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 Electricity” provides 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.
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.