Electricity Basics (and some advanced)

I received my second request for a post! This time the submitter asks for information about electricity, transmission, and how intermittent renewables like wind and solar fit in.

So, the first question:

1. Electricity, for the most part needs needs to be consumed the instant it is produced?

Yes. Storage of electricity can be done in batteries, or with pumped-water energy storage, but these are all just ways of being able to make electricity at some moment later in time. In short, electricity, once produced, is either used immediately or stored. Massive storage is not practical at the moment, so it's used.

2. Wind or Solar electricity is essentially in addition or parallel to the base load, and do little to lessen the use of coal, NG, or nuclear derived electricity!

This bring up an interesting point about electricity production. In the US, we have 60hz electricity. It's made 60hz by the generator design (in the US, Europe and other places use 50Hz power). Thermal power plants, those that burn things to produce power, rely on spinning a turbine in a magnetic field to produce power. The magnetic field is part of the turbine design, and is too complicated for this post to discuss in further detail. The turbine is spun because water, turned into steam by the heat from burning things or other reactions (coal, natural gas, or even heat from fission), expands rapidly from water to steam. It creates pressure, and then pushes through the turbines to spin them. The turbines spin at the exact rate they need to in order to produce 60hz electricity.

If we produce slightly too much electricity, the turbines start spinning slightly faster. To keep the grid at the right speed, electricity production is reduced at plants. If there is too little electricity, the turbines will slow down, and we'll fall below 60hz. There is a constant dance of the power plants and the electricity users to make everything balance. It's mostly automated, and happens very quickly.

What does this have to do with solar and wind? A lot. Solar and wind power output can be predicted, but not perfectly. If we want to maintain a perfect 60hz grid, we need to be able to adjust for wind and solar output. Because, again, electricity is used when it is made, and not stored. Coal and nuclear power plants aren't great at changing how much electricity they produce in a short timescale, so if we are going to have power plants to make the balance necessary, we need hydro and natural gas to account for the variability of the solar and wind. There isn't enough hydro to do that all over the country.

In  other words, if we want to maintain a 60hz grid, we are always going to have some amount of natural gas power plants.

But beyond that little wrinkle, solar and wind power absolutely offset coal-fired power plants. The more solar and wind we have, the less nuclear and fossil fuel power we need, in general.

In practice, do renewables offset much? See the chart below.

US primary energy consumption. Source: eia.gov info

Short version: Wind was about 1.2% of primary energy (primary energy counts burning oil for cars as well), and solar is 0.16%. So wind and solar can replace coal and nuclear, but it barely does currently.

Longer version: We can let the 60hz grid go from exactly 60hz to let it slide between 58 and 62. And then we can fairly easily do away with a lot of other power plants, as long as we have enough wind and solar. Note, however, that there aren't enough good wind sites in the US for this, and solar is currently too expensive and resource-demanding to replace fossil fuels.

3. Electricity is bought and sold just like a commodity?

In some ways, yes, but not exactly! There is a complicated daily bidding process, and several factors are brought into play.

This one is a bit confusing. I'll do my best. Power plants bid on the day-ahead market. They submit their bids to what is typically called an ISO, for Independent System Operator (some places call it differently, like RTO for Regional Transmission Organization. The ISO/RTO looks at the bids, looks at their best guess for power the next day, and then figures out how many of the power plants they need to hire for the day. Those that don't get hired don't actually burn anything or produce power. Those that do get hired, get hired at the rate of the highest bidder. Let's do an example to explain better.

Note that a MWh is one hour of one MW production. So a 600MW plant produces 600MWh in one our, and 1800MWh in 3 hours.

A plant says, "I can produce this many megawatts at this many dollars per megawatt." Power Plant 1 might say, "I can produce 600MW of coal power at $80/MWh." Power Plant 2, "I can produce 1000MW of natural gas power at $100/MWh." Power plant 3, a nuclear power plant, doesn't shut down. They just keep running. They say, "I can produce 1200MW at $0/MWh." Why? Cause they have to run anyways. They are delivering that power at any price. Power plant 4 is an old coal-fired power plant that has already paid for itself, so it's really cheap, and says, "I can provide 300MW at $50/MWh"

Let's assume it is determined that all of the less expensive power plants, along with Power Plant 2, need to run in order to satisfy electricity demand. They want $100/MWh. Power plant 1, despite bidding in at $80 per MWh, gets $100/MWh, nuclear plant 3 also gets $100/MWh, and coal plant 4 also gets $100/MWh.

On another day, it is determined that only enough electricity is needed for power plant 4 (and all the ones who bid below it). So Power plants 1 and 2 do not produce electricity, power plants 3 and 4 each get $50/MWh.

Should inputs become more expensive, then the power plant has to raise its price. Natural gas, for example, became a lot less expensive in the past 5 years. So they now produce electricity for less than a new coal fired power plant would. So they bid in for less.

A bit confusing, right? It gets more complicated than that. This is a great example to show that electricity is not exactly treated like a commodity.

Now what about solar and wind? Pretty much, if solar and wind is produced in the US, it is purchased, pretty much outside the normal bidding system. What happens to the bidding system if all power becomes solar and wind? There probably will still be some version of it, changed to fit the new system!

That's all for now, thanks for reading!

- Jason Munster

Power Grid

I was struggling to write a post about PV solar panels (the struggling part came in while trying to describe the quantum mechanics that take place), and realized that I need to describe how our power grid works in far greater detail than I had before. What follows is the gory details about how power is transmitted to your home. This is important because while solar power costs 5x as much as coal on the wholesale market, it only costs about 2x as much as coal at your house. Sometimes less. This is because coal-powered electricity is wheeled and dealed through several players as it reaches you, and is marked up every time. Solar power dumps straight into your home. Some of you are gonna love this article, others have already closed it.


