Electricity That’s Cheaper Than Free
Posted on November 4, 2009
Would you believe that there are places and times when power companies generate so much renewable energy that they give it away?
In west Texas and Illinois, when the wind blows at night and nuclear plants run around-the-clock, power generators produce more electricity than people need. This oversupply “has forced electricity prices into the negative range,” an expert explains—meaning that some customers are paid to use electricity.
The expert is Terry Boston, and he knows what he’s talking about. Boston is the CEO of PJM, the company that manages the electricity grid that serves 51 million people in 13 mid-Atlantic states and Washington, D.C. It’s not an everyday occurrence but when demand exceeds supply, “cement manufacturing plants can get paid to take electricity,” he says.
It sounds crazy, but there’s a perverse economic logic at work. Owners of the wind turbines collect aproduction tax credit of 2.1 cents per kilowatt hour when they generate electricity, so they don’t want to shut the turbines down. So long as they pay customers less than the subsidy to consume power, they make money. Put simply, taxpayers dollars pay the wind companies who pass along a portion to their customers.
“It is not sustainable to have large negative prices for long periods of time,” says Boston. No kidding. Think about how you would behave if you were paid to use electricity. You can be sure no one at the cement company is chasing around turning the lights off.
One solution to this problem (aside from fixing the incentives) is energy storage, which would deliver other benefits as well. Ever since Thomas Edison invented the light bulb, people have been looking for cost-effective ways to store lots of electricity.
» Filed Under Renewable Energy
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