Taxpayer money to fund employment for chinese folk

texrex, you seem to know how these things work down there in Texas...

Can you pls enlighten the ignert? If all this wind power is so difficult, inconvenient and demand is poor, why do all these people (first E.ON, then this Chinese group) keep investing in new farms in Texas? What's so special about Texas, if it's not the demand? As you say, it would make more sense to locate them in Cali, wouldn't it?

 

There are a number of reasons.

One is that there are non-market incentives that bastardize what would normally fix itself. The federal government pays the windfarm operator a Subsidy for every MWh generated, (say $20 or so), so prices can go to negative 19 dollars and that operator will still want to generate into the grid. A side effect of this is that many Power purchase agreements reference windspeed and quality, and not necessarily MWh’s generated. So, when the grid operator forces the windfarms to ramp down because they are destabilizing the grid, the party that bought from the windfarm has to pay anyway, even though they are not generating (AND they have to go procure their supply somewhere else, since they likely have obligations).

Another reason is that in the rush to put up turbines, it seems like everyone operated in a blind haze, and all of a sudden massive amounts of wind generation became available in a very short period of time. The wind quality is pretty decent in northwest texas, and there are some federally supported “renewable energy zones” are in the making. It just so happens that there isn’t much load (or demand, you might say) in NW TX, given the absence of cities, etc. the turbines went up faster than transmission, so it causes significant congestion over the few lines that actually do exist (remember, there’s not really much demand out West, so why the hell have all kinds of transmission in place leading there). I think everyone got caught by surprise when all the wind farms came on at roughly the same time. Without the free (well, taxpayer and saver funded) subsidy, this crap wouldn't have sprung up like it did, because the economics just aren't there.

Regarding why they don't really build in California: one reason is that it’s a bit easier to build things in TX than elsewhere, just from a reduced regulatory “pain in the ass” factor that you might be able to imagine in Cali or Seattle or those kinds of places.

Also, 2008 was the first real problem year, and many players just can’t react that fast. T Boone has more of a trader mentality, so cutting bait is in his toolbox. Not so sure about e.on and the Chinese. Culturally it may just be different: Once the project is in motion, it’s hard to stop or steer. Just think of the Chinese’s Tbill accumulation, or Daimler’s purchase of Chrysler. Like slow motion trainwrecks, with everyone frozen in the headlights (all just my opinion, I suppose).

What is a fact though is that the federal subsidy and other factors distort the market to produce a disproportionate allocation of this less than desirable energy source. The result is that the grid operator has to deal with large amounts of sudden generation when wind comes on, causing them to reduce the output and do other work that they wouldn’t have to with reliable and predictable power generation. The costs of all this extra activity, including having real generation on standby in case the wind dies, constantly re-dispatching the grid to keep it frequency-stable and reliable, are passed along to the consumer, and cause many other market participants headaches.

 

The wind power industry is beginning to attract talent. This is good news. There is a new technology coming out for wind power farms.

We can now save wind power for later usage. It sends highly compressed air down the tower and into underground storage, such as caves or depleted gas wells, or through pipelines. The pressurized air can be released when needed to power an electricity generator, even if wind is not spinning the turbine's blades.

So wind power generated at night can be stored and released during the day when power consumption is higher.

The rotation of talent from creating subprime derivatives to engineering is a step in the right direction.

Also, some french guy figured a way to generated water from wind farms. It capture the moisture from wind and condensed it. Area that don't have fresh water, can now capture moisture from the air using wind towers.

 

Thanks, texrex... It's good to get a better understanding of these things from knowledgeable people.