On a logistical note, I haven't posted in the last two weeks cause I am too busy with life things to write both the blog and play computer games. Computer games sometimes win out. Thanks, X-Com: Enemy Unknown.

Generators, LSEs, Home Energy

Generators are all the different types of power plants we have discussed. They produce power, and in a deregulated market, sell the power to the grid. They are given a price based on demand. We have discussed how each power plant will "bid in" a day ahead and say how much power they can produce at which prices. As more power is demanded, the price will rise to bring more expensive power online. No matter what the power plant bids in, if they are online, they will get the per-MWh payment of the most expensive plant to come online. In other words, the marginal cost of energy production is what each power plant gets paid per MWh. If an expensive power plant is brought on-line for $1000/MWh, for instance, every single plant that is operating will receive that.

Okay, we have also seen the cost to produce power in several posts. It makes sense to repeat it here.

Dispatchable Technologies
Conventional Coal 85 65.7 4.1 29.2 1.2 100.1
Advanced Coal 85 84.4 6.8 30.7 1.2 123.0
Advanced Coal with CCS 85 88.4 8.8 37.2 1.2 135.5
Natural Gas-fired
Conventional Combined Cycle 87 15.8 1.7 48.4 1.2 67.1
Advanced Combined Cycle 87 17.4 2.0 45.0 1.2 65.6
Advanced CC with CCS 87 34.0 4.1 54.1 1.2 93.4
Conventional Combustion Turbine 30 44.2 2.7 80.0 3.4 130.3
Advanced Combustion Turbine 30 30.4 2.6 68.2 3.4 104.6
Advanced Nuclear 90 83.4 11.6 12.3 1.1 108.4
Geothermal 92 76.2 12.0 0.0 1.4 89.6
Biomass 83 53.2 14.3 42.3 1.2 111.0
Non-Dispatchable Technologies
Wind 34 70.3 13.1 0.0 3.2 86.6
Wind-Offshore 37 193.4 22.4 0.0 5.7 221.5
Solar PV1 25 130.4 9.9 0.0 4.0 144.3
Solar Thermal 20 214.2 41.4 0.0 5.9 261.5
Hydro2 52 78.1 4.1 6.1 2.0 90.3

So the cost to produce is the total system levelized cost (and now you should realize that producing power for $1000/MWh is ridiculously high. Except it has happened recently and momentarily in New England).

People at home don't see the price that a generator gets. Do you notice that you pay about 20 cents per KWh in MA (I use MA cause apparently all my readers are here), it is $200 per MWh. What gives? All these power plants are producing power for way less than that. Except for solar thermal and offshore wind, which both suck and are expensive.

The reason for this is that home/commercial retailers do not buy from the generators and from the wholesale market. Things called Load Serving Entities (LSEs) buy from the wholesale market. Often they will just be your utility company. They then distribute it to end-users or to other complicated things that we don't care about. The end users are your households and commercial things like shopping malls and stores and offices.

Sidebar: One important thing to note is that industry usually buys directly from generators. So while we pay $200/MWh for electricity, a Ford power plant might pay $60/MWh. This has implications that we will discuss later.

So, the LSE buys electricity off the wholesale market. And then marks it up and sells it to consumers. That is why you pay $200/MWh.

RTOs, system management

This section is getting specific, some of you may want to skip to the end of the article, the implications part.

Who tells generators when to come online and manages the wholesale market? Regional Transmission Operators. In New England, our RTO is called ISO-NE, for Independent System Operator of New England. They take bids and determine which power plants produce. They have important things to consider, like making sure a regional power line isn't too congested.

Line Losses

Nearly all power lines lose a percentage of their power as heat. Transmitting long distances loses around 8% of power. This is because there is always some resistance to the flow of electricity. It is like friction for the flowing of electrons. Power lines also have a limit to how much power can flow through them. If you try to go past the limit, they heat up rapidly and lose a ton of power.

The latter is something that the RTOs manage, to make sure that there won't be problems. The former has massive implications for renewable energy. Most of our renewable energy is wind and solar. Like wind in the sparsely populated midwest. And solar in completely unpopulated deserts. Transmitting this power to cities incurs huge line losses. With current capabilities, transmitting power from Iowa wind farms to NYC would make power more expensive than just building the wind farm near NYC, despite that wind in NY sucks (heh, punny). I don't have a source for this, I just saw it at a talk at Harvard.

Implications for installing renewables at home, commercially, and in industry


We pay $200 per MWh of power as residents in Boston. Solar PV in the best cases is $144. This will be in deserts. In MA, we don't get as much sunlight. But for the sake of argument, lets say that the average cost of solar in MA comes out to be $200-$250. With subsidies, it will be less. So would you pay $200 per MWh from your utility, or $200 per MWh to produce your own energy and stick it to the man? Also your own power would be clean, with far less CO2. With subsidies available in places like MA and NJ, solar comes out to less than $200/MWh at home.

Next lets consider commercial places. They also buy from LSEs. This is why you see a ton of them building solar panels. It makes sense economically and gives them a good vibe that the public likes.

Finally, let's consider industry. They buy directly from the wholesale market. So they pay closer to $100/MWh. They won't give two shits about renewables. Because they won't save money by installing renewables on their sites.

And this, my friends, is the trend we see. On-site renewables are adopted by commercial real estate and by residents, and industry is highly unlikely to ever embrace it. Interesting, eh?

Thanks for reading!

-Jason Munster