{"id":341,"date":"2012-04-09T21:55:28","date_gmt":"2012-04-10T02:55:28","guid":{"rendered":"https:\/\/allenergyconsulting.com\/blog\/?p=341"},"modified":"2012-04-10T09:41:21","modified_gmt":"2012-04-10T14:41:21","slug":"volatility-in-the-power-markets-inevitable","status":"publish","type":"post","link":"https:\/\/allenergyconsulting.com\/blog\/2012\/04\/09\/volatility-in-the-power-markets-inevitable\/","title":{"rendered":"Volatility in the Power Markets Inevitable"},"content":{"rendered":"

Last week, I spoke at the <\/span>Flexible Power Symposium<\/span><\/a>.\u00a0\u00a0 I will note for my readers that I was rated as one of the highest speakers for the symposium.\u00a0 Many told me first hand, I was the best speaker.\u00a0\u00a0 Speaking on a stage is natural for me, given my youth background as an aspiring actor.\u00a0\u00a0 I had the privilege of attending the High School for the Performing Visual Arts in Houston.\u00a0\u00a0 However, my analytical mind got the best of my aspirations as I looked at my probabilities of success and my required income.<\/span><\/span><\/p>\n

Nonetheless, my talk consisted of laying out the issues confronting the energy markets.\u00a0 I titled my presentation \u201cUnintended Consequences from Good Intentions in the Electric Markets<\/strong>\u201d.\u00a0 As typical of my style of presenting, the slides were much less important than what I had to say.\u00a0\u00a0 I focused on the three areas on which, as a society ,we should strive for in the electric markets \u2013 Renewables, Environmental Policy, and Better Market Design.\u00a0\u00a0 I made it clear to the audience, I am pro-renewable and environment, but I am also cognizant of the trade-offs.\u00a0\u00a0 This is probably where I may lose some of you.\u00a0\u00a0 The externality of the fossil generation is real.\u00a0\u00a0 The plant is emitting potentially harmful chemicals.\u00a0\u00a0 However, as in life, there are trade-offs and the corresponding externalities.\u00a0 Extreme environmentalists like to ignore this other side of the equation.\u00a0\u00a0 Having low cost generation, though more environmentally harmful, offer externality factors of greater expanded use of power which can generate jobs, save lives, and include making society feel better (e.g. comfortable temperature).\u00a0 As I noted in my discussion of the MATS rule by the EPA<\/span><\/a>, our choices to spend for environmental improvements need to be balanced with alternative for use for that capital (financial and human).\u00a0 In addition we really need to understand what our goals are<\/span><\/a> when we plan to spend resources.<\/span><\/span><\/p>\n

Many speakers ahead of me already discussed the variability of renewables in terms of generation.\u00a0 The interesting points in the variability discussions, the wind is hourly whereas the variability of solar is in minutes.\u00a0\u00a0 In addition, wind is quite spatially consistent.\u00a0 Wind blows simultaneously at the same levels for large regions.\u00a0 Whereas solar can have some balancing effect if there is large regions of solar.\u00a0 I also pointed out the choice of renewables given the higher cost, does take away from the economy as energy is only a means to an end.\u00a0\u00a0 Many models only consider the wholesale power price, but given renewables are largely done through power purchase agreements (PPA) which are rolled into rates wholesale power prices are less relevant when it pertains to consumer pricing.<\/span><\/span><\/p>\n

Environmental policy already in effect will retire coal units.\u00a0 Many of the coal units support many of the ancillary services: of the electric market – load, following ability, voltage and reactive load support, unit frequency response and system restoration or black start.\u00a0 In a Catch-22, the price signals of each of these services are essentially non-existent due to the large sunk cost in these facilities.\u00a0 There is bound to be a bumpy path as the units get removed from the system and the price signals for investments in these services catch up.<\/span><\/span><\/p>\n

Market design,\u00a0to regulate or to de-regulate, that<\/span>\u00a0is the question. I talked about the pros and cons. Ultimately many markets are already on the path of de-regulation.\u00a0\u00a0 These markets are bound for market volatility as returns required for investments are higher in de-regulated environment.\u00a0 In addition, high return industries naturally move in business cycles (over to under investments).<\/span><\/span><\/p>\n

In conclusion, given the three areas of renewables: environmental policy, market design, and the future electric markets are bound to see volatile pricing.\u00a0 There will be winners and losers.\u00a0\u00a0 The losers may be the rate payers as they could see higher prices with less reliability.\u00a0\u00a0 The winners will be those who have the flexibility and the forethought to skate to where the market will be not where it is now. <\/span><\/span><\/p>\n

Please do consider All Energy Consulting to help you understand where the markets will be and how best to align your organization to capture the change. <\/span><\/span><\/p>\n

We positively and evocatively challenge the current thinking involving any aspect of energy use. We look for projects that offer meaningful, transformative, with impactful outcome to the marketplace or society.<\/span><\/p>\n

Independent analysis and opinions without a bias right is what we offer to our clients. Please consider and contact All Energy Consulting for your consulting needs.<\/span><\/p>\n

Your Energy Consultant,<\/span><\/p>\n

\u00a0<\/span><\/p>\n

David K. Bellman<\/span><\/a><\/p>\n

\u00a0<\/span><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Last week, I spoke at the Flexible Power Symposium.\u00a0\u00a0 I will note for my readers that I was rated as one of the highest speakers for the symposium.\u00a0 Many told me first hand, I was the best speaker.\u00a0\u00a0 Speaking on a stage is natural for me, given my youth background as an aspiring actor.\u00a0\u00a0 I […]<\/p>\n","protected":false},"author":1,"featured_media":34,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,3,6],"tags":[126,34,128,127,369,129,24,20],"class_list":["post-341","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","category-natural-gas","category-power","tag-deregulation","tag-economy","tag-environment","tag-environmental-policy","tag-power","tag-rate-payer","tag-regulation","tag-renewables-2"],"_links":{"self":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/341","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/comments?post=341"}],"version-history":[{"count":4,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/341\/revisions"}],"predecessor-version":[{"id":345,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/341\/revisions\/345"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media\/34"}],"wp:attachment":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media?parent=341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/categories?post=341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/tags?post=341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}