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Texas ice storm ‘led to $4 bn loss for wind farms’
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ArcVera Renewables, a prominent international provider of consulting and technical services for wind, solar, and storage projects, has published its report ‘ERCOT Market Cold Weather Failure 10-19 February 2021: Wind Energy Financial Losses and Corrective Actions’ which points to shortcomings in the financial structures that led to significant losses for wind farm operators and gains for counterparties. The study set out to quantify the lost energy production, and calculate the financial impact of the rare Texas winter weather event. It focused on wind farm outages reported by the Electric Reliability Council of Texas (ERCOT), the grid operator, for the period 14-19 February 2021, when the grid experienced extensive wind farm downtime, lost energy production, and high hub-settled electricity prices. Three re-pricing scenarios are evaluated in the study using market pricing before the imposition of $9000/MWh prices by ERCOT. “Given that the market demand was decreased by ERCOT with blackouts so that production balanced that reduced demand with market prices high but not near the $9000/MWh imposed value, we consider that the $9000/MWh ERCOT mandate could have imposed large, and quite possibly artificial, financial impacts (windfalls and losses) on wind energy power plant operators and investors”, said Dr Gregory S. Poulos, ArcVera Renewables CEO, Principal Atmospheric Scientist, and author of the report.
“With more installed wind capacity than any other state in the United States and its projections for renewable energy capacity to
dominate ERCOT generating capacity within a decade, we believe that ERCOT must now more stringently apply atmospheric science-based risk assessment, particularly concerning extreme weather operational scenarios. Renewable energy production is governed by the weather. Peak electricity demand scenarios are also governed by weather, such as high and low-temperature events. This being so, there is a clear need for restructuring electricity system resilience to account for weather-driven production and demand, concomitant with the pace of the transition to renewable energy- dominated production,” commented Dr Poulos. The icy weather conditions and an unprecedented period of below-freezing temperatures caused extensive wind farm downtime. The study analyses the outage periods documented by ERCOT for 191 wind farm units, with a nominal capacity of 21 888 MW, of which 57% (12 495 MW) is subject to a hedged financial structure.
The findings of the study show that the lost energy production from wind farms, aggregating individual wind farm results, was 629 700 MWh with a financial impact of this lost production, whether the financial loss to the owner or gain by others, estimated at $4.18 billion This represents an average financial impact on any project of $44.4 million. For hedged projects, the financial impact of this lost proxy production is even greater, with an average financial impact of $45.4m. The study makes three assessments:
● Hedged financial structures in ERCOT need to properly reflect realistic meteorological conditions, extreme weather stress tests,
and, therefore, more realistic production assurances.
● Hedged products need to recalibrate their strike prices to reflect the asymmetric risks presented by the availability of different resources during extreme electricity demand, ERCOT minimum and maximum prices, and market interventions by regulators.
● Wind farm owners and their hedge counterparties need to partner with turbine OEMs to develop reliable, cost-effective weatherization technologies to reduce the asymmetric risks from future icing events. “Our observations, taken together, clearly describe a condition where, with greater attention to the atmospheric science details when assessing the risks of weather-driven electricity production and demand, an adequately resilient and interconnected ERCOT electricity system can be created. ERCOT planning should consider that cold-weather events worse than the recent February 10-19, 2021 event are possible.” Dr Poulos concluded. Having worked on ERCOT measurements and detailed wind energy resource assessment for more than 20 years, ArcVera has evaluated hundreds of wind farms in ERCOT development and amassed in-depth knowledge of wind behaviour across the grid operators ERCOT’s vast expanse of wind farms. Combining its data with decades of atmospheric science and engineering experience, ArcVera has devised a method to determine materially accurate estimates of net energy production at the wind farms that experienced outages during the event.
Hexicon to acquire Wave Hub test site
UK Wind power Hexicon, a Swedish company that develops floating wind farms, is to acquire the Wave Hub offshore renewable energy test site in Cornwall, South West England. The deal, which is expected to complete at the end of May, will see Hexicon through its UK subsidiary, TwinHub, acquire the assets of Wave Hub Ltd from local authority, Cornwall Council, for an undisclosed sum. Hexicon intends to develop the site for a 30- 40 MW floating offshore wind project and deploy their innovative twin-turbine floating foundation.
The team will establish how the technology could be brought to market, and explore the roles that local suppliers could play during investigative works, in fabrication and assembly, mooring, and installations, as well
as serving the long-term needs of the floating offshore wind industry. Power could be delivered by 2025. Hexicon is working with engineering major Bechtel. The project will be seen as a coup for
the Cornwall authorities. The county has a significant offshore renewable energy supply chain and has worked hard to position the maritime region as a base for floating offshore wind projects in the Celtic Sea, where The Crown Estate recently announced its intention to deliver a new floating wind leasing opportunity for projects of around 300 MW.
The deal does not include Wave Hub
Development Services. Cornwall Council will retain this as a wholly-owned business, to provide support to the TwinHub project and other Celtic Sea deployments.
Wave Hub Ltd’s assets include a 30 MW grid-connection and agreement with Western Power Distribution (expandable to 40 MW); a four-way seabed hub 16 km offshore and four inter array cables; an onshore sub-station and related land; and a consent over eight square kilometres of sea with water depths of between 51m and 57m, with one of the best offshore wind resources in Europe.
6 | May 2021 |
www.modernpowersystems.com
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