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  1. I think what you are describing is a well understood market failure where investment or asset write off decisions are made on the short term market situation and the consequence only filters through into a market price signal in the medium to long term, producing price bubbles followed by price crashes.

    Classic example is housing, when prices are high property developers can raise large amount of capital and sign off investment decisions on building more housing based on the current market status and its current rising price trend. However at the point at which the new houses are finished the time lag between the investment decision and completion of the building results in a significant oversupply of property, and the prices collapse houses are sold of cheap or left derelict and many developers and home owners go bust. The cycle continues to repeat and is inefficient in its use of capital and costly to the economy as a whole.

    The electricity market is exactly the same, there is a large lag in the price signal and new capacity coming online. The inevitable result is overshoot in supply followed by market collapse and bankruptcy then undersupply creating large price spikes repeating the cycle. The other side of it is that only the lowest overnight cost and shortest build time generator would survive such a market as they can come online sooner to take advantage of the high prices and have lower write down costs when the market switches.

    The background intent by the companies is almost irrelevant as the economies result in a single technology winner and boom bust cycling which benefits neither the ratepayer or society at large. Like in the housing market some companies will make obscene amounts of money during the boom times further exacerbating the situation.

    The only solution is a regulated electricity market, however that isn’t in vogue these days where market liberalisation is panacea for all ills.

  2. As someone who’s employer takes a “belt and suspenders” approach to electrical power reliability, the point of a backup system is dependent on what happens when the power goes out. In the case of my headends it means loss of cable, phone and Internet for our customers. To a lesser extent, it also sometimes causes equipment failure because the hardware is designed for continuous operation, in many cases the uptime measured in years.

    Our primary backup for about 80% (and growing) of the devices is a DC battery plant, the other 20% by a large UPS. Then the secondary backup is a very large diesel generator. The DC plant and UPS usually only need to supply power long enough for the generator to get up to speed and the transfer switch to engage, usually less than a minute, but are built to supply about 6-8 hours of runtime in case the generator fails to start.

    Every month I perform cursory inspections of these systems, and every quarter contracted technicians perform more thorough inspections and maintenance, and annual testing.

    Having all this backup is extremely expensive, but necessary if we want to achieve our uptime goals. I’m sure if there were an alternative offered by the power coop that was guaranteed at the same level as our battery plant it might attract interest. But that would likely mean supplying diverse redundant paths to the headend, which immediately doubles the cost of the distribution network. And to really do it right you’d need 100% redundancy, including “worst case” manual switching and multiple transfer points at the delivery point. I’m sure there are customers who are willing to pay for this sort of system, in fact my father once worked for a steel manufacturer who had this sort of redundancy for the electric furnace. But there’s also something to be said for knowing you have options and supply diversity if the power goes out.

    1. I know of a piece of UK critical national infrastructure where they run continuously from the UPS backed by generators with the grid as topping off the UPS if available as the risk of the UPS not working or the generators not starting is seen to be too high.

      1. That’s called an “on-line UPS”.  It’s actually rather common.

        I understand that many data centers have switched from AC power supplies to switchers fed by 48 VDC… which is conveniently the same voltage used by telephone exchanges since forever.  This both allows full battery backup and gets the AC transformer/rectifier out of the air-conditioned machine room, adding in a big savings in A/C costs.

  3. “The nuclear industry spent at least $3 billion in reaction to the events at Fukushima, even though none of the reactors in the U.S. are on sites that are susceptible to station blackouts from tsunamis or any other external event.”

    Yeah, everyone knows that southern, central and northern california doesn’t ever experience large earthquakes. And that Diablo is miraculously sitting in a no quake zone.

    1. People with subject-matter knowledge know that Diablo Canyon is sited roughly 3x as high over sea level as the 2011 Tohoku tsunami.

    2. @Jon Hall

      No nuclear power plant has ever experienced significant damage to its safety related systems as the result of an earthquake. In fact, there are very few examples of any steam plant built to reasonably modern standards suffering much damage from seismic events. Believe it or not, but engineers understand how to strengthen systems, structures and vital components in contained systems like factories & power plants to ensure they are able to resist serious damage from earthquakes. (Roadways, tall buildings and bridges are much more challenging from a seismic safety point of view.)

      Diablo is sitting on a relatively stable part of your relatively unstable state. Sure, there have been heavily promoted discoveries of “faults” in areas close to the facility, but geologists can engage in unlimited debate about what constitutes a fault and whether or not that fault indicates instability.

      It’s also worth noting that the NRC believes the design and location provide adequate protection and that the initial “fault” that caused so much angst when the plant was under construction was discovered and reported by a pair of Shell Oil Company geologists.

      It’s even named after them – Hosgri. According to characterization published by the Southern California Earthquake Data Center, it doesn’t sound like it’s much of a risk, especially if you know anything about the current state of the Diablo Canyon Nuclear Power Plant.

    3. Well, gee, glad to know if there is a quake of magnitude 6.5 or better, that Diablo will just keep humming along, without even shutting down to assess any possible damages. Yep, a severe quake won’t affect operations at all, and all the customers relying on Diablo’s power might not have chimneys, but, by golly, they’re gonna have power!

      BS.

      1. @Jon Hall

        Your reading skills still need improvement. How did you read operate without interruption into my comment?

        I can guarantee that if the facility is forced to close, it will not be supplying any power any more.

