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Published on May 2nd, 2011 | by Zachary Shahan

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Wind Power is Making Electricity Cheaper (Exxon: Wind to be Cheapest Source of Electricity)

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May 2nd, 2011 by Zachary Shahan 

 

This is part of an ongoing project to create a comprehensive resource page on all things wind. Chime in if you’d like to contribute by dropping a comment below. Or send me a message on Twitter @zshahan3 or Facebook.

Following up on my overview post on the cost of wind power, here’s a little discussion on some more intricate matters related to wind power. (And don’t worry, for those concerned about the “intermittent nature of wind,” we’ll get to that in future posts.)

Wind Power is Making Electricity Cheaper in Texas & Europe

Is the rapid growth of wind power in Texas actually making electricity cheaper?

Yes, says Bernstein Research in a recent report, “Will Wind Power Blow Texas Generators Away?,” a follow-up to their own prior effort. The idea is that wind power is steadily replacing more expensive forms of power generation, essentially natural gas

Yes, that’s actually from an article in the Wall Street Journal.

There’s more to it than the fact that wind power is cheap, but we’ll get to that in a moment. First, let’s note that the same thing is happening in Europe.

‘Wind Energy and Electricity Prices’, a comprehensive assessment of studies of the impact of wind energy on electricity prices, was carried out by the independent consultancy Pöyry AS on behalf of EWEA. It brings together, for the first time, the findings of case studies in Germany, Denmark and Belgium.

The report finds that in the studies reviewed by Pöyry, electricity prices were reduced by between 3 and 23 €/MWh depending on the amount of wind power. It concludes that the studies “essentially draw similar conclusions” and that “an increased penetration of wind power reduces wholesale spot prices.”



“It has already been well-established that wind reduces CO₂ emissions,” said Christian Kjaer, EWEA’s Chief Executive. “But now we have stronger evidence than ever before that wind power also reduces electricity prices for consumers. The message is clear – if you want affordable CO₂-free electricity, increase the amount of wind power in your electricity mix.”

How Does Wind Power Drive Down Electricity Costs?

Aside from the fact that wind power is cheap, there is another important factor at play here – merit order pricing.

Wind (and solar) have no fuel costs and low operating and maintenance costs (O&M). That means that once the systems are up and connected to the grid, they can afford to sell their power for very little money. In the case of wind, the O&M cost is about $0.01/kWh.

Check out this graph from the International Energy Agency (via Jerome de Paris/The Oil Drum):

When the call goes out for electricity, wind can sell it’s power for about a penny and not loose money (at that moment). And, with a $0.018 feed in tariff (FIT), wind can actually give its energy away and still make money! That means that wind is always going to be able to underbid any fuel-burning producer.

What actually happens is that a call goes out for X units of electricity. The least expensive providers get picked up first — that would be wind, then hydro might be next, followed by nuclear and coal. If wind, hydro and nuclear can provide all X units, coal gets left out. And same could go for nuclear if wind and hydro can cover it all.

Alternatively, coal and nuclear, which can’t be turned on and off quickly, might have to sell at a loss for that time block in order to be up and running when they can sell for a profit. I think this is what could eventually push coal, at the least, off the grid (and turn the energy tables even further).

What this effectively does, as well, is it lowers the price of electricity. This is a key reason why Texas, Europe, and other places with a lot of wind power are seeing reductions in the price of electricity (and people’s electricity bills).

Read much more on this topic in the following articles and reports:

 

The Future

As mentioned above, wind has no fuel costs. That is an advantage today, but with peak coal coming in the not-too-distant future, this is likely to make wind increasingly cheaper than coal. (Of course, if we just cut our coal use now, we wouldn’t even have to run into peak coal, but it seems that we aren’t so foresighted.)

Natural gas has become much cheaper of late due to hydraulic fracturing (aka ‘fracking’ or ‘fracking horrible idea’), but there are numerous cases showing that this seriously threatens water supplies and, increasingly, projects are being put on pause as a result. Where this goes no one knows — some predict natural gas will continue to stay cheap and will boom (more than it already has), others postulate that new regulations and environmental costs will reverse the trend. Of course, wind will remain free.

As Jerome de Paris notes, there are numerous reasons to shift more to wind power and numerous reasons why it would help create a more secure, brighter future:

the reality is that you get cheaper electricity with wind – and oh by the way, wind requires no imports of fast-depleting fuels from unstable countries, spews no carbon and provides lots more domestic jobs. And it’s a perfect investment for our pension needs – safe, low risk, stable, decent long term returns…

It is just a policy decision, one very strongly opposed by powerful fossil fuel companies and their politicians, including, essentially, the entire Republican leadership/Congressmen at the moment .

Will wind be one of the top electricity sources of the future? I hope so. Fossil fuel Congresspeople would have to do a lot to stop it now.

ExxonMobil: Wind Cheapest Form of Electricity Generation

Now, to close out, from ExxonMobil’s yearly review of energy statistics and trends, Energy Outlook: A view to 2030, here’s an interesting chart (via European Tribune):

click to enlarge

This 2025 prediction shows wind power being much cheaper than any other electricity source if a price is put on carbon (something that should obviously happen sooner rather than later, but which is being stalled in the U.S. by fossil-fuel-funded politicians — again, mostly the GOP — in Congress).

Even if a price were not put on carbon, though, wind remains one of the most economical choices. And this conclusion comes to us from an ExxonMobil report!

