Daniel - you're right that solar and wind aren't free and, on a levelized cost basis, they have historically been significantly more expensive than traditional generation sources. My point is that, "ONCE BUILT"
, the decision to operate these wind and solar plants is dependent upon the plant's marginal, as opposed to levelized, cost competitiveness . It's the lack of fuel or labor costs which allows PV and Wind to bid into wholesale markets at $0.00/kWh and depress the premium mid-day wholesale pricing which traditional generators have grown dependent on. This, combined with the German EGG's prioritization of generation based on carbon intensity, has resulted in the current market disruption. +Daniel Lemire
- I know you like papers - take a look at this one (http://arxiv.org/pdf/1307.0444.pdf
) for further detail on how the merit order effect results in renewables having an out-sized market impact (relative to their penetration levels)
Now, the other interesting part of this story is the utility consortium's claim that subsidies for solar and wind have become prohibitively expensive. With the exception of off-shore wind, subsidies for wind and solar have declined significantly in all markets over the EU
over the past 5 years. Today, the feed-in-tariff rates paid for solar generation is lower
than than the retail rate (by a few euro cents per kWh). This spread will only increase as the German FIT decreases by 1.8%/month and retail rates continue to climb. The net effect is to encourage "self consumption" and adoption of enabling technologies (like demand response and distributed storage).
The incremental cost impact of new distributed energy is a very hot topic currently (google "utility death spiral"
or "value of solar - Net energy metering"
) but it's important to always remember that
1) there's real value of co-locating and harmonizing generation and load.
2) solar and wind become cheaper while fossil generation becomes more expensive with each passing year.
3) huge electrical grid investments (~$500B over the next 25 years in the US alone) need to be made regardless of whether we decide to double down on centralized generation or embrace a meaningful transition to renewable energy + demand response + distributed storage + energy efficiency.
The linked article is all about the consortium ignoring #1 and #2 and pushing for business as usual to preserve their current regulated monopoly status.