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Wind Energy Cost: Think Again ($0.15/kWh wholesale prohibitively expensive)

“Once these hidden costs [of windpower] are included and subsidies are excluded, wind generation is not close to being competitive with conventional generation sources such as natural gas, coal or nuclear.”

- George Taylor, quoted below.

“However, to meet the 33% RPS, technical studies show ramp rates may triple, which is not possible for the [California] ISO’s conventional generation as configured today.”

- Clyde Loutan (Senior Advisor, CaISO), “How Intermittent Renewables Impact CallSO.”

George Taylor and I have published a new study for the American Tradition Institute (ATI) that finds that on a full cost basis, wind electricity is nearly twice as expensive as what is typically reported. “The Hidden Costs of Wind Electricityprovides an analysis of three major costs that past estimates have ignored.

“The costs that have been left out of previous reports are the costs of paying for the fossil-fired plants that must balance wind’s variations, the inefficiencies that wind imposes on those plants, and the cost of longer-distance transmission,” said Taylor in ATI’s press release.  “Once these hidden costs are included and subsidies are excluded, wind generation is not close to being competitive with conventional generation sources such as natural gas, coal or nuclear.”

Adding a conservative estimate of the hidden but real costs to the Energy Information Administration’s (EIA’s) and the Office of Energy Efficiency and Renewable Energy’s most recent generation-cost reports increases wind’s projected cost from 8 cents to 15 cents per kilowatt-hour (kWh).

AWEA’s Rebuttal: Misdirection I

Taylor and I summarized our findings in the Washington Times opinion-page editorial, “Blow off wind-production tax credit” (December 19, 2012). We described the Production Tax Credit (PTC) as a bad deal, imposing additional costs on consumers and taxpayers with no offsetting benefits.

Unsurprisingly, AWEA spokesman David Ward repeated some industry falsehoods in rebuttal to our piece. His assertions (in blue) are followed by my rebuttal.

“Adding wind energy to the grid does not cause any need for new power plant capacity,” he stated, “as grid operators can readily use the existing reserve power plants that they already use to accommodate large fluctuations in electricity demand as well as sudden failures of large fossil and nuclear power plants.”

Putting aside for the moment our report specifically noted that wind to-date has been able to ‘piggy back’ on the existing infrastructure (albeit with imposed costs to that infrastructure), going forward with even more undependable wind would further exacerbate an un-economic situation.

California needs additional capacity precisely to accommodate its growing wind population. As reported by Reuters, California is having to sign contracts for capacity ahead of when otherwise needed, partly due to retiring facilities. The existing reserves will soon be inadequate.

The contracts being signed provide capacity, something absolutely crucial to grid reliability that wind facilities cannot provide. While all generation is ‘back-upped’ by other facilities on the grid, wind requires but does not provide any backup to others. It is, somewhat uniquely, a parasitic resource.

“Data from the California grid operator confirms that the state can obtain 33% of its electricity from renewables without any increase in the state’s need for power plant capacity, and that the reserve generation needed to reliably accommodate large fossil and nuclear power plants is a dozen times larger than the reserves that would be needed to integrate 33% renewables.”

Actually, Senior Advisor to the California grid operator Clyde Loutan has stated pretty clearly that additional capacity is needed to accommodate 33% renewables. “To meet the 33% RPS, technical studies show ramp rates may triple, which is not possible for the ISO’s conventional generation as configured today.” Loutan thinks the need for flexible conventional generation going forward cannot be overstated.

“Similarly, the Midwest grid operator has said on numerous occasions that it has been able to reliably integrate 10,000 MW of wind generation without any discernible increase in its need for reserve generation….”

Once again, Mr. Ward spins a story here. The Midwest ISO is one of the largest interconnected grids able to call on reserves over a large area, including from neighboring control areas. While wind has not yet forced the Midwest ISO to increase reserves, it has had to call on those reserves that already exist more often. That will further degrade with increasing amounts of wind.

As the amount of wind increases, wind’s capacity credit (contribution to maintaining reliability) decreases according to MISO in their loss of load studies, with each increment of wind providing less and less capacity. With a current planning reserve margin of about 14.5 % this is not currently a big issue, but as loads grow that reserve margin will shrink without additional capacity resources.

