The Death Spiral of the Utilities Starts in Hawaii

[kristopher]

5. You bet they mind.

Virtually all utilities are invested in large scale thermal power plants - commonly called 'base load" plants - that are designed to run 24/7. Many of them depend on selling into two different kinds of markets to meet their expenses; they throttle back at night sell their production by long term contract, and then during the day they crank it up and sell into the short term (hour or day ahead) market where the power is much more expensive. The bid they place is based on their fuel costs, with the grid operator stacking bids from lowest to highest until they hit the amount of power they solicited bids for. Whatever the value of the final bid, that is the price that all lower bidders also receive.

Since wind and solar have no fuel costs they are bidding into the same market and driving down the amount paid to the generators for the power and the large generators are finding it increasingly difficult to meet their expenses. Cheap natural gas prices are also a big factor, but where wind and solar are plentiful during the day, it is especially bad.