Wind Power, Grid Mismatch Costly To Investors

Wind farm investors face growing losses from “curtailments,” as turbine installations outstrip the capacity of local transmission systems to accommodate the new power.

The issue is a “growing pain” of wind technology, Judah Rose, Senior Vice President, ICF International in McLean, VA, said. Curtailment has become an increasing problem since 2008 as wind capacity nationwide increases from almost nothing 10 years ago to more than 42,000 megawatts now. “It’s occurring even in RTOs (regional transmission organizations) with advanced pricing and management systems,” Rose said.

The Midwest Independent System Operator (MISO) says its curtailments in 2010 amounted to about 8% of wind output, some 824,000 megawatt-hours, up from 292,000 MWh in 2009. The system experienced more curtailments of longer average duration as more wind projects came on linein areas with transmission congestion.

Rose and Kiran Kumaraswamy, a transmission expert with ICF International, told a webinar this week that the situation makes it vital that new projects assess their curtailment risk. Coordination with transmission providers – both traditional utilities and merchant transmission builders – will be increasingly necessary for wind project profitability, they said.

Involuntary curtailments occur when consumer demand is less than the generation available, and grid operators must order some generation disconnected in order to keep the grid stable.

Wind Worries

It’s a particular problem for wind, which often doesn’t blow during peak demand periods on hot afternoons, but does blow overnight when power usage is low. In the Midwest, Rose said, peak curtailments have occurred in the spring, when demand is low but wind is typically plentiful.
Curtailments can be particularly costly for wind projects, since theircapacity factors are low. Good projects generate just 30-40% of their rated capacity over a year, so being unable to sell output when winds are most productive can hit project revenue hard.

Rose said MISO wind has averaged 3% curtailment over a recent 14-month period, but some locations with particular transmission constraintsexperienced as much as 20% curtailment.
That means projects are losing not just the revenue from selling those megawatt-hours, but also the production tax credits and renewable energy credits. He said the project owner often bears those losses.

Kumaraswamy said grid operators are trying different pricing systems to better manage the variable wind output, like MISO’s Dispatchable Intermittent Resources (DIR) rule. It creates a new generator category for wind and sets more flexible rules for wind generators bidding into MISO’s forward markets. But it does demand that larger wind operators participate in those markets, and pay penalties if they fail to follow dispatch orders, similar to performance demanded of all other generators.

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