AWEA’s Rebuttal: Misdirection II

The findings of our report were described in Forbes by Chris Helman. Again unsurprisingly AWEA took offense, this time by Michal Coggin, AWEA’s Manager of Transmission Policy.

Mr. Coggin referred to his own blog that “debunks” George’s and my study. However, either because he failed to read our study or simply misunderstood it, he cites various power purchases that ‘show’ wind is competitive.

Coggin completely misses the difference between price and cost. It is just like buying mail order where the catalog price is only part of the total cost. What may appear to be a good deal pales when you must also pay for shipping and handling, especially when shipping and handling are as much as the stand-alone price. The hidden costs we quantified represent those shipping and handing costs.

Conclusion

Because wind is an intermittent source of electricity, it needs appropriate amounts of fossil-fueled capacity ready at all times to balance its large and rapid variations. Those primary fossil plants then operate less efficiently than if they were running full-time without wind, meaning that any savings of gas and coal or any reductions in emissions are much less than simple calculations would indicate, even if they are producing fewer kilowatt hours.

All this means higher costs for consumers, even if they don’t see it.

————–

Tom Tanton is executive director and director of science & technology assessment at the American Tradition Institute (ATI). Dr. Taylor is senior fellow at ATI and executive director of Palmetto Energy Research, an educational nonprofit which has focused on the cost and environmental impact of the leading alternatives for electrical generation.

13 comments

1 Tom Adams { 01.08.13 at 8:38 am }

Tanton’s makes a particularly insightful point about wind power’s impact on reserves that deserves emphasis: “wind requires but does not provide any backup to other (generators).”

A related point is that because geographic diversity provides almost no smoothing of wind output, all interconnected wind capacity should be considered for the purposes of reliability analysis as effectively one single generating unit. Analyzing wind power’s reliability impacts on the basis of NERC control areas is not good enough. The performance of the wind fleet in one control area is highly synchronized — at the granularity down to an hour or less — with the performance of the wind fleet in adjacent control areas.

As wind capacity expands, the need for loads to become more involved in providing ancillary services seems likely to increase. Consumers unable to operate in ancillary services markets are going to bear a greater burden.

2 Eddie Devere { 01.08.13 at 9:25 am }

It would be nice if gov’t agencies like the EIA didn’t mislead people by placing intermittent sources of electricity (like wind/solar) into the same analysis as baseload power plants. (See the 2012 EIA report or earlier reports. http://www.eia.gov/forecasts/aeo/electricity_generation.cfm)

Different types of power plants create different types of electricity: intermittent, baseload, peak-following, & stand-by, to name a few. Comparing between these types of electricity is like comparing between a Porsche and Pinto. (Clearly, I’ll willing to pay more for the Porsche than for the Pinto even if they both get me to work. In this analogy, the Porsche is the peak-following electricity plant and the Pinto is the wind turbine.)

I’ve done some quick calculations for the levelized cost of wind with enough electricity storage to be able to follow load-demand. In that case, the average levelized cost of the wind turbine and electricity storage is between $250 and $350 per MWh…not the $96 per MWh if you only include the cost of the wind turbine (as suggested by the EIA.) The value of $250 to $350 that I calculated depends on the wind speed and wind variability of one’s region.

In other words, to compare apples with apples, one really needs to include the cost of electricity storage along with the cost of the wind turbine; and the cost of the electricity storage is larger than the cost of the wind turbines themselves. All in all, the cost of wind with electricity storage is roughly 4 to 6 times more expensive than a peak-following NGCC power plant. Now, you can make a fair comparison: a Porsche that costs $100k versus a Porsche that costs $500k. You should always choose the $100k Porsche.

Has Master Resource done a calculation of the cost of “wind w/ electricity storage’ ?

