Blame It On El Nino -- Wind Not Profitable -- BloombergBusiness -- September 2, 2015

Previously posted; important story, needs to be re-posted as a stand-alone post.

BloombergBusiness is reporting what the rest of us already know. Utilities aren't making money off wind. If it weren't for tax credits and state mandates, intermittent energy would have died years ago.

Power producers who invested billions in turbines are finding that making money off the wind can be as unpredictable as the energy source itself.

NextEra Energy Inc., NRG Yield Inc. and Duke Energy Corp. all said a lack of sufficiently windy days cut into second-quarter sales. And neither power generators nor forecasters seem to know exactly why.

“There was a definite trend with several utilities talking about weak wind resources,” said Shahriar Pourreza, a New York-based analyst for Guggenheim Partners LLC. “This isn’t something that has been major in the past so definitely a phenomena worth following to see if it’s sustainable or an anomaly.”

Weak wind resources. LOL. A lack of "sufficiently windy days." LOL.

Tax credits?

Tax credits for wind production are expected to more than double to $2.4 billion in the fiscal year ending Sept. 30, according to an August 2014 estimate, the latest available from Congress’s Joint Committee on Taxation. Wind credits may reach $3.6 billion annually by the fiscal year ending in 2018, the committee reported.

Developers have been installing turbines in the gusty plains of the Midwest and Texas as well along mountain passes in California and other western states. Wind provided nearly 10 percent of electricity production in Texas and 7 percent in California last year.

 Blaming El Nino. My hunch is they were snookered by some fast-talking snake oil salesmen.

******************************

The Math Adds Up

In New England, the "cost" of wind:

Wind projects in New England receive such enormous payments for their generation, they will offer their output to the grid even when prices go negative.

Clearly, when low or negative pricing occurs, the best course for the electric power providers is to reduce the production of energy. That's common sense, unless the power producer can be paid handsomely for products attached to their output, " the enhancers."

Real time wholesale prices in New England averaged $40 per megawatt/hour for the last quarter of 2014.

Wind power entering the grid normally is a "price taker"( they would take the price other generators offered the market ), therefore they would receive, on average, $40 per megawatt/hour delivered. They also would receive $62 per megawatt/hour for the renewable energy credit entitled to them by State Government Renewable Portfolio Standard Programs. They also receive $35 per megawatt/hour entitled them through a federal government program named the Production Tax Credit.

Some wind plants also receive about $8 per megawatt/hour for "capacity payments," meaning they cash in for the annual promise to "be there" three years in the future.

Normally, wind doesn't affect the wholesale real time price of electricity, but, because of the ancillary products( " the enhancers" ), which are outside the wholesale energy market ( REC, PTC, capacity guarantee ), the retail, customer price absorbs these payments in the monthly bills. That's a $145 per megawatt/hour gift from the taxpayers and ratepayers. 

Let's break that down:

• wholesale prices in New England, per MWH: $40
• State program, renewable energy credit, from the state, per MWH: $62
• Federal government, Production Tax Credit (PTC), per MWH: $35
• Capacity payments, per MWH: $8

_______________________________

Total: $145/MWH for wind energy; real time wholesale prices in New England averaged $40/MWH. What's not to like.