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Clean Power wine-angel

Published on May 8th, 2014 | by Mike Barnard

46

2013 Wind PPA Prices In US Interior Averaged 2.1 Cents/KWH (WINDPOWER 2014)

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May 8th, 2014 by  

Originally published on Energy & Policy Institute.

wine-angel

Las Vegas isn’t exactly a familiar haunt for me, but I’ve been here several times for conferences (and one wedding). I had seen the wine angel in the Mandalay Bay floating up in her harness beside the several story wine cellar a few years ago, but didn’t go further than the entrance. This time I went in for a night cap with the Crazy Canucks (and deep environmental toxicity experts) from Intrinsik, Loren and Melissa.

The day was mostly as expected: extraordinarily deep and broad expertise in all facets of wind energy everywhere.

Perhaps the most unlikely experts were the principals from B&K Trucking, a specialized logistics company that pulled 75% of their 2012 revenue related to wind energy, trucking 400 wind turbines around the continental USA for BP Wind, including shipping a tower from Houston to Pennsylvania, mostly off of the interstates because they just weren’t built to accommodate wind turbine-sized loads despite having been built to facilitate major US military materiel movement in the event of an invasion.

Wind turbines: heavier than truck loads of M1 Abrams. Who knew? And in 2013 they were victims of the PTC shutdown as so many US entrepreneurial organizations were, able to weather the doldrums but planning to shift their business to oil & gas instead of wind. Great people, salt of the earth, and shifting to carbon- and pollution-intensive industries because of short-sighted politics. What’s up with that?

The PTC gap was illustrated graphically in the extensive Navigant training session, which featured a stellar cast of experts from multiple fields. Sure, some of it sounded a bit like a Navigant sales pitch, but then the transmission engineer started talking about placement guidelines for upstream/downstream positions related to load and rapidly achieved the most deeply geeky presentation of the day. Not bad for a sales pitch, if that’s what was intended, and very insightful. My understanding of the intersection of wind resource and transmission resource improved significantly due to Dwayne Stradford of Navigant.

Ryan Wiser of the Lawrence Berkeley National Laboratory (LBNL) hit the most Tweets/Facebooks from the day’s sessions (despite my giving him an almost completely different name in Tweets… sorry Ryan).

  • Utility scale solar PPA prices just over 5 cents / KWH – Eric Riser LBNL #windpower14
  • 2013 PPA prices in US interior averaged 2.1 cents / KWH – Eric Riser LBNL #windpower14
  • Eric Wiser LBNL – ‘low-wind’ turbines dominating US installs up to 9 m/s wind sites #windpower14

These are interesting facts for a few reasons. PPA stands for Purchase Power Agreement and is a long-term agreement for the rates paid to a generator by a utility. These are the bottom end of the range and include the benefits of the Production Tax Credit, but they are extraordinary. By comparison, many parts of the wealthy and competitive developed world are paying 25-30 cents per KWh, and these wholesale prices are three to seven times cheaper than those wholesale prices. That’s a big gap. It’s a long way below any US consumer prices as well. And renewables are projected to continue to decline substantially over the next two decades.

It’s worth comparing this to the real Eric’s presentation (Eric Lantz of National Renewable Energy Laboratory or NREL) on the comparison between renewable prices and gas generation fueled by unconventional gas (aka fracked gas).

  • Broad-based shift to renewables based on economics alone won’t occur until late 2020s – PTC/RPS required – Eric Lantz #windpower14

His analysis pulled in both the lifecycle cost of electricity (LCOE) but also the externalities from the LCOE such as full dispatchability, transmission costs and ancillary values of generation. It showed clearly that unconventional gas still has a pure market price lower than wind energy. However, that gap is narrowing constantly as wind energy decreases in price — per comparison of numerous projections — and unconventional gas — once again per numerous studies — increases in cost. In the mid-to-late 2020’s the projections cross and US renewables will explode regardless of incentives because the market demands lowest cost nine out of ten times. In the meantime, public policy still demands the PTC because human mortality impacts, costly environmental impacts and climate change all have values exceeding the minor gap. USA: renew the PTC.

A subject of interest for me is when offshore wind energy will finally become real in the USA. The consensus from people such as Bruce Hamilton of Navigant and Nema Darani of Tradewind New Energy Advisors LLC is that Cape Wind will be functional in 2016. It’s expected to deliver 468 MW from the waters off of Cape Cod, Massachusetts, and has just won its 24th straight court victory over ‘vexatious abuse of the democratic process’ according to Federal Judge Richard Stearns. I’ll continue to test this over the week as offshore wind is a significant step in wind maturity in a jurisdiction.

