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Power Prices Go Negative! But…Is This a Good Thing?

The Star Tribune thought this New York Times article so newsworthy that it republished it: “Power prices go negative in Germany, a positive for energy users.” If you scan the article casually, it looks like a tribute to wind energy:

Germany has spent $200 billion over the past two decades to promote cleaner sources of electricity. That enormous investment is now having an unexpected impact — consumers are now actually paid to use power on occasion, as was the case over the weekend.

Power prices plunged below zero for much of Sunday and the early hours of Christmas Day on the EPEX Spot, a large European power trading exchange, the result of low demand, unseasonably warm weather and strong breezes that provided an abundance of wind power on the grid.

Negative electricity pricing is, as the article acknowledges, a fluke. But doesn’t it show how effective wind energy is? No, actually, it shows the opposite.

The problem with wind energy is that it is not “dispatchable.” This is a polite way of saying it us unreliable. Unlike reliable energy sources–coal, natural gas, nuclear–the supply of wind energy can’t be calibrated to the demand. You don’t necessarily get it when you need it. If it is windy at a time of low demand, great–but the energy can’t be stored, so it is essentially given away.

On the other hand, if the wind stops blowing, wind turbines stop producing electricity. This is why we can’t rely on wind energy. If the wind doesn’t blow, it is unacceptable for lights to go off, traffic signals to go dark, elevators to stop between floors, electric-heated homes to grow cold, etc. So reliable energy sources must be maintained in a volume sufficient to meet peak demand. Wind energy is an expensive afterthought.

Still, you might ask, don’t these negative power prices benefit consumers, if only occasionally? No, they don’t. If you read to the end of the Times article, you find this:

Do consumers benefit?

Not directly. The wholesale costs of power make up only about a fifth of the average household electricity bill in Germany. The rest is a stew of taxes, fees to finance renewable-energy investments and charges for use of the grid.

You can read all about the failure of Minnesota’s renewable energy policies in the Center’s blockbuster report by Steve Hayward and Peter Nelson.

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