February 13th 2020
Along with many other states, California, Arizona and Nevada all have "renewable portfolio laws." California requires that 60% of its electric power be from renewable sources by 2030. Nevada requires 50% by 2030. Arizona requires 15% by 2025. Renewable power is defined by law in each state, but usually it amounts to wind or solar.
One might think that having a quota for renewable power means that the power has to be generated by wind or solar and consumed within the state. There is a loophole. The "renewable attribute" can be legally separated from the actual power. So, the power can be consumed in one place, but a different place gets credit as if it had actually consumed the renewable power. For example, a wind farm in Colorado can generate a megawatt hour of electricity. The power is actually sold and consumed in Colorado, but California gets credit for a megawatt hour of renewable power.
The Colorado wind farm in the normal course of events can sell the abstract credit, known as an RPC or Renewable Power Certificate to California. California needs credits to meet it renewable power quota, so it is willing to pay, for what is a piece of paper. The wind farm can also sell the real electric power separately to someone who is willing to buy electricity that comes without the renewable power attribute, because the renewable power attribute has been sold to California. This is a legal way to convert power from fossil fuels into renewable power, or to meet a renewable power quota without actual renewable power.
California Energy Commission
Sometimes the certificate may be more valuable than the power. In fact, sometimes the power may literally be worth less than nothing. At certain times California has too much solar power that it can't use because it would destabilize the grid. When the power is worth less than nothing, the producer will have to pay someone to use the power. Someone has to use the power or there can't be a certificate. That would be a counterfeit certificate. You can't just throw the power away. That would negate the whole rationale. You might think that any state would be happy to accept free power, but it may be inconvenient for technical or economic reasons, or it may just be that only one party is available that can take the power and they can exercise monopoly power and make the party trying to get rid of the power pay for the privilege.
A similar situation exists in the spring with wind power in the Pacific Northwest. Wind power receives a 2.4 cents per kilowatt hour subsidy from the federal government. But in the spring, there is a surplus of hydroelectric power due to plentiful rainfall. The wind power suppliers pay power consumers to take their power so they can get the federal subsidy. The hydroelectric suppliers have no motive to do the same because they don't get a subsidy. So, the hydroelectric suppliers spill the excess water and some electricity users get paid rather than billed for their power. This is known as a market distortion caused by the government.
Often with solar power there is too much during the middle of the day and not enough later in the day. In the evening there isn't any solar power. In California the major problem with excess solar power is in the spring, when the sunshine is kicking in, but the big consumption for air conditioning hasn't yet kicked in. California could simply tell the solar power generating stations to cut back, but then they would lose credit toward their renewable power quota. Some contracts may even make them pay for the power that they would have received without the cutback. So, they try to get utilities in adjacent states to take the power, keeping the certificates for themselves. This was all revealed in a Los Angeles Times article. Apparently, California is paying as much as $15 a megawatt hour to unload the unusable solar power.
To see why this makes sense for California it is necessary to look at the economics of solar power. To generate solar power if there weren't various subsidies would cost about $80 per megawatt hour. With the federal and state subsidies the cost might be reduced to $25 per megawatt hour. In contrast, the marginal cost of generating power with natural gas is $15 to $20 a megawatt hour. But the $25 renewable power runs out when the California grid can't accept any more solar in the middle of the day. If they pay Nevada $15 to accept the excess solar, they now have a route to get renewable credits for $40 per megawatt hour, $25 for the solar power and $15 to get Nevada to accept the unusable power. Essentially by a legal strategy they are converting natural gas electricity, delivered in the evening, into renewable electricity. Nevada, on the other hand is getting electricity that is not legally renewable, even though it really does come from solar. Nevada may not want more non-renewable electricity unless they are paid for it, because Nevada has a quota for renewable power too.
The situation is more than a little strange. Propaganda from the sellers of wind and solar power makes people think that wind and solar are actually useful. Huge subsidies make wind and solar seem cheaper than they really are. The idea that introducing wind and solar in U.S. states will make a significant difference in world CO2 emissions is wrong. The real emissions problem, if it is a problem, is in Asia. People that really believe in global warming should face up to the fact that nuclear is the only route to stopping the increase of CO2 in the atmosphere. Some of the most important advocates of global warming catastrophe make that clear.
The most salient fact conc erning wind and solar is that they are intermittent and erratic sourcesof power. They always have to be backed up with fossil fuel plants that take over when the sun sets or the wind stops. They never replace fossil fuel plants.
A pathetic attempt to correct the inherent problems of wind and solar is to add batteries to store power. That costs a fortune, a very high price to pay to help in meeting renewable power quotas..
The utilities know the facts. But the utilities have no incentive to stop the waste because they have figured out how to make money by promoting dubious renewable power. Apparently, the politicians on state public utility commissions and in state legislatures don't have the knowledge or the courage to represent the interests of the people, rather than the interests of the manufacturers of wind and solar stations and the interests of the environmental organizations that are profiting from an artificial fear of traditional energy. People send money to environmental organizations because they have been convinced that catastrophes are looming.
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Norman Rogers is the author of the book: Dumb Energy: A Critique of Wind and Solar Energy (Amazon). His website RenewableFairyTales.com goes into more detail concerning renewable energy.