  • Most optimistic offshore wind projection sees 40% cost reduction by 2030 Navigant #windpower14

Eric Lantz of NREL continued to provide an excellent pragmatic baseline to the discussion, presenting analysis that showed that offshore wind was in the 18 cents per KWH range and that the most optimistic projection of 40% reduction by 2030 in the USA was still well above new wind, solar or gas generation. Offshore wind is simpler to deploy from an overall stakeholder perspective, but still complex as twelve years of litigation in the US and challenges in northern Europe have shown.

Mark Bielecki of Navigant and Emily Capello of Aspen Environmental also had key points, both explored during Q&A sessions. Mark’s assessment showed a trend toward replacement of meterology masts with sensors such as LIDAR and SODAR, which are currently more expensive but increasingly competitive at the height of modern wind turbines and with much better mobility. Emily is deep into the environmental assessment aspects of permitting in California. The key takeaway from her material was the increasing regulatory hoops surrounding wind turbines despite having the lowest average environmental impacts. Natural gas has a target of a year, although it often doesn’t make it, but still progresses more smoothly than wind energy in part due to familiarity and density. This is an area where energy density actually has an argument, albeit a weak one. It’s easier and faster to perform and review an environmental assessment on a small site than a large one. As environmental assessments are comparatively minor costs pre-capital investment, this is a deferral of major investment rather than sunk capital, but it’s still jarring to see fossil fuel generation get a relatively free ride compared to much more benign wind energy.

Expecting something more network-ish from the House of Blues reception, I actually stood in the remarkably long lineup to get into the tiered, Grand Ole Opry style performance space replete with ear-splitting noise, smoke, narrow aisles and long lineups. I left quickly because I was actually hoping to be able to find people and speak to them, both of which were impossible under the conditions. That led me to the B&K couple as well as a very interesting discussion with a Shell Wind guy whose name, due to my namelexia, escapes me. A key point he made was that wind farm electronics now not only enable wind farms to behave responsibly on the grid with regard to frequency and voltage standards, but also — given lower than maximum output — act as frequency and voltage ancillary services. This is important as coal generation is being displaced in developed countries and hydro is drought-stricken in many cases, and they have traditionally provided these ancillary services for ‘free’ as part of their characteristics. With them off lined, grid stability declines, at least slightly, but now wind energy has the ability to provide those services and contribute directly to grid stability rather than being a minor grid destabilizer. What’s the economic value of this? I’ll keep asking.

And so to wine angels. They are sommelier-performers who are hooked into harnesses that are then hooked to cables which winch them up the vertical wall of a tall and narrow wine rack. The winches smoothly lift them up the face of the three- or four-story wine rack to select the bottle the patron wants. All electric of course, and hence environmentally sound.

I’ve been in contact with members of the Canadian consulting organization Intrinsik who have a focus on wind energy for quite a while. I’ve read their testimony and the plaudits given to them by judges in court cases for a couple of years. There are two of them in Las Vegas for WINDPOWER 2014 this year, Loren Knopper and Melissa Whitfield Aslund. I’ve been in touch with Loren for a while and Melissa recently, and they are also Canadian, so this gave us a tremendous opportunity to both network and be extremely nice without worry of inadvertently offending anyone. Both are fascinating individuals, not only because of their nationality. Loren was originally studying veterinary science so of course this required research stints in the Galapagos and a tiny island halfway between nowhere and Hawaii. Melissa is an expert on using earthworms to assess toxicity of soil, which led to several riffs on the B-movie about carnivorous earthworms of course. Many Canada-centric references were bandied about, but I won’t incur boredom in the non-Canadians who are reading.

This is, of course, a skim across a deep day which will require further thinking and analysis over the coming months. Any errors, misapprehensions or superficial understandings are mine alone. Until tomorrow.

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About the Author

is Senior Fellow -- Wind, with the Energy and Policy Institute. He has been a deeply interested observer of energy systems for three decades. His work as a business and technical architect on large initiatives in a variety of domains gives him the systems thinking perspective and stakeholder analysis skills to engage effectively with an area as complex as the grid. He’s regularly asked to peer-review academic and non-academic publications related to wind energy by journals, organizations and individuals. Through the Energy & Policy Institute, CleanTechnica.com, his blog barnardonwind.com and other venues, he focuses on bringing data-centric reality to bear in policy, siting and social license discussions related to wind around the world.



