Strangely, Power Company Rebates Make Sense
Posted by Max Dunn Wed, 23 Jan 2008 01:17:00 GMT
It seems awfully strange that a company that sells power would subsidize compact fluorescent lights (CFLs) that use less energy, and give rebates for energy efficient appliances. This would be like Starbucks giving awards to people who cut down on their coffee drinking! But even though this seems strange, power companies trying to cut power consumption actually makes sense.
The first thing to realize is that power demand peaks during the day, and goes down considerably at night, especially during the summer [1]. Nuclear plants are run at full capacity all the time [1] so this leaves fossil-fuel plants that can be turned on and off to adjust for changes in demand. But coal-fired power plants in particular are not very efficient when run at less than full capacity or when turning on and off. [4] [5] Also, over half the cost of a coal-fired power plant is in capital costs, [6] so it makes sense to run it as much as possible.
Solar is one technology that actually helps peaks production close to when it is needed. Wind, on the other hand, peaks in the evening so very little of of its maximum capacity can be counted on during peak hours [2][3]. In any event, none of the alternate energy sources contribute very much to the power grid.
So how will power companies meet the increasing demand for peak power, especially in the summer months? They could build new coal-fired power plants, but a 500Mw plant will cost over a billion dollars and will only be needed a small part of the time. For intermittent use, natural gas plants are better, but these are also very expensive to build and it still doesn’t make sense to run them only infrequently.
Since almost all power companies in the U.S. are regulated and have to sell power at pre-determined prices, they don’t want to build new power plants. Instead, it is more profitable for them to try and get everyone to reduce the energy used by subsidizing CFLs and energy efficient appliances. In particular, they would love to cut down on air-conditioning usage which is the main cause of incremental power consumption at the peak times in the summer.
[1] California ISO: 2007 Summer Load and Resource Operations Assessment (Page 10)
[2] Above, Page 11
[3] Above, page 52, Santa Clara Wind Project
[4] Boiler Operation Engineering: Question & Answers (Page 99)