Coal and nuclear, i.e., the traditional forms of base load power generation, have relatively high capital expenditure, but low operating expenditure. Thus, they need to sell a lot of electricity (at a profit) to recoup the original investment. With the increasing share of renewables, wholesale prices are, on the average, lower and more volatile. Thus, nuclear and coal are in trouble, as they’re not flexible enough to accommodate their output in response to price fluctuations (shutting down and starting up a nuclear plant takes a week).

On what’s being done about this: the UK government is, according to reports, negotiating a “contract for difference” with EDF, effectively guaranteeing a given price for electricity if they build new nuclear in the UK (see:
http://bit.ly/RZH12t). Similarly, in Germany, the government has drafted a law that would give additional money to utilities while preventing them from closing down certain gas-fired power plants deemed critical for system stability (see:
http://bit.ly/P7sZyC). If this seems odd, it’s because in Germany the price situation between coal and gas is the exact opposite of the US: gas is expensive, and coal power is very cheap now that the price of emission permits is in the tank.

Best regards,

Kimi Arima
Wärtsilä Power Plants
http://www.smartpowergeneration.com

“According to an internal industry document from the Electric Utility Cost Group, for the period 2008 to 2010, maintenance and fuel costs for the one-fourth of the reactor fleet with the highest costs averaged $51.42 per megawatt hour.

That is perilously close to wholesale electricity costs these days.

Bruce E. Biewald, the chief executive of Synapse Energy Economics, a consulting firm in Cambridge, Mass., compared the nuclear plants to old coal plants now facing big capital expenses. The cost of new pollution control equipment has coal companies “writing off hundreds of millions of dollars right and left,” he said. Much the same is now true for nuclear plants. “An asset that might have been worth a couple of billion dollars is now basically worthless,” he said. And with average costs approximating average revenue, some reactors face higher-than-average costs.

http://www.nytimes.com/2012/10/24/business/energy-environment/economics-forcing-some-nuclear-plants-into-retirement.html?_r=1

I agree, energy efficiency is also a big part of the solution, especially in the US where energy consumption is twice that of Western Europe.

On the gas capacity: there’s a lot of it as is, yes, but it’s the wrong kind of capacity. The capacity we have was designed for base load operation, i.e., running on full for 8,000+ hours per year – not ramping up and down continuously in order to compensate for wind and solar output. That’s a whole another ball game, and one of the main implications of this kind of operation is that the 60+% efficiencies touted for combined cycle plants turn into 40% or less. And that’s not good in terms of total system efficiency.

Best regards,
Kimi Arima
Wärtsilä Power Plants
http://www.smartpowergeneration.com

thank you for the comments. I agree with your view that it’s possible to dramatically reduce the use of coal plants. Just bear in mind that the 96% reduction in use might only see, say, an 85% reduction in emissions, as coal plants and their pollution prevention systems are designed to operate optimally on stable full load operation. But that’s still a good amount.

I am also with you on the energy storage issue, in the long run that is the only way to go (at least in view of currently available technologies). However, the power generation industry is notorious for its inertia, described accurately by the saying “in the power business, a quarter is 25 years”. The first commercial wind plants were installed in the early 1980s. Solar cells were invented in the 1950s. I suspect my ten year timeline is, if anything, optimistic.

Best regards,
Kimi Arima
Wärtsilä Power Plants
http://www.smartpowergeneration.com

“Negative prices aren’t a very big issue”, and “Exelon still faces challenges” are nearly identical. Being green doesn’t make up for sloppiness.

I question your wind and solar prices. The LCOE of wind is now about $0.05/kWh. PG&E just signed at purchase contract for solar at $0.104/kWh.

End user solar has reached retail parity for large parts of the US. If we get only a modest amount of rooftop solar we’ll see the general price of grid electricity drop. Rooftop will replace a lot of very expensive peak generation.

We’re in the natural gas trap. For the most part the decision of how we generate electricity is made by people who don’t put a value on CO2 emission or on pollution past the point of what they might be required to mitigate. Natural gas is cheap and “bottom line is all that counts” utility decision makers are going for gas.

We’ve got two promising utility scale battery technologies going into production in the next few months and Ambri’s liquid metal battery could provide very cheap storage. I think we’re stuck with natural gas until we get cheap storage. (Or the general public gets concerned about climate change enough to require a price on carbon.)

That would take those coal plants off line fifty weeks, 96%, of the time. Think how much CO2 we would avoid. How much less mercury. How fewer health problems.

Yes, we do need some gas as fill-in for wind and solar until we start bringing more storage on line. But your ten year time line is very likely much too long. We’ve got multiple promising battery storage technologies and two going into manufacturing at the moment.

Of course, I want my electricity to be as cheap as possible. But I also don’t want the situation to end up like in Germany, where the government is implementing a (tax-funded) payment to utilities so that they won’t shut down some of their older plants. Because of wind, these plants get very few running hours, so are bleeding money, but the system still needs them from a security of supply point of view.

The main character in this story is not Exelon or the wind companies, it’s the power system as a whole. Renewables are the answer in the long run, but for some time still, fast flexible gas fired capacity will be needed to balance the fluctuations in wind and solar output. Yes, in 10 years we might have a breakthrough in energy storage technologies, but we’re not there yet, and if we want to do something about CO2 today, then it’s wind and gas, and these two sides should recognize the fact and work together.

Once again, good post, keep it coming.

Best regards,
Kimi Arima
Wärtsilä Power Plants
http://www.smartpowergeneration.com