If the environmental movement really wants to have a renewable electricity source, we should not allow them to use the fossil fuel infrastructure to pick up the slack when the wind doesn’t blow. It doesn’t seem fair that others have to pick up the slack. It’s like turning fossil fuel power plants into indentured servants for the wind industry.
And beyond that, we shouldn’t sell the wind industry any electricity to use in their factories that has been generated from fossil fuels.
Let’s call their bluff. Let’s force the environmental movement to make wind turbines and solar panels that truly are renewable; and we can do this by not selling them any natural gas, oil, coal or fossil-fuel derived electricity/cement. Then, let’s see if the wind industry can compete when it truly is renewable (not this current facade.) We need to convince the fossil fuel industry to stop subsidizing renewable energy. Or we could try to add an amendment to any Renewable Energy Bill that states that companies who apply for Renewable Energy Credits are not allowed to buy coal, oil, gas or fossil-derived electricity/cement in the making of their products.

If we could play by their game, and force renewable energy companies to really be renewable, my guess is that most of them would fold or relocate to Washington, Oregon, and Idaho…where there is plentiful, reliable, and cheap hydro-electric power.

3 ttanton { 01.08.13 at 9:42 am }

Well, you’re basically correct Mr. Devere, but I suggest you read the underlying paper. It calculates the cost of wind plus natural gas (the ~15 cent/kwh) to show what wind as a comparable resource costs. You’re right that intermittent technologies cannot be compared to baseload or peaking technologies (something EIA acknowledges in their ost recent reports). Wind needs a pairing partner…which could come from fast acting storage or from fast acting generators. Right now the latter is less expensive, so that’s the comparison we made. Wind is still twice as costly.

4 R. L. Hails Sr. P. E. { 01.08.13 at 7:19 pm }

The real harm caused by the Production Tax Credit (PTC) was to permanently weaken the US energy infrastructure. It no longer matters if the politicians distort the market for a few more years. The harm has already occurred.
Suppose you are the father of a bright teen considering engineering in college. Would you recommend coursework in nuclear reactors, solar panel technology, advance coal combustion, or hydroelectric dam design? If you guess wrong, your child will be unemployed, or underemployed for most of their career. So you steer them away from an uncertain future, into marketing courses aimed at international clients. This has been US reality since TMI and the avalanches of EPA regs.

The US no longer can build a modern nuke, a modern coal fire power plant, or a modern refinery; we have not built a big base loaded unit in generations. Engineering colleges dropped the course work decades ago. I term this the externality cost of our fouled up, campaign contribution driven US energy policy.

Executives who can land a government grant will refute this argument (unless they are liable to sanctions for their inability to staff projects with experienced engineers, and other rare talents.)

The certain result of all green energy is higher user costs and a weaker energy infrastructure . It will get worse.

A wind generator can not be backed up by a worn out coal fired power plant, or one whose economies of continued operation has been destroyed by the EPA .

5 Craig { 01.09.13 at 8:09 am }

Photovoltaic cells, electric cars and wind turbines ( for electricity) have been around since app. 1880. This predates the internal combustion motor, the computer and airplanes. How is it we were convinced they are new technologies and deserve public subsidies in the first place? What happened to bright individuals like Bell, Benz, Edison, Tesla and Atanasoff ? We have been living off their 100 + year old inventions and not coming forward with new ones. Where are these creative people now? I suspect staring at their “smart phone”. The road grid in my neighborhood is 150 years old, we could never construct it today. We have the tools, just don’t have the backbone. The interstate highways and the trans Canada railway were largely built in a decade, there is a single highway overpass near me that took over a decade to replace. Imagine proposing a new coast to coast railway! It is very lucky for us that those bright men and women left us a legacy of useful ideas and products to carry forward, I don’ t see people in 100 years saying the same about us.

6 Eddie Devere { 01.09.13 at 12:26 pm }

FYI
For anybody that’s interested in some back-of-the-envelope calculations, the cost of electricity energy storage using batteries at the grid-scale is roughly $400/kWh.
So, if you need to storage enough electricity for 5 hrs, then add $2000/kW to the upfront capital cost. If you need to be able to storage 10 hr of electricity, then add $4000/kW to the upfront capital cost of the power plant.