This is one part of our collection of ‘living articles’ on renewable energy.  It is our intention to update and improve these articles over time, making them the go-to source for reliable information.  Help us out by pointing out mistakes, providing better data, introducing new ideas.  We’ll periodically rewrite these pieces using community input.

Related Stories:

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About the Author

spends most of his time here on CleanTechnica as the director/chief editor. Otherwise, he's probably enthusiastically fulfilling his duties as the director/editor of Solar Love, EV Obsession, Planetsave, or Bikocity. Zach is recognized globally as a solar energy, electric car, and wind energy expert. If you would like him to speak at a related conference or event, connect with him via social media. You can connect with Zach on any popular social networking site you like. Links to all of his main social media profiles are on ZacharyShahan.com.



  • UglyTruth

    These cost do reflect the total cost of ownership or lifecycle cost analysis aka the cost of decommissioning these structures as well as the cost of storing spent fuel. The cost to decommissioning and time required is extremely high with no clear and accurate analysis. The Fukushima plant will now take 100 years to decommission at current estimates, source NHK. Vermont Yankee will take 40 years. Missing is the time need to properly handle spent fuel which is rarely discussed never mind the estimated cost which must also include damage to the environment as well as health risks source VT Digger.

    The Energy Department is poised to approve $6.5 billion in federal loan guarantees for the first nuclear power plants built from scratch in this country in more than three decades, source Fox News. Please note Wall Street will not touch these nuclear investments …gee maybe too risky.

    • Bob_Wallace

      Wall Street, private money, won’t touch new nuclear plants. Private money won’t take the risk.

      Reactors only get financed if the risk is put off on taxpayers.

      And reactors wouldn’t get built if the owners had to take full responsibility for a Chernobyl/Fukushima disaster. There is no way they would be able to afford premiums on full liability insurance. That’s also on taxpayers.

      We be the patsies.

  • Pingback: Cheap Wind Power Prompts Energy Policy Change In Brazil

  • Charles

    Evergreen is an oil drilling company….once again you have should your stupidity…get back on your horse and ride away.

  • http://jcmooreonline.com/ Moore, J.C.

    I hope you will not let the negative comments by fossil fuel advocates discourage you from proceeding. Fossil fuels only seem cheap because we do not consider their “true cost” . An analysis of the subsidies to fossil fuels that include the environmental and health costs shows that we are subsidizing fossil fuels about $74 per barrel of energy equivalent while the subsidies to wind energy are about $33. The analysis is given in http://jcmooreonline.com/2012/01/13/who-wants-to-kill-the-electric-car/.

    I also have a nice picture of the windmills in western Kansas that you may use it you would wish. It is on an article exposing the fallacies of Robert Bryce’s attack on green energy at http://jcmooreonline.com/2010/05/13/robert-bryces-myths-about-myths-about-green-energy/. Let me know, and please keep promoting wind energy.

  • Pingback: Wholesale Price of Electricity Drops to $0.00 in Texas, Due to Wind Energy | CleanTechnica

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  • Pingback: Why Wind Intermittency is NOT a Big Deal – CleanTechnica: Cleantech innovation news and views

  • Anonymous

    ” On an investment of $100 million, the wind developer receives more than
    $74 million in Federal tax credits and accelerated depreciation alone”

    That certainly seems to be a stinker of a claim.

    As far as I can determine wind farm owners get a choice between a 2.2 cent per kWh subsidy (PTC) or a first year 30% investment tax credit. One or the other.

    As part of the stimulus package projects which commenced construction by 31 December 2011 and placed in service by January 1st 2013 were given a third option of a cash grant equal to 30% of the project. This amounts to an early tax refund. The remaining 70% of the capital investment can be depreciated in normal fashion. One of the three, not all three.

    Early wind farms had some problems. What technology has not suffered growing pains.

    Yes, Solyrna and Evergreen may well fail. Not all companies make the right decisions and in this case other solar manufactures made better decisions and took the market away from those companies which have are will fail.

  • http://importantmedia.org Important Media Umbrella Acct

    there are a number of issues & false claims here to address — we will be doing so in a post in the near future. in the meantime, no, wind is not the most heavily subsidies, is not on the road to failure, and will save us money not cost us (compared to sticking to fossil-fuel-based electricity).

  • AndrewW

    Amazing. You are confusing “price” with “cost.” Many wind farms are nearing bankrupt because the price they can get doesn’t cover their capital costs. Without subsidies averaging 60-70% wind is not affordable.

    Green cheerleaders are hurting their cause by not understanding simple math.

    • Anonymous

      Andrew, please provide some numbers and links for your claims.

      Tell us what the “60-70%” subsidies are and how they are paid.

      In addition to the 2.2 cent PTC and the 30% investment tax credit (ITC) which lowers financing costs what are those additional subsidies you claim?

      The PTC reduces the wholesale price of wind by about one third, from around 6.7 cents to 4.5 cents per kWh. That 2.2 cents is minor compared to the direct and indirect subsidies provided for coal (4x to 12x more per kWh) and nuclear (3x more per kWh).

      The ITC functions roughly like the federal loan guarantees provided for nuclear plant construction.

      Give us some proof that “many wind farms are nearing bankrupt (sic)”.

      This is entirely new news for me, I’ve never heard anyone, even fossil fuel industry people, make these 60-70% subsidies/nearing bankruptcy claims.

    • Charles

      Where in the HELL do you get your information??? From the cereal box……STOP being so STUPID.

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