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Published on August 28th, 2014 | by AWEA

16

What The Falling Price Of Wind Power Means

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August 28th, 2014 by  

AWEA Blog.
Peter Kelley.

Wind energy has never been more affordable, the Department of Energy’s Berkeley National Laboratory announced recently in releasing its new 2013 Wind Energy Technologies Market Report and a companion slide presentation.

Wind means lower electric bills for millions of Americans across the wind-rich states. That value to consumers is why it’s essential to keep the tax incentives that encourage private investment in building new wind farms — so that more people can benefit from low-priced wind power.

The energy trades are taking notice of the new DOE report: “New Study Finds Price of Wind Energy in U.S. at an All-time Low,” said Civil and Structural Engineer.

With Wind Energy Prices at All-Time Lows, DOE is Cautiously Optimistic,” former New York Times reporter Jack Cushman wrote in Inside Climate News. And from North American Windpower: “Despite 2013 Challenges, U.S. Wind Power Reaches All-Time Low Price.”

Through innovation and economies of scale, the wind industry has indeed been able to shave over half of its costs in just the past five years.

What do the resulting record low wholesale prices mean for U.S. electric utilities, and we the rate-paying public? For development companies and U.S. turbine factories? For the campaign to extend critical tax policies it will take to build more wind farms?

Americanflagwind

More and more utilities now say they buy wind energy to save their customers money. In some places, wind is now the cheapest way to add electrical generating capacity today. Everywhere, it provides a great long-term hedge against rising prices for natural gas, the other leading contender.

That’s good news for consumers because, despite many peoples’ outdated assumptions, wind power is no luxury product, but is now something Walmart shoppers can get behind.

Of course, it’s not just about the money. Wind power causes no pollution or water use in operation. It cuts carbon on a large scale at an affordable cost. It keeps family farmers and ranchers on their land.

As wind approaches 5 percent of the U.S. grid, we can still spread these savings and benefits much, much farther so long as we keep up the policy signal to build more wind farms.

Wind power can double in the U.S. by 2020, and double again by 2030. That’s according to the draft of a new vision for U.S. wind power, now in peer review. It is slated for release this fall by another arm of the Energy Department. This new Wind Vision will include a roadmap of how we’ll get there.

Getting the private investment will be critical – hundreds of millions of private dollars must be raised to build a modern utility-scale wind farm. The total has recently averaged  $15 billion a year. Electrons from wind may be cheap once the turbines are up, but to invest in building more of those turbines, private investors still need to see a return comparable to other forms of energy. And those competitors have had 100 years of incentives.

Creating the incentive for that much investment takes the Production Tax Credit or the alternative Investment Tax Credit. They provide initial tax relief that each project will more than repay over its lifetime, in federal, state, and local taxes. The tax credits’ extension in the EXPIRE Act is now urgent, to avoid another bust in U.S. wind farm construction. And that would mean the disappearance of more of America’s hard-won wind energy manufacturing base.

The PTC and ITC have expired five times, creating boom/bust cycles that have caused anywhere from a 76% to 92% drop in installations the following year. Last year, new wind installations fell to a virtual halt. Private investment dropped from $25 billion in 2012 to about $2 billion. Nearly 30,000 jobs were lost, including thousands in manufacturing and construction. This is likely to happen all over again if these tax policies aren’t promptly extended.

As DOE reported, “Trends are enabling very aggressive wind power pricing and solid economics in many regions despite low natural gas prices.” But, “Growth after 2015 remains uncertain, dictated in part by future natural gas prices, fossil plant retirements, and policy decisions.”

So yes, it’s good news for consumers that the wind industry has been able to cut its costs so low. And yes – pending tax reform in which all energy incentives would be on the table – we still need to keep up these critical investment incentives, so that more of us will get to share in that good news.

Source: AWEA Blog. Reproduced with permission.

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About the Author

The American Wind Energy Association (AWEA) is the voice of wind energy in the U.S., promoting renewable energy to power a cleaner, stronger America. Keep up with all the latest wind industry news at: http://www.aweablog.org/blog/



  • Bob_Wallace

    That would depend on how it was used. If used to make electricity then that’s storage. If used in vehicles then it’s fuel created from electricity.

    Syngas is one of the storage technologies that will be considered. It would probably be easier to store than hydrogen. But both may be too inefficient to play a meaningful role in storage.