Also, Mr. Hails, you are incorrect about a couple of things. (1) We have been building many coal and natural gas power plants in the US over the last decade. I think that your point may be that we are not building as many fossil fuel and nuclear power plants to make up for the planned retirements of these plants. If that’s your point, it’s a good one.
(2) There are a lot of college courses in power plant design. I know because I teach one of them, and I’m always on the look-out for textbooks to use from other professors. Once again, if your point is just that there were more power plant design courses in the past, then that’s a fair point. But I wouldn’t say that there are no courses in power plant design. As the need arrives, electricity utilities will start pushing colleges to have more power plant design courses. You can already see this in places like Pittsburgh, where natural gas drilling companies are asking local universities to provide more students knowledgeable in drilling the Marcellus Shale and in monitoring the environmental impact of the drilling. Supply & Demand…it’s a crazy thing…it just takes a little trust.

7 Wind Power – “Uniquely Parasitic” « kootenaybob { 01.09.13 at 2:06 pm }

[...] …wind generation is not close to being competitive… California is having to sign contracts for capacity ahead of when otherwise needed, partly due to retiring facilities. The existing reserves will soon be inadequate. [...]

8 Wind Energy Cost: Think Again ($0.15/kWh wholesale prohibitively … » greennewstweets.com { 01.09.13 at 8:09 pm }

[...] Green News Source- Click to read full article [...]

9 Robert Hargraves { 01.13.13 at 8:39 pm }

There are analyses of wind power costs in my new book. The 18 cents/kWh figure is optimistic because it assumed a 40 year lifetime and 30% capacity factor. Lifetimes are closer to 20 years, and capacity factors near 25%.

10 Joel Theis { 01.16.13 at 11:47 am }

The following link provides additional rationale for why wind and natural gas are a pairing of resources that could drive power prices high and reliability lower, contributing to declining economic growth. There is a high correlation between regional wind patterns based on information presented, and clear reasons why much more scrutiny needs to be given to the expansion of natural gas and wind power to fully understand the implications of adding more of these power resources than historically in terms of resource mix.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2180523

11 Mike Fortuna { 01.24.13 at 5:09 pm }

The Little Hoover Commission report, conducted here in California, had findings that mirror what has been said. They found that goals for greenhouse gas reduction are at odds with the wind farms going up. The need for gas fired generating plants is made clear by Germany’s start up, late last year, of the first of 5 that are planned to provide the base load. Most states, like California, are setting goals of reducing greenhouse gas emissions by closing coal fired plants. The comission study found that there was no unified plan on reducing emmissions and going to “renewable” energy sources at the same time.
Also of importance to them is the fact that, out here, power purchase agreements are not made available to the pubic and that the cost is going to far exceed what the public will accept.

12 Stan { 01.28.13 at 8:09 am }

Just posted today on Bloomberg…German electric cost going up to 7.4 cents(US) per kwhr because they’re going to 80% renewables. I’m paying twice that and we can’t afford to go to renewables. Something wrong here.

13 derek dutton { 03.10.13 at 11:42 pm }

If wind and solar are so efficient , why wont they run on being paid for what they actually produce?

Take away the subsidies and tax credits. Denmark is awash with turbines but can’t close single coal or gas plant. it has the highest cost electricity in the world. Has to sell excess power at discount and pay full price to buy. Norway checked it out and dismissed it. British environmentalists rejected wind after a 6 years study. Britain now building a nuclear plant and more coal fired plants.

Experts show wind power electricty not equivalent to coal per kilowatt. Irelands comparision, 3500 MW wind equals 496 MW Kilowatts from coal. Two German studies show. 25,000 MW of wind only allow reducing 2,000 MW of conventional power. No claims for Base Load for industry. All information on wind by vested interests. Nor is there any support for CO 2 being a Greenhouse gas by bona fide scientists. Only discredited IPCC , Al Gore and the CRU UEA. Wind & solar 100% dependent on conventional power plants. Who have to dump cheap power to accomodate Wind and Solar.Then use more fuel to come back on line. Wind power costs averages 2 to 3 times coal, Solar 5 times.

Cheaper with no subsidies but then no power. Wind needs a 55 to 85 kph wind to peoduce claimed output. Half wind speed 25kph 89% drop in output. No dispute , formula for output practical mathmetics, not argument.

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