Colorado’s Cedar Point Wind Farm – Energy Strategy or Corporate Welfare?
“Speaking subjectively, when we provide natural gas, coal, or nuclear with subsidies, we get thousands and thousands of gigawatt-hours of constant, concentrated, and reliable electricity that drives our economy. When we provide solar and wind with subsidies, we do not get enough electricity to pay back even as much as the initial investment; and that electricity is not constant, not concentrated, and not reliable. In fact it has to be continuously backed up by natural gas, or nuclear, or coal just to keep the lights on.”
- Jerry Graf, Energy Subsidies in the USA (March 2013)
Earlier this week, in commentary under an article on a different site, I was informed that my assertions that current wind and solar technologies were less-than-effective alternative-energy sources were “not true.”
I was asked to search for information regarding “Xcel wind & solar”, and also informed that Xcel’s projects were providing energy with competitive Power Purchase Agreements (PPAs) as low as $60MWh. No additional details regarding any specific projects were provided.
Following up on this, I performed some research regarding Xcel Energy wind projects. I found a specific Xcel wind turbine sample project to analyze, the Cedar Point Wind Farm near Limon, Colorado, east of Denver. I chose this project for two reasons:
1. I was able to locate the specific project details necessary.
2. It is in mountains in Colorado and therefore should benefit from some of the best wind resources available in the USA (best case scenario).
My Cedar Point Turbine Analysis is linked here.
Employing a realistic analysis using the real average annual wholesale cost of electricity ($50/MWh) and accounting for inflation and O&M costs, a reasonable expectation is that the wind farm can pay back the initial $535,000,000 investment in 20 years; just about at the end of life for the turbines. This is obviously NOT an acceptable business case, but it is about the best performance of a wind turbine project that I have seen (due to the mountain wind speeds).
The question is, “Why would Xcel (and the other energy companies involved) invest $535 million in something that would take 20 years to pay off the initial capital cost, and that would be at end-of-life at about the same time it finally does pay off?”
The answer is in the government grants and subsidies:
· The federal government is providing a Production Tax Credit of $22/MWh.
· A federal stimulus grant for $145,596,213 was provided, to offset the construction costs.
· Colorado “renewable” energy mandates provided an incentive in driving this project.
· Adding the PPA and the PTC and the grant; and assuming a 20-year lifetime production of 16,943 GWh; the U.S. federal government and the State of Colorado are providing direct subsidies in excess of $40/MWh to this project.
Taking all this corporate welfare into account, the payback for Xcel (and the other energy companies involved) is actually more like 8 years; at which time they start raking in the cash for the next 12 years until the wind turbines reach end-of-life. This is a pretty good deal for everyone except the taxpayers and ratepayers.
Once again, other than the damage to the economy of the waste itself, the real problem with mandating and subsidizing non-viable energy technology projects is that this distracts us and diverts resources from other efforts to improve our energy production strategy.
The U.S. needs a change in energy strategy. The change, however, needs to be determined by scientific evaluation of fact and logical analysis of performance and economics; not by emotion, political considerations, and “feel good” methodologies.