line depends on the percentage of electricity generated by renewables.
The green vertical line depicts the sudden ramping up of fossil fuel generation assets as the sun sets and renewables no longer provide large amounts of electricity.
Theoretically, storage of electricity would extend the supply of electricity from renewable sources for a period of time, and have the effect of minimizing, or theoretically, eliminating, the sudden ramp up depicted by the green line. While storage solves the need to suddenly ramp up fossil fuel power plants, it also further reduces the electricity sold by the utility from fossil fuel sources.
Except for pumped storage, batteries provide the only realistic technology for large amounts of storage today. Storage by hydrogen, methane, compressed air (CAES) or thermal techniques are, at best, questionable … and probably unlikely in sufficiently large quantities.
Germany’s energiewende policy provides a real world example of what happens when renewables displace electricity that has traditionally been supplied by fossil fuel power plants.
In 2012 only 22% of Germany’s load was supplied by renewables, as shown on this diagram by the areas in gold and blue.
Renewables are already displacing electricity from utilities, which is why E.ON and RWE, two of Germany’s largest utilities, are tying to divest themselves of all their fossil fuel power generation assets.
The red line depicts what could happen if the percentage of renewables increases to 60%, or more, as forecast by Germany’s energiewende policy. The area above the red line represents revenues lost to utilities from their fossil fuel generation assets.
While it’s impossible to predict the future, there appear to be only two possible outcomes in Germany.
- Electricity rates being charged to consumers, which already pay 4 to 5 times as much as do Americans, are increased substantially, perhaps double or triple today’s rates.
- The government nationalizes the electric utility industry and the grid, so that tax payer money is used to operate the uneconomic utility industry.
In the United States, California is leading the charge in mandating the use of large quantities of renewables. Elsewhere, 31 states have renewable portfolio standards (RPS) mandating that as much as 25% of electricity be from renewables.
Note in the United States, hydro is not considered to be renewable by most states, including California.
Perhaps it is time to consider why states are mandating the use of renewables?
It can’t be to lower costs to consumers, because wind and solar are both more expensive than generating electricity using natural gas or coal.
The Energy Information Administration predicts that four years from now, in 2019, the cost of electricity from the various renewable sources will still be higher than for natural gas:
- On-shore wind, 8 cents per kWh
- Off-shore wind, 20.4 cents per kWh
- PV solar, 13 cents per kWh
- Thermal solar, 24 cents per kWh
While electricity produced by natural gas will be 6.4 cents per kWh.
Note that the cost of wind and all forms of solar today are significantly higher than the costs predicted for 2019.
In other words, renewables are, and will remain, more costly than electricity generated by fossil fuels, even without adding the cost of backup generation for when the wind stops blowing and the sun stops shining, or the cost of transmitting wind generated electricity long distances.
Lower costs for consumers and industry are, therefore, not the answer.
The reason renewables are being forced onto the system is because they don’t emit CO2.
Even Musk, in his introduction to Tesla energy batteries, said that batteries and the sun would prevent catastrophic climate change by reducing CO2 emissions.
In other words, the utility industry is being threatened, and costs to consumers are being increased because of the government’s efforts to cut CO2 emissions.
The Duck curve, together with Germany’s real world experience, prove that renewables are not necessarily beneficial.
Renewables have the potential to destroy the utility industry and cause consumers and industry to pay much more for electricity, thereby depriving the economy of the benefits of additional consumer spending and investment by industry.
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