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How Wind and Politics Pushed the Price of Texas Electricity Below Zero
Slate dissects the strange circumstances that led the price of electricity in Texas to briefly dip not just to zero, but into negative territory, reaching at one point negative $8.52 per megawatt hour. Why? A combination of being an "electricity island" with only weak ties to the surrounding state's grids; strong wind in a state that's sprouted thousands of windmills; and infrastructure design that means the only real buyer for most electricity producers' output is ERCOT, the Electric Reliability Council of Texas. (One of the comments attached to the story notes that Texas is not completely isolated from the national grid, but it's still markedly isolated.) A slice: Demand fell—at 4 a.m., the amount of electricity needed in the state was about 45 percent lower than the evening peak. The wind was blowing consistently—much later in the day Texas would establish a new instantaneous wind generation record. At 3 a.m., wind was supplying about 30 percent of the state’s electricity, as this daily wind integration report shows. And because the state is an electricity island, all the power produced by the state’s wind farms could only be sold to ERCOT, not grids elsewhere in the country.
Wind farm owners get lots of taxpayer help paying for the construction of the wind farm, then forced production credits means they get paid if power is needed or not. Apply this to any generation technology and the result would be pretty much the same.
The model is even worse in place where the grid is forced to purchase power a even higher rates.
In this model, who pays for the reliable backup?
There are many storage methods available for this excess energy.
Seemingly concerned with the "Texas" angle, TFA fails to mention if this is a rare anomaly or worthy of storage development.
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Negative prices have persisted in Texas and elsewhere for the past decade; this is not news. It is a function of the tax credit, but also a lack of transmission. When transmission is not available from wind resource areas, the prices will be negative there (and higher on the other end), reflecting the fact that wind has to back down because it can't go anywhere. There are also instances where there is simply more power than there is demand over an entire area, but this not as common; that scenario is actually a bigger problem in California due to the buildout of solar (for which there is no production tax credit, notably). Negative pricing was much worse in Texas a few years ago before they built a backbone transmission system to get wind from West Texas to load in the east. There is no doubt that the spot price of energy on average is lowered by wind; utilities nationwide are signing contracts at $20/MWh or less, well below today's average spot price, fixed for 20+ years. Interesting aside - even before there was much wind, prices in the Pacific Northwest would typically go negative for a few hours in the spring when coal needed to be paid to back down to accommodate spring runoff through the hydro system.
If storage has even an 50% loss rate, then daily price variation should be limited to 50% because otherwise storage batteries would make a profit.
The trick is to create a battery efficient and cheap enough to reliably make money on daily price variations.
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it sounds to me like we aren't dealing with a free market here.
there is no such thing as a "free market" so this is not surprising
No, that in itself isn't enough for storage batteries to be profitable. Take lead-acid batteries for example. They're a century-old technology whose primary drawback (weight) isn't a factor for storage applications. A deep-cycle lead-acid battery will cost you about $1 per Ah. At 12 V, that's $1 per 12 Watt-hours of capacity, or $83.33 per kWh of capacity.
The average residential price (the more expensive) of electricity in the U.S. is $0.12/kWh. If the price swing between day and night is $0.12/kWh ($0.18 at peak, $0.06 at night), then it will take you $83.33/$0.12 = 694 cycles to recoup the cost of the batteries and actually start to make money.
"Great! So you'll start making money after 2 years!" No, these batteries typically only last 150-300 cycles. Deep cycling is very stressful to the chemistry, and the cells rapidly begin to lose capacity beyond that many cycles. So it'll die long before you reach your break-even point. If you figure it lasts 300 cycles, the daily price differential in electricity price between day and night needs to be $0.278 per kWh before the battery becomes economical. If it only lasts 150 cycles, the price differential needs to be $0.556 per kWh. And I haven't even factored in charge/discharge efficiency.
This is why batteries are used almost exclusively for mobile applications - where it's impractical to draw power straight from the grid. Essentially you're paying dozens of dollars to carry around a few cents worth of electricity. Trying to turn that around and use batteries to release electricity back to the grid is adding a huge expense for very little benefit. It's almost always more practical to just scale electricity production up or down to meet demand, than try to time-shift it with batteries.