Friday, February 21, 2014

What's Up With Electricity Supply?

Two similar stories from two different continents.  A looming shortage of generation capacity.  When you have the Financial Times and Texas Monthly writing about the same thing two days apart - - engineering needs to be following the issues.

From the Financial Times yesterday - Power Down -

"Britian's power problems are symptomatic of a global industry undergoing wrenching change.  Traditional thermal generation is under pressure from climate change policies, volatile commodity markets and the rise of renewables.  All of Europe's incumbent power providers are facing what Peter Terium, chief executive of RWE, the German utiltiy has described as the "worst structural crisis in the history of energy supply".

To the other side of the global you have Texas Monthly and Generation Gap.   From the article:

"Unfortunately, more generators won’t necessarily lead to additional power plants. With gas prices so low and retail contracts sold mostly on an annual basis, generators can’t get financing to pay for new construction because they can’t predict their revenue stream more than a year or two out. “There’s no method for compensating anyone in the market for building new generation,” Hirs says. Without more plants, the chance of blackouts keeps rising.

On a typical day, power on the wholesale market sells for between $30 and $100 per megawatt hour.* But during January’s cold snap, prices spiked to $5,000. At times like that, generators make big money, which creates an incentive to withhold power from the market. “They know if they hold back and get into real shortages, they will reap tremendous rewards,” Hirs says. Electricity traders have raised questions about suspicious activity that suggests withholding has been going on, but no one has proved anything. What we do know is that the free market isn’t responding the way the architects of deregulation expected. The market doesn’t care if your AC isn’t running in August."

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