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Comment by jobu | Hacker News Reader

Unlike carbon-based power, Mr. Kava said, wind supply prices do not fluctuate, enabling Google to plan better.

Can someone explain this? It seems like wind energy prices should fluctuate based on weather patterns (more wind == lower prices).

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Once you spend the capital on wind turbine hardware and infrastructure, the price of your energy generation is fairly constant. Price on energy supply from fossil fuels always depends on the fluctuating price of those fuels, which introduces uncertainties to future costs of energy.

Price = where supply and demand cross. If there's no wind, supply goes down, so with constant demand prices will go up! That's disregarding second-order effects (e.g. other providers marking up their prices to make bigger profits, or the wind-power provider increasing its prices in the future to make up for the lost income and provide a nice return on investment).

You can predict the supply of wind, as an average over a long enough period of time, much more easily than you can predict the supply of oil.

"You can predict the supply of wind, as an average over a long enough period of time, much more easily than you can predict the supply of oil."

Over the long haul, yes, but in real-time - no. And electricity prices to fluctuate a lot over days, weeks etc..

But indicating that 'price stability' is a point for green is not really fair, when it's almost always going to be considerably more expensive.

Knowing that something is going to be 'consistent, and consistently more expensive', I don't think is a good argument for green.

There are other, better arguments.

> Over the long haul, yes, but in real-time - no. And electricity prices to fluctuate a lot over days, weeks etc..

You'd deal with this the same way you deal with it in every other commodity market, futures contracts.

Yes, of course, but a futures contract definitely adds cost, is my point.

Google is in effect doing the same thing as 'buying a future' and it's unreasonable for him to make the argument that this is 'inherently a better thing about green'.

I could buy a futures contract for Oil today and would it be fair for me to say 'Oil is has more stability in prices'?

The difference is you know the supply of wind. It fluctuates with the weather, but on average you know if you have X windmills you'll have Y joules, the risk in future contracts is a lot smaller, and priced accordingly. The oil supply is a lot more complicated, and the risk priced into future contracts is priced accordingly.

Ok, I see that.

But Oil shouldn't fluctuate too-too far between $50 and $120 a barrel. And that's just the raw costs. With all other components, which costs will be more fixed, the actual end price of fuel should not change more than 40% in either direction, max.

I'd argue that the greatly varying costs of wind installations, aggregate availability, huge one: supply and demand for electricity overall, specifically for renewable electricity - regulator changes, improvements in technology - definitely create a situation wherein the 'end cost' of renewable electricity is somewhere in the range of the variability for fuel produced by other means.

Wind power is already cheaper than coal, at least in Australia, even when you ignore the cost of building the coal plant (it's been way cheaper for a long time if you factor in the initial construction cost), and solar will soon reach the same crossover point.

But will that prediction enable you to scale demand? With increasing hardware lifecycles, it might one day be economic for a global like Google to overprovision datacenters enough to be able to shift compute load to wherever intermittent energy is available. Requests can be routed over much longer distances than energy. But I suspect that Moore's law just isn't dead enough yet to make it economical to keep large datacenters offline just to wait for locally favorable energy prices. And on this scale, economical is a pretty good first approximation of ecological.

There are a lot of people selling and buying oil, thus changing the price every second. But there's no person looking at the wind and wager at what the "wind price" would be! You can never change your price if you wrote it in the CONTRACT, Google would be stupid if they don't cover it in the contract and let their Wind Farm builder change the price, because it makes zero sense.

" But there's no person looking at the wind and wager at what the "wind price" would be!"

Uh, sure there are, they are wagering on weather, which is a very common thing to do in various commodities markets.

> There are a lot of people selling and buying oil, thus changing the price every second.

I have never heard before a theory that greater market participants necessarily increase volatility. Can you cite a source for this please?

Wind farms are almost always constructed with Power Purchase Agreements where utilities agree to buy 100% of the output from the installation at a specific price. These prices in Texas / Oklahoma / Iowa are usually under $0.03/kWh.

From a long-term point of view, the cost of the wind energy is just the depreciation of the turbines plus the maintenance costs on the farm. Those two dollar inputs will create a fairly predictable number of kilowatt hours output. The problem of getting those kwh when you want/need them is one of selling into the grid when you have them and buying out when you need them, but I guess from the point of view of Google, they are calculating: we will consume X kwh, so we need to build X khw, and wind provides a very predictable source of those kwh. Macro vs micro.

> From a long-term point of view, the cost of the wind energy is just the depreciation of the turbines plus the maintenance costs on the farm.

A minor detail, but don't forget the cost of transmission. My understanding is that the US has massive wind energy potential (http://www.nrel.gov/gis/images/30m_US_Wind.jpg and http://www.nrel.gov/gis/images/80m_wind/USwind300dpe4-11.jpg) but it's not necessarily near the most densly populated regions. Building and maintaining these transmission corridors is not an insubstantial cost.

Theyre writing long term contracts for power production which provide a fixed price for the resource developers and by consequence provide them with a fixed cost.

Typically, these types of contracts, providing price certainty, are required to build develop new renewable assets.

This. Price doesn't fluctuate for the purposes of this article because they've bought a minimum amount of electricity for a fixed price over time. (not because price of wind power never fluctuates)

Similar pegged pricing can be achieved if you trade futures to hedge your price but typically this is only achievable year to year and difficult to do with electricity as it can come from so many different sources and hedging against them all may be difficult. Perhaps there's a megawatt future out there?

EDIT: Yup - regionally-based electricity price hedge. Cool! http://www.cmegroup.com/trading/energy/#electricity

This is the correct answer. Price hedging is a typical feature of corporate PPAs (power purchase agreements). The aim is to reduce risk for both parties. All the other answers here are speculating without knowing how corporate energy procurement works.

It seems the author is using the phrase "do not fluctuate" to explain wind supply prices in the same way most people think, or assume, the value of the dollar does not fluctuate.

Everything fluctuates, but some things are less prone to wild fluctuation, by quite a large margin.

I think that statement makes sense in the context of the fossil fuel markets.

As others have mentioned, it is a narrow definition. The idea is that the only fluctuations occur due to uncontrollable factors (weather) which, in all fairness, do impact carbon-based power too (to varying degrees).

So a war in the middle east or a trade embargo won't impact the price per kwhr. Whereas a tornado would impact both wind and oil (even if just by slowing down the deliveries).

I would argue that wind (and solar (not so much hydro)) are much more susceptible to weather impact, but with sufficiently large capacitors/batteries that can be minimized.

Weather fluctuates, but climate is relatively stable. As long as you have some kind of storage and base-load supply, you can plan yearly wind-power usage based more around climate than weather, at least to my understanding.

this has much more to do with the locked in rate utilities/the state demands when Distributed Generation (like wind and solar) are feeding into the grid. 'wind energy prices' is vague - not sure if it is getting at the relatively low fluctuating cost of standing up a turbine, OR the flat rate wind suppliers are paid for generation (like google)

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