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09 June 2010

Is There Such A Thing As Free Electricity

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When we pay our electricity bill, we are paying for more than just the operation of wind turbinesor nuclear power stations.

What with rental for the electricity meter, costs for using the power grids, value-added tax and a tax on electricity, coupled with a surcharge for the preferred sourcing of green power, the final price we pay is effectively double the generation cost.
Having said that, is it conceivable that there is such a thing as free electricity in the ever more dynamic power market?

The answer is yes - there is actually electricity that the power grid operators have to pay for, to get rid of it. The European Energy Exchange (EEZ) in Leipzig makes this possible. In the past year alone, short-term power surpluses have actually pushed electricity prices into the red on 18 occasions.

Due to an absence of feedback control mechanisms, coal-fired and nuclear power stations experienced periods of surplus supply at times of low demand that coincided with favourable weather conditions for the production of wind power.

However, since the power grid is unable to store electricity, this surplus power still had to be used to assure stable operation of the system. The outcome was that power grid operators contributed up to 13 Eurocents per kilowatt-hour to encourage major industrial companies to use the surplus electricity.

The real winners in this scenario were the operators of pumped-storage power stations, a fair number of which are based in Austria. With this 'free' power, they are able to pump water up into their reservoirs, and then release it back through their turbines at times of peak demand and high prices.

Despite the fact that it is left to German electricity customers to pick up the costs for this, free electricity is not in any way an alarming event. "Negative electricity prices are the logical consequence of market behaviour," states Kurt Rohrig from IWES, the Fraunhofer Institute of Wind Energy and Energy System Technology, based in Kassel.

Due to the fact that, since the early part of this year, wind and solar power are being traded more frequently at Leipzig's Energy Exchange, periods where prices have a negative value could occur more often through 2010 - an unmistakable indicator of the fact that existing power lines are no longer able to cope with rising requirements.


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