Manuel Bartlett is the corrupt head of CFE, Mexico’s state electricity company. He hates renewables. So he’s trying to kill it with the support of Mexico’s president. From the man himself: “Wind and photovoltaic (plants) don’t pay the CFE for the backup. Do you think it’s fair for the CFE to subsidize these companies that don’t produce power all day? That’s not a free market, it’s theft!”
Do his arguments make sense?
Let’s unpack them. The first argument is that any firm feeding electricity into the grid should pay to transmit the electricity. The second argument is that renewables aren’t on all the time, so somebody has to have backup generators in place and that somebody should get paid.
The first argument makes little sense. Cenace, the organization that runs the grid (owned by CFE) charges rates to feed in power. Maybe they should be higher for everyone, maybe not, but it isn’t a reason to discriminate.
There is a technical argument that intermittent power sources raise transmission costs. That technical arguments have been solved. First, the more intermittents you have on the grid, the more predictable it is. Second, weather forecasts are pretty good these days. Third, getting “reactive power“ into the grid when needed is not particularly expensive or difficult. ERCOT, the Texas grid operator, found that you needed capacity about 0.1% of intermittent capacity to maintain grid stability. Internationally, there’s no relationship between the penetration of intermittent power sources and grid stability. Why? Well ... natural gas plants go offline all the time! California’s crisis in 2015 was caused by a leak at a gas storage facility in Aliso Canyon.
So that’s a nothingburger. But what about the fact that somebody has to keep the lights on when the sun isn’t shining and the wind isn’t blowing?
That could be a problem. Dispatchable power sources (i.e., ones you can turn on and off at will) suffer cycling costs, the same way that turning a lightbulb on and off every few minutes will raise power use and lower lightbulb life. It’s certainly a problem for CFE! The good news for CFE is that CCGT natural gas plants have relatively low cycling costs. The bad news is that you’ll run them less because solar and wind will eat their lunch during sunny and windy times. CFE will be able to charge a little more but that won’t make up for the loss of business and there will be some increase in cycling costs.
In short, Bartlett’s argument comes down to the fact that cheap solar and wind isn’t just cheaper than burning hydrocarbons, it also raises the cost of burning hydrocarbons.
But so what?
Imagine: A cheap airline comes in on a popular route. It steals away passengers from legacy airlines. The legacy airlines’ costs rise b/c they have stranded assets (unused planes) and high fixed costs. So prices on routes operated only by the legacy carriers rise a bit. Would you for that ban low-cost airlines? Or throw a tax on them? Or limit their landing slots? If your answer is no, then you think Bartlett is full of it.
Yes, CFE has a mandate to keep the lights on. No, it’s not like they’d just turn off their power plants at night if that mandate didn’t exist. They want to make money. Prices will go up for baseload power and CFE will stay in business. It is remotely possible that Mexican electricity consumers will wind up paying so much for baseload power that net electricity prices will rise. Well, remotely possible other than the fact that it hasn’t happened anywhere else. (A decade ago Spain and Germany ran into problems with rising electricity costs because they oversubsidized solar power. But solar power was a lot more expensive back then.)
The whole thing makes me sad, because I thought AMLO could have been a great president. Instead he’s bad for the Mexicans alive today and very bad for everyone who will be alive in the future. Future generations will revile him. The only reason he won’t be reviled around the world is because Mexico is small and George W. Bush and Donald Trump will outshine him as historical global warming villians.
Once upon a time, back in 2008, I sarcastically joked that (then citizen) AMLO’s terrible energy policy would be good for the world because it would lead Mexico to produce less hydrocarbons and that’s a good thing. What I never expected is that AMLO wouldn’t just want to hobble private hydrocarbon production, he’d also try to hobble anyone who wants to produce electricity without setting anything on fire.
Anyway, there you have it. Bartlett’s argument has nothing to do with Mexican consumers, who will benefit from cheap solar and wind. Nor does it have to do with keeping the lights on, which is easy to do. It’s just about keeping out cheap competition to benefit CFE.
The real question is why he feels so strongly about helping CFE and burning Mexican oil. Any answers to that would be greatly appreciated ....
Recent Comments