Coal & Gas Are Too Variable To Be Worth Considering
In one extremely important way, coal and gas are too variable to be worth considering.
We have heard it over and over. People whose thoughts go no deeper than common knowledge make the statement, “The sun doesn’t always shine, and the wind doesn’t always blow.” They seem to say this as though they think it is profound.
I will suggest a counter. “The variable nature of thermal power will kill natural gas just as surely as it is killing coal.” Thermal plants that are dependent on coal, gas, or nuclear fuel have one part of their nature that is too variable for them even to be worth considering in many places where they are used.
What matters to industry is not whether a given wind turbine is turning. What matters is getting the power when it is needed at a reasonable rate. Sign a power purchase agreement (PPA) at the right rate, and it is up to the supplier to make sure the power is there. If the seller cannot deliver, it will have to buy power to replace it. Therefore, the user can go for the least expensive power sources around with a fair amount of confidence that the power will be delivered at the proper price. And the least expensive resources happen to be renewable.
The CleanTechnica article, “Lazard: Wind & Solar Power Costs Continue To Fall, Putting Coal & Nuclear At A Disadvantage,” describes this. While that article is ten months old, the situation has only got worse for thermal power, as solar prices have continued to fall (see many articles HERE).
This is not as risky for the seller as it might sound. The buyer is looking for renewable energy, and renewable energy comes in many forms. A wind farm selling energy to a business can, for example, buy solar power to resell when it has insufficient wind. Since wind power is lowest during the daytime and during the summer, the very times that the sun shines brightest, solar power can provide a lot of the backup it needs. The wind farm can also call for hydro power, which is just about always available. It can also get power from geothermal plants, or biodigesters, or batteries. With today’s highly efficient transmission lines, it could buy the power cost-effectively from hundreds or thousands of miles away. There are a lot of options, and the power seller can either own those types of power plants itself, or it can enter into cooperative power agreements with other providers who do.
There is another thing that needs to be considered. Baseload power plants that are fueled by coal, gas, or nuclear materials are inflexible and cannot change their output to accommodate changes in demand. Because of their inflexible nature, they rely on plants called peakers, which are purposely built to provide variable or intermittent power. This is the old paradigm.
The new paradigm can rely on a smart grid. Renewable energy sources can be matched to demand. And demand response systems can adjust demand, if that becomes necessary.
So we have two ways of doing things. We can use the old paradigm, in which as much as possible of the constantly varying demand is met by inflexible power sources. Or we can use the new paradigm, in which the variable demand can be matched rather precisely by variable resources of many kinds, in many places.
Now comes the catch for thermal power, such as coal, nuclear, and thermal gas. Variability is not an issue that ends with the supply and demand of electricity. It also relates to the supply and demand of fuel, along with other variable costs. Thermal power is variable in one respect where renewable power is not, and that is its cost to the wholesale customer.
An article from Bloomberg, “Tech Investments Are Powering Up Clean Energy,” puts this very nicely. It says, “Corporations sign these purchase agreements for a number of reasons (sustainability goals and positive media coverage certainly being two), but the main reason is that long-term contracts with generators that have no variable costs are good for business. They give companies visibility on their power prices for several decades and, at least historically, have offered cheaper prices than what the grid provides.”
Commercial customers need to be able to have predictable costs. The fuel for solar and wind production will cost exactly the same twenty years from now as it does today. When you take that to the bank, you are pretty likely to be believed. That will not happen with coal, gas, or nuclear power. And that difference is very important when you are dealing with large amounts of money. All else being the same, it is easier to get a bond to build a power plant without variable costs than one for which some costs are unpredictable.
Solar and wind power are absolutely predictable when it comes to variable costs. By contrast, coal and gas power are altogether too variable to be reliable.
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