Opinion: Electricity reliability on a tightrope

Mark J. Perry

As millions of Texans sweated through a heatwave last summer, the electric grid was pushed to its limits. Power demand surged to a record high. Texas wind generation — which provides more than 20% of the state's power — flopped.

Because wind turbines don’t operate in the still air of July, reserve margins evaporated. Officials with ERCOT, the state’s main power supplier, looked on in disbelief as electricity prices spiked from the normal range of $20 to $30 per megawatt-hour to $9,000 not once but twice.

Had a power plant or two gone offline for maintenance or a gas pipeline ruptured, the entire electric power system would have come undone. Renewables supply power only when the wind blows and the sun shines, and there is no technology available for storing large amounts of power. Fortunately, there were no rolling blackouts or brownouts. Texas dodged the bullet, thanks to appeals for voluntary reductions in power demand requested by power companies.

Wind farms are proliferating in Texas and throughout the Great Plains. But wind energy supplies power only when the wind blows, and as more wind farms are added to regional grids, their productivity declines. Though the cost of individual wind turbines is low, when there are enough of them, they impose real costs on the rest of the system. 

The high levels of renewable energy production cause too many power plants around the country to retire before it is economic for them to do so, Perry writes.

In Texas, the grid was pushed to its limits by relying on too much wind power, brought about by a dramatic drop in its cost and an ever-expanding accumulation of state mandates and subsidies for renewables that prevented the electricity market from working the way the marketplace should. In Michigan there are more than 1,000 wind turbines fueled by millions of dollars in federal tax credits. But wind power is facing a backlash from property owners who worry that wind farms will destroy property values and rural quality of life.  

Acute problems with renewables have also been experienced in California, where solar and wind account for about a fifth of the state's electricity. California mandates the use of renewables even when they cannot be relied upon to power the grid. So extra backup capacity is needed when wind and solar are not producing. But this backup capacity is idle much of the time, adding cost to the system. 

There can also be too much wind and solar power being produced at the wrong time of day. Last May, grid operators in California shut down 4,700 megawatts of surplus energy, mostly solar, because it was worth nothing when it was being produced. That's a lot of lost juice.  

Consequently, California's electricity prices are sky-high. Between 2011 and 2017 electricity prices in the state rose five times more than in the rest of the country. Today California pays 60% more for electricity than the rest of the nation. 

The high levels of renewable energy production cause too many power plants around the country to retire before it is economic for them to do so. And it prevents the timely development of new power supply. The combination of too many power plants closing and too few new plants being built threatens America's power supply.

There's something seriously wrong with the electricity markets in many states like Texas and California — which do not value baseload capacity that can be dispatched when needed and do not provide value for fuel diversity. Coal and nuclear, the two sources of electricity that can produce electricity around the clock at stable prices with virtually no price volatility, are at risk of being shut down. But they are the core strength of the U.S. electric system, supplying 40% of the nation's electricity. 

Politics and taxpayer subsidies have artificially tilted the playing field in favor of renewables for producing electricity. But it doesn't matter how cheap renewables are if they can't deliver power when it's needed. Regulators should act now to ensure they have enough baseload generation. It shouldn't take a crisis to spur action.

Mark J. Perry is a professor of economics at the Flint campus of the University of Michigan and a scholar at the American Enterprise Institute.