From the Horse’s Mouth

From the Horse’s Mouth

When analyzing comments made by people, it’s very important to go to the source document to be certain the person is being quoted accurately.

In my view, and that of others, several RTO/ISOs have created an auction system for wholesale markets that, by their design, excludes the use of electricity from baseline sources. See, The Market for Electricity is Rigged

Day-ahead auctions use marginal costs to decide the winning bid, and since wind and solar have no fuel costs, they can always win against bids submitted by baseline power suppliers. They can even bid zero and get paid several cents per kWh, or whatever the highest bid actually was.

That’s right, they don’t get paid what they bid, they get paid whatever the highest bidder bid.

Baseline suppliers of electricity, nuclear, coal-fired and natural gas power plants, are mostly excluded by the bidding process.

These baseline suppliers actually provide the lowest cost electricity with levelized cost of electricity (LCOE) that can, in the case of coal-fired and natural gas combined cycle power plants, be less than half the LCOEs of wind and solar.

These baseline sources are also reliable and can provide electricity without interruption, while wind and solar are unreliable and can’t provide electricity when the sun doesn’t shine or the wind doesn’t blow.

These are the basic facts about the auction system and the various sources of electricity.

The RTO/ISOs include the PJM Interconnection. See accompanying map. These are the organizations conducting auctions, and they cover around two-thirds of the population of the United States. The remainder of the country relies on utility commissions to regulate the market.

What did PJM actually say about the sources that provide electricity? And, what are PJM’s motivations? 

Here is what Frederick “Stu” Bresler, PJM senior vice president – Operations and Markets, said about the sources that supply electricity to the grid. 

“PJM markets have facilitated an unprecedented fuel and technology switch from older, less-efficient resources to advanced, increasingly efficient resources including demand response, energy efficiency and renewable energy.”

This statement is inaccurate and misleading. It goes to the heart of the problem. The RTO/ISOs are politically motivated to eliminate greenhouse gases. See, Americans Are Being Badly Served  

Bresler refers to nuclear, coal-fired and natural gas power plants as being “older, less efficient resources,” which is blatantly untrue. As seen above, they are reliable and can generate electricity at the lowest cost.

He refers to renewables, i.e., wind and solar, as “the advanced” resources, which are, in fact, unreliable and more costly resources.

He could only make a statement such as this if PJM is politically motivated to cut GHG.

The PJM annual report includes a section on a “carbon pricing”, confirming PJM’s motivations. 

“In August 2017, PJM released its most recent working paper addressing carbon pricing approaches.” 

The PJM annual report goes on to say:

“PJM prefers a regional approach to carbon pricing in the energy market and believes a coordinated carbon policy could be advanced through the PJM markets by a subgroup of states prepared to adopt a common set of business rules.

“These rules would enable state policies that limit carbon emissions through a carbon price, preserve orderly and competitive economic dispatch across the entire PJM footprint …”

Summary

RTO/ISO auctions are designed to exclude baseload power. 

There is an underlying objective to cut greenhouse gas emissions regardless of the effect on cost and reliability.

PJM’s words, not mine, commit PJM to these objectives.

. . .

2 Replies to “From the Horse’s Mouth”

  1. I don’t understand why these people keep referring to energy sources like biomass, wind and solar as “advanced” or “modern” or “21st Century Technology”, when in fact they are ancient, even primitive sources of power. The first windmills made their appearance on the landscape of Europe in the early medieval era. Wind-powered sailing ships where used by Phoenician explorers to circumnavigate Africa in about 600 B.C. Biomass dates back to the age of the first caveman who dragged a burning tree limb back to his cave after the tree was struck by lightning. Solar energy was used in the Neolithic age to warm stones for nighttime heating of primitive dwellings. Peat was used as an energy source for over 2,000 years. Waterwheels (i.e., hydropower) were developed in the later Middle Ages. Coal use dates back to the early industrial revolution. Petroleum was developed on a large-scale basis in the 19th century, along with natural gas. Then, finally, we come to nuclear, first discovered in the 1930s, harnessed in the early 1940s, and deployed as commercial technology in the 1960s. Of all those, which is the more modern, the more advanced, the more reliable, the one with the most incredibly high energy density? Nobody asks or answers these questions. But the cult-like devotion to “modern wind” and “modern solar” is accepted without question.

    • Great comment.
      I find it to be absurd and frustrating when people refer to wind and solar as being modern, and coal, natural gas and nuclear as being “Old”.
      It sounds good, but is, as you point out, patently false.

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