  • OneHundredbyFifty

    Thanks for the great post Mike!

  • Alex

    Show me the NREL study that claims 2.1 cents kwh is the average onshore wind PPA price in the US. Show me. Where is the link? If $21/mwh is the average onshore wind PPA price across the whole US, what is the average PPA go for in the panhandle? $5/mwh? Even with the value of the PTC subtracted that is an absurd price and it’s total nonsense. It’s either derived from some weird unconventional calculation that takes into account pollution externalities (which should have been mentioned if that’s the case) or it’s erroneous. This is simply not the plain vanilla LCOE price of an avg. wind PPA.

    • Bob_Wallace

      LBNL, not NREL…

      “According to a panel of researchers at the Windpower 2014 conference, continued improvements in wind and solar technologies are making them a threat to natural gas.

      Ryan Wiser, a staff scientist at the Lawrence Berkeley National Laboratory, highlighted innovations in blade and rotor design. Advances in materials have allowed the design of longer turbine blades and rotors that can operate efficiently at lower wind speeds. Since 2012, a “massive proliferation” of these turbines has driven average capacity factor increases up by 10 percent at every level of wind resource. As a result of these advances, costs are falling; preliminary data shows that the average 2013 power purchase agreement was at $0.021 per kilowatt-hour.

      “These are not your grandfather’s wind turbines,” Wiser said. “They are not even your older brother’s turbines.””
      http://www.greentechmedia.com/articles/read/The-Price-Gap-Is-Closing-Between-Renewables-and-Natural-Gas

      • Alex

        “preliminary data shows……” where is the data? Where is the study? How come Ryan Wiser wasn’t quoted? The only info on this is a couple sentences in a Cleantechnica article, a GTM article, and Mike Barnard.

        • Bob_Wallace

          ​You’re going to have to sit back and wait for the official report.

          Capish?

        • OneHundredbyFifty

          Really, it only requires a little knowledge of the data to recognize these numbers as highly credible. Between recent developments in high CF wind turbines and the beginning of utilization of the best wind sites, http://handlemanpost.wordpress.com/2014/01/15/compare-maps-of-the-grid-and-renewables/ it has been clear that these numbers were coming. I thought it would be 2014 but happy to hear 2013.

  • CsabaU

    I get the impression that wind power is much cheaper in US (~5c) compared with Europe (more likely ~10c). Is the wind turbines cheaper, or US have much better wind sites, or are american workers more effective, or is the other “soft costs” much lower?

    • JamesWimberley

      It’s an odd mirror image of the situation in solar pv, which until very recently was half the price in Europe.
      Generally, wind resources are poorer than in the US Midwest. Also, perhaps European retail electricity prices are so much higher that there’s less competitive pressure. A lot of data here for German costs. The O&M costs alone come to >3$c per kwh.

      • Ronald Brakels

        I would imagine the cost of land would also be an important factor. Even here in Australia on land one would have trouble fattening a goanna on, payments to land owners are a significant portion of the cost of wind power.

        • Bob_Wallace

          Land owners in the US get a very sweet price for the leases they sign. But real estate costs are a minor part of the overall package.

          Those land leases and new jobs are pumping a lot of money into struggling Midwest communities. Dying towns are being reborn. The revenue stream and jobs created have made some conservative state Republican governors big advocates of wind energy.

          • Ronald Brakels

            Our newest wind farm in Australia, which is still under construction but supplying energy, makes payments to landowners that come to about 0.3 cents per kilowatt-hour. That seems like quite a lot to me, particularly considering wind’s small footprint compared to a coal plant and associated mine. In Europe where land costs an awful lot more and the capacity factor tends to be a lot lower I imagine payments to land owners would be a considerably heftier portion of the cost of wind, especially for older wind farms with smaller turbines. Maybe Europe’s community wind results in lower payments to landholders than what they would be otherwise, but I really don’t know.

    • Bob_Wallace

      The US is “the Saudi Arabia of wind”. We’ve got excellent resources.

      The center part of the US is windy and not heavily populated. (Not heavily populated partially because people don’t want to live where the wind blows like stink most of the time.)

      We got into the business early, we’ve got 30+ year old commercial wind farms. I suspect that has made our companies efficient and our supply streams strong.

      • grant

        not heavily populated except for the wind turbines are killing the American eagles and owls. So much so that Obama has issued waivers so that makes it legal to kill eagles now with wind turbines.

