Heads I Win, Tails You Lose: What to Do When Wind Doesn’t Perform as Promised

Wind generation is unpredictable.  Many like to use the term intermittent.  Some say that the term intermittent is inaccurate.  I prefer to talk about unscheduled flows.  The wind operator makes a commitment to produce power at a specified rate.  Sometimes the production exceeds that specified rate.  Sometimes the production is less than the specified rate.  Seldom is the production exactly equal to the specified rate.  It reminds me of Goldilocks and the three bears,  “Too hot, too cold, but seldom just right.”

Most utility approach unscheduled flows of electricity by punishing the provider for any imbalance.  If production exceeds the specified amount, then the price for the surplus is less than the standard price.  If production is less than the specified amount, then there is a high price changed for the shortage.  “Heads the utility wins.  Tails the generator looses.”

Utilities are used to the concept of “Too hot, too cold, but seldom just right” in the way they control their operations using the metric of Area Control Error (ACE).  Until about a decade ago, the operating paradigm was that ACE should pass through zero at least within 10 minutes of the last time it passed through zero.  ACE never was quite equal to zero, sometimes it was “too hot”, sometimes it was “too cold”, but never was it “just right.”  ACE just passed through being just right.

These “seldom just right” concepts can be combined into a financial model.

  • When ACE is positive and there is “too much electricity,” we can set a very low price for unscheduled amounts of wind.
    • If the wind is producing too much, then the wind operator will be disappointed with the price. 
    • But if the wind is operating below the specified rate, the charge for the shortfall will be the same very low price.
  • Conversely, when ACE is negative is there “isn’t enough electricity,” we can set a very high price for unscheduled amounts of wind.
    • If the wind is producing too much, then the wind operator will enjoy the high price for its surplus generation.
    • If the wind is producing less than specified, then the wind generator will face a penalty rate for the short fall. 

Since ACE is nominally a continuous variable, the price can vary continuously around some set point, such as the utility’s announced hourly price for electricity.

I call this pricing concept WOLF, for Wide Open Load Following.  You may want to read an old paper of mine or recent comments

  • “Tie Riding Freeloaders–The True Impediment to Transmission Access,” Public Utilities Fortnightly, 1989 December 21,
  • “A Pricing Mechanism To Facilitate Entry Into The FCAS Market” Investigation Of Hydro Tasmania’s Pricing Policies In The Provision Of Raise Contingency Frequency Control Ancillary Services To Meet The Tasmanian Local Requirement, Office of the Tasmanian Economic Regulator, 2010 July 9
  • “Ratemaking To Facilitate Contra-Cyclical Operations” FERC Docket RM10-17-0000 Demand Response Compensation In Organized Wholesale Energy Markets, 2010 December 27.

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Mark Lively earned a BS in Electrical Engineering from MIT in 1969 and a MS in Management from MIT Sloan School in 1971. He worked for American Electric Power Service Corporation in New York City from 1971 to 1976 and at Ernst & Ernst, Ernst & Whinney, Ernst & Young in its Washington Utility Group from 1976 to 1991.

7 thoughts on “Heads I Win, Tails You Lose: What to Do When Wind Doesn’t Perform as Promised”

  1. A wind turbine will not make a significant dent in your electric bill unless you live in a place where the wind blows pretty hard most of the time. Even in a very windy location, it may take 10 years for to generate enough power to pay for the initial cost. Windmills are designed to produce maximum power at a particular wind speed; at half that speed, they produce only one eighth as much power. Here’s a link for some commercially available windmills. (Not included.) If you build your own, it will probably be much less efficient. In most cases, the price tag does not include a tower or installation. Check your electric bill to see how many kilowatt hours you use during your windy season. Divide by the number of hours in the billing period to get the average power consumption. Before deciding on a windmill, you should compare against other options. In urban communities with lots of sunshine, solar is best. Gasification is a much more attractive option for areas that don’t get much wind or sunshine. However, the gas turbines that go with them tend to be pretty noisy, so they are not suitable for crowded urban communities.

    1. A big enough wind turbine will make a dent in your electric bill, but it will also make a big dent in your investment account. The determination of the average power consumption is important for “right sizing” the wind turbine, but should be irrelevant if the local utility will buy your surplus at an appropriate price.

      1. You have several prbleoms of which the cost would be the greatest. The wind doesn’t always blow so you’ll need batteries and a converter to AC. Then there’s high winds that can tear down your windmill, lightning strikes, annoyed neighbors, city ordinances, house insurance premiums and did I mention the really, really high cost. Go to the XXXXXXXXXXXXXXX. I believe their website is the same. They sell this sort of thing. You have to have the wind blades, a mast, supply your own concrete foundations, a PTO power generator, the storage batteries, converters, regulators, wire, power transfer switches. You’re talking about 35 to 50k, easily.

    2. A is the strongest answer. The sun is not in the sky for half the time, on average, but some locations have extremely reliable wind.
      B is 99% false. Same thinking as above.
      C is about 60% true. Solar is not economical for many homes, and wind even less so due to geography.
      D is 90% true. When heating, cooling, and cooking needs are taken into account, solar does not supply enough power. When heat comes from somewhere else like a wood stove or natural gas, solar can supply a home’s needs. There’s still the economic issue. And the term efficient is subjective.

  2. Energy from solar panels can be stored in batteries for when there is little sun light. It’s very expensive to install, maybe 8 grand upwards for home systems, hence its usually just used for heating up water etc.. but average *home* system can take on maybe up to 40% of that household’s annual electricity usage.. it is rather expensive per square metre to buy as silicon is not so readily available to make it cheap.. but once it’s up there it doesn’t need much maintenance except to clean it, etc. wind turbines are expensive to install but once up, not much maintenance is needed, checked up maybe every few years.. the energy can be stored in batteries when there is no wind present. so, i guess its def not answer B and C. edit: wind and sunlight is free so it isn’t expensive to *use*

    1. There is always the tradeoff between the cost of installation and the value of the output. The cost cited and the amount of the household’s electricity usage that can be met are both highly variable with the size of the installation. And part of the installation cost issue is the cost of the batteries.

    2. First, a quick check with your local building daerptment will tell you whether it’s forbidden, and if not, whether there’s even a chance they will issue you a building permit for it. Check with your neighbors, since if they object, you’re unlikely to get a permit. Unless you’re a certified professional engineer with lots of time on your hands to do the research, hire a professional to evaluate your site and advise you on options. You need steady, strong winds much of the time.Since wind is intermittent, you need either a grid connection or lots of (expensive) storage.In my opinion, this is not a practical technology for home deployment.

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