        If it is kept in service AND a major earthquake hits AND inspections reveal damage needing repair, the facility MIGHT need to be shutdown for a significant period of time.

      2. Perhaps your writing skills are what needs improvement, Rod. “Station blackouts” aren’t “interruptions”?

        “….even though none of the reactors in the U.S. are on sites that are susceptible to station blackouts from tsunamis or any other external event.”

      3. Jon Hall

        It would take more than an earthquake to cause a station blackout and god forbid….if there is an earthquake (earthquake….not tsunami) large enough to take out a Nuke Plant you can bet that would be the last thing people will be worrying about. Unfortunately, Japan was more worried about the Nukes (that have directly killed zero people) than the 20,000 people who were killed DIRECTLY by the earthquake and resulting tsunami.

        You have no idea how robust Nuclear Power Plants are. They are quite amazing actually…….WAY overdone, but still amazing.

        Yeah….power is never needed during a major natural disaster. See hurricane Harvey and South Texas Project.

      4. It occurs to me that none of you, (blathering on about man made machinery, buildings, or structures being able to withstand major geologic movement), have ever been through a major quake. In Woodland Hills, California, I had a house I lived in broken in half by the Northridge earthquake of 1994. No man made structure, subjected to the ground movement that broke that house in half, would have withstood the forces at play. The ridiculous notion, that a NPP is capable of withstanding any and all earthquakes that may occur is a disingenuos assertion. There is simply NO WAY you can make that assertion with complete confidence. In the past, I have made the argument here that the NE industry has stepped in it, by making such assertions. Such assertions, that plants are completely safe, no matter what, are doomed to be proven wrong, as they have been in the past, repeatedly. Which opens the door for all the “yeah buts” offered by those opposed to NE. Yet, Rod has repeatedly rebutted by saying “the industry makes no such assertions”. And then, threads like this come along. Go figure.

        1. @Jon Hall

          You continue to either misunderstand or misrepresent what you are reading here. We have not said that nuclear power plant structures will not be damaged by a significant earthquake. We have said that the systems, structures and components of the plant will be able to continue to serve their safety functions and protect the public from harm.

          Think of the engineering case of NASCAR automobiles that can be involved in horrific accidents involving flying metal, debris and even flames. In nearly every case, the fragile human driver somehow manages to walk away.

          Someone with reasonable understanding of the design and situation can confidently state that no one outside of the track is ever splattered with blood from that driver. Some people with little or no understanding or with impressively creative imaginations might be able to come up with an unprovable exception to the statement.

      5. The 2011 Tohoku quake was magnitude 9.1.  All the nuclear plants along the coast, from Fukushima Dai’ini to the south to Onagawa to the north, came through without any major damage.

        Your Northridge quake was magnitude 6.7.  That’s 1/250 the energy of Tohoku.  Your house got ripped in half because it was (a) built like crap, (b) set on fill which magnified the ground movement, or (c) both.

      6. Jon Hall

        Your house compared to a Nuke Plant as far as being robust goes…..hahahahaha

        You seriously need to tour a Nuclear Power Plant…or AT LEAST do some research on the subject matter.

  4. Regarding the PTC, Production Tax Credit, of $23/MWh: BPA, the Bonneville Power Administration, is now required to put as much water as possible through the turbines of those dams which have smolt drifting downstream during spring runoff. So there is lots of electricity generated from those dams in the spring.

    The smolt survive the trip through the turbines but when forced to go over the spillways develop the bends, nitrogen decompression sickness.

    But the wind is blowing best in the spring and the wind farms are willing to pay customers to wheel away the power; they collect the PTC and make some money in any case. The result is a supply of more electricity than can readily be consumed, despite interties to three cardinal points of the compass.

    In the spring of 2010 or 2011 the result was BPA ordering the wind farms to shut down while at the same time giving power away on all interties. The wind farmers complained to the FERC.

    The FERC ruled that BPA could so order but was then required to pay the wind farmers the foregone PTC.

    This happened again this past spring of 2017. Partly because of these payments BPA has upped its standard rate from $32.50/MWh to just above $35/MWh, a hefty increase.

  5. Good article Rod. In addition to loss of TV, Lights ,range and oven there is the problem of keeping warm when there is an outage. Recently we had a 12 hour outage from 5 PM to 5 AM. We lit candles, got out flash lights, lit a fire in our wood burning fireplace, warmed up down comforters with a hot water bottle. We used a wind up emergency radio and found out that `150,000 had lost power.. Our neighbor checked on us old folks. Also our son telephoned us. His cell phone did not work because the wind toppled over a tower. One week after the storm we heard that our electricity rates are going up 5 per cent per year…

  6. Perhaps you’d be interested in hearing the latest in the South Australian saga. I read in the ‘Australian’, generally regarded as a rabid, right-wing rag, (I naturally feel it’s far, far to the left), that the SA government has spent several hundred million on diesels to make sure there aren’t any blackouts before the SA election in March next year.

    Entertainingly, they have also just blown up the last remnants of the Port Augusta power station. It ran on cheap junk coal, not expensive imported oil. There’s enough coal at Leigh Creek for at least another couple of centuries, but our oil imports can be cut off at any time.

    We have a Queensland state election on 25 Nov 17. The ruling Labor government advocates 50% renewables. I think I’ll put them second last on the ballot. The Greens always go last, of course.