        See, going green isn’t necessarily environmentally friendly. And a waiver is cheaper than putting a whistle or something on the turbine to let the bird know to stay away.

        • Bob_Wallace

          Yes, a few birds are being killed. However wind turbines are responsible for only a tiny percentage of human-caused bird deaths.

          Fossil fuels kill far more and uncontrolled climate change will wipe out entire species.

          We don’t have a perfect solution. We have to go with the best we have in hand. And, at the same time, we need to continue to work on decreasing the very small number of birds being killed by turbines.

  • JamesWimberley

    I’m finding it hard to reconcile Wiser’s US datum of wind contracts at 2.1c/kw in 2013 – a datum not a projection – with Lantz’ estimate that renewables will overall only be cheaper than gas in the USA without incentives in a decade. Lantz includes the negative grid externalities, mainly despatchable backup, and his number for these must be very, very high.

    How does he get there? The capital cost of the gas backup is sunk already. Perhaps he’s assuming that regulators will step in to assure its owners a reasonable return on capital, through a capacity market or some such. (I agree this is likely.) Without such intervention, the gas backup will have such a low capacity factor that it will run at a loss.

    A less charitable possibility is that he’s running the numbers for pure wind or pure solar separately. Since they are in fact complementary (especially over the seasons), this would simply be a mistake.

    • http://barnardonwind.wordpress.com/ Mike Barnard

      Lantz adds in the required grid interconnections and minor elements of backup and ancillary services which wind generation cannot provide itself. He excludes the PTC which is temporary, but gas generation has tax code breaks which are permanent, not requiring renewal as the PTC does for wind energy.

      Per discussions I had with people close to this last week there is little chance of any tax reform eliminating gas tax breaks or making permanent similar provisions for wind energy, so this is a fair assessment.

      With the advantages of tax code advantages such as MLPs and 40 years of significant investment in fracking R&D, gas is really, really cheap, but still projected to increase in price, while wind energy is projected to decrease in price.

      The key statement here is that in about 11 years or so, wind energy will be cheaper than any other form of new generation on a completely unlevel playing field and massive deployment of renewables will occur on purely economic terms.

      Don’t lock in your fossil fuel investments.

      • Bob_Wallace

        Mike, wind PPAs dropped from 4c to 2.1c, 2012 to 2013. What is the industry talking about as the realistic lowest price based on technology we know that works?

        4c and 2.1c I read as 5c and 3c for 20-25 year PPAs with the 10 year cutoff for the PTC.

        • http://barnardonwind.wordpress.com/ Mike Barnard

          “Only” a 30% further reduction before it levels out.

          • Bob_Wallace

            So wind at ~1.5 cents per kWh or ~2.5 cents unsubsidized.

            We can live with that.

          • OneHundredbyFifty

            Unfortunately, without transmission upgrades there will be limits on the amount of wind. Need the HVDC links from great plains to the East coast. That, in my view, is where the industry should be focusing. 50% CF wind in the best areas is compelling even without the PTC but we have to be able to get it where it is needed. Basically, without the PTC we are talking about 4 cents which is inexpensive by East coast standards.

  • globi

    What’s the value of the production tax credit?
    What would the PPA price be if the PTC wasn’t included?

    Nevertheless 2 cents/kWh is very impressive and also shows that one could use wind power as a spinning reserve (back-up power). (Example: If Wind power was curtailed by 33% on average, the costs would only go up to 3 cents/kWh.)

    • JamesWimberley

      Wikipedia gives a value for the PTC of 2.2c per kwh for 20 years. So in states like Texas without a state-leval incentive, the raw price may be around 4.3 c/kwh. To get a good pre-tax number, you would have to do a state-by-state breakdown. A reasonable takeaway could be “less than 5c/kwh”.

      • http://zacharyshahan.com/ Zachary Shahan

        NREL has the minimum (presumably with PTC taken out of the equation) at 5c/kWh. would assume some of those projects are coming in a bit under 5c/kWh, though. don’t think NREL’s database is comprehensive, and it surely rounds up a bit.

        http://en.openei.org/apps/TCDB/

        • Bob_Wallace

          Can’t be 5c. That’s a 3c spread from the 2c selling price which includes owner profits and (sometimes) transmission costs.

          Add back in 1.15c/kWh to remove the 2.3c/kWh ‘first ten years’ subsidy. That’s the average non-subsidized LCOE plus profits/transmission.

