Wind Power: A Case Study

The Seeking Alpha investment blog looks at industrial wind from an investment perspective - or more accurately,  from a not to be invested perspective

Wind Power: A Case Study - Seeking Alpha:

The United States government currently gives wind power a tax break for every megawatt produced in the range of $19 / megawatt hour of production. This means that even if prices are negative, wind turbines can produce at a potential profit.

Graph capture from ERCOT Wind Integration Report

Grid Integrity

Sustained negative pricing has massive ramifications for the electric grid. When prices are negative, it means that any plant exposed to the real-time price of electricity is rapidly losing money. For example, if prices are -$50 / megawatt hour and a plant is producing 500 megawatts per hour, it is losing $25,000 per hour before any expenses are accounted for. This type of environment leads to plants either closing or hedging their production for long periods of time.


Unfortunately, the plants facing these decisions are base-load units, or units which are required for daily system reliability. As these plants begin to shut down, the grid finds itself in a bind - it desperately needs electricity to meet demand or it will have to institute blackouts. To get this extra production, ERCOT is attempting to send a price signal by recently raising the price cap for electricity to $4,500 / megawatt hour. However, what type of company is going to make a massive capital investment to create a power plant when power prices gyrate so dramatically? This question is yet to be answered.

Where do we go from here?

The short of it is this: wind power is a great idea on paper but it is unreliable, mainly there when you don't need it, subsidized to the point where it destroys essential generation, and creates an environment where investors are rethinking investment in new plants.

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