        • http://barnardonwind.wordpress.com/ Mike Barnard

          NREL’s numbers, depending on chart or graph, often include the externalized costs of grid interconnections and the like. They aren’t reporting on strict PPAs, but trying to achieve full grid apples-to-apples comparisons of alternative strategic choices.

          By that comparison, wind without any tax breaks such as the PTC will be cheaper than gas which maintains its tax breaks by mid 2020’s. In other words, on an unlevel playing field wind energy will be cheaper than gas.

          • Bob_Wallace

            What are gas’s tax breaks? (I suppose I could have looked that up.)

          • http://barnardonwind.wordpress.com/ Mike Barnard

            I don’t have the complete list at my fingertips, but a big one is availability of master limited partnerships (MLPs) as an investment vehicle. It basically dodges the ‘double taxation’ against corporations by dispersing profits as partnership income. This reduces total cost of the fiscal vehicle significantly and as such drops cost of financing. That’s available on the gas side, but not for wind energy. There are a handful of other similarly arcane things which give gas a fiscal advantage in the absence of the PTC.

            As it was described to me last week by a wonky tax-policy guy, every other form of generation has one or more tax code breaks, most of them written in as permanent breaks as opposed to expiring breaks like the PTC. One of the biggest arguments for extension of the PTC is that the optics of the only form of generation having zero tax code breaks being wind generation are really bad for the people opposed to it.

            Imagine the story if wind were the only form of generation with zero tax breaks. Imagine the optics for the Republicans.

          • A Real Libertarian

            What is the definition of “optics”?

          • http://barnardonwind.wordpress.com/ Mike Barnard

            How it would play out in the press and public opinion. Especially since 70% of wind energy is built in Red states.

          • A Real Libertarian

            OK.

            What’s wrong with calling it PR?

          • http://barnardonwind.wordpress.com/ Mike Barnard

            Optics is how something is perceived. PR is the action of changing how something is perceived.

          • A Real Libertarian

            OK. Thanks.

        • OneHundredbyFifty

          They are just beginning to build out the best areas in the great plains. Current average CF is about 40%. 50% CF http://handlemanpost.wordpress.com/2014/01/22/with-50-capacity-factors-wind-has-reached-the-tipping-point/ areas are under-built due to lack of transmission access http://handlemanpost.wordpress.com/2014/01/15/compare-maps-of-the-grid-and-renewables/. They are starting to snake lines out there and the wind farms are following. If you do some google earth prospecting, you can see wind farms beginning to pop up in these choice sites. Texas’s best wind areas are hardly being built on. However ERCOT is building transmission lines out there. When complete I think we will see a rapid expansion of Texas’s already large wind infrastructure.

      • http://www.schoolcharging.org SchoolCharging

        No matter how you slice it, even without incentives, that is a great number

      • Bob_Wallace

        “2.3¢/kWh for wind, geothermal, closed-loop biomass; 1.1¢/kWh for other eligible technologies. Generally applies to first 10 years of operation.”

        http://dsireusa.org/incentives/incentive.cfm?Incentive_Code=US13F

    • Bob_Wallace

      2.23 cents per kWh for the first ten years of farm production.

      For a 20 year PPA that averages out to about 1.15c/kWh. Call the price of wind 3.25/kWh. That includes owner profit and any transmission charges which would not be included in a LCOE calculation.

      Good point about the low cost of curtailment. That’s why it will make sense to overbuild wind and solar to some extent rather than to try to store every kWh produced.

      • JamesWimberley

        So Wikipedia is wrong on the PTC duration? You might care to edit the page.

  • Doug Cutler

    OMG! 2cents/KWH! That was supposed to be Cold Fusion’s number.

    • Bob_Wallace

      Wind is the new cold fusion.

      • A Real Libertarian

        No, Thorium is the new cold fusion.

        Wind is the real cold fusion.

        • Doug Cutler

          . . . or is wind actually hot fusion – energy delivered daily from the sun? Ah, whatever . . . High Five! (like I had anything to do with it).

          Better yet, three cheers for the engineers!

          • http://zacharyshahan.com/ Zachary Shahan

            And a 4th cheer from me!

        • http://zacharyshahan.com/ Zachary Shahan

          Haha :D

        • A Real Libertarian

          Bob get the boot for trolling on other sites and now the new cold fusion Bob

          Ha, ha ha

          Ladies and Gentlemen… Anti-Environmentalism!

  • Shiggity

    I just saw a WSJ article crying about how the wind tax credit is incredibly unfair. Fossil fuels are getting scared.

    • http://zacharyshahan.com/ Zachary Shahan

      Yes they are!

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