    H2, for example, is roughly 65% lossy. One starts out with 3 kWh of electricity and ends up with 1 kWh. Other storage technologies are in the range of 35% to 5% lossy.

    The infrastructure for syngas would have to be very cheap in order to make up for that loss.

    • Calamity_Jean

      Excess wind or solar power could be used for both storage and fuel simultaneously.

      The US Navy is working on a process to make jet fuel from seawater using electricity from their aircraft carriers’ nuclear reactors. The process makes 75% jet fuel and 25% methane. Obviously from the Navy’s point of view the methane is an unwanted byproduct. If the same process was done on shore using excess wind or solar power, the methane could be fed into the natural gas distribution network, or just held in a tank for gas turbines to back up renewable generation.

      • Bob_Wallace

        There really isn’t much excess wind. We currently curtail less than 4% of all wind and most of that is due to transmission limitations so it wouldn’t be available for making fuel.

        I suspect we will have little to no surplus electricity going forward. As EVs become more common they can be charged during times of extra supply and soak up any extra.

        If we decide to make jet fuel from wind and solar it will almost be certain that we’ll build more wind and solar capacity to generate that power. It will be over and above current demand.

  • eveee

    Double between 2020 and 2030? Is that another subtle case of decreasing expectations from the EIA? Wind has been doubling rate faster than that at about 5 years. (14% annual compound growth) Why would we want to slow it down to doubling every 10 years? The first doubling takes 5 years. That would take it to about 10%. The second doubling would take it to 20%. That should happen by 2025.

    • sault

      All these congressional shenanigans with the tax credits complicate any constant growth rate assumptions. With a 90% drop-off of installations in 2013, 2014 will need to show 2 years’ worth of 2012-level installations to even keep close to 14% annual growth. Now maybe this is just in the U.S., but with 20% of the global carbon emissions (and another 20% due to the consumption of imported goods), lagging action in the USA to reduce emissions will have a large effect on global trends for the foreseeable future.

      • Deep Time

        Good luck getting that to change. The congresspeople elected by and representing the Koch brothers will do whatever they can to slow alternative energy.

    • Matt

      Could increase the rate even more if they said PTC good until 2025 and then ramp down to zero in 2035. Oh and if you farm has storage of 1/3 your estimated daily peak, you get double the PTC. Ok need to do a little math on the 1/3 and double; but you get the idea. I know there isn’t enough batteries for the “now”; but wavy a little green at it. The only ones hurt by wind, are those invested in FF. Everyone else in the country benefits. Think of the jobs the above would generate, and the improved air (health).

  • Marion Meads

    It means that we need to move on and go full steam ahead with developing cheaper and more efficient energy storage systems. With the cheaper and more efficient energy storage system, the fossil fuel industry would become obsolete and go the way of the typewriters and dinosaurs.

    • sault

      Energy storage isn’t an issue until you get 40%+ penetration levels of wind energy. The report highlights this on page 12:

      “System operators are implementing methods to accommodate increased penetration of wind energy. Recent studies show that wind energy integration costs are almost always below $12/MWh—and often below $5/MWh—for wind power capacity penetrations of up to or even exceeding 40% of the peak load of the system in which the wind power is delivered.”

      So, handling wind power variability costs 1.2 cents / kWh worst-case and is usually below 0.5 cents / kWh. We have a lot of room to grow before we have to worry about storing wind energy.

      • Marion Meads

        You are talking about averages, and averages are misleading when you deal regional areas on wind power availability and variability on a case by case basis. When you talk about averages, you imply the need for a big super grid for balancing so that it can balance to accommodate variability of wind in various regions, but such a super grid is not a reality yet. Do we really need to build the expensive super grid when we have local storage for each distributed electric generation?

        • Bob_Wallace

          “Do we really need to build the expensive super grid when we have local storage for each distributed electric generation?”

          The answer will vary from place to place and change over time. Right now it seems to make sense to strengthen our transmission abilities. Were super cheap storage to appear then the math would change.

          We’ve started building transmission to move Midwest wind to the Southeast, but higher towers could mean that localized wind might make more sense. And the Southeast has some very good offshore wind resources.

          I’m sure that whatever we do we’ll be able to look back and see that we could have done some things in a better way. But it’s hard to buy future hindsight.

        • sault

          No, I am quoting the part of the BNL report that concerns grid system operators. Grids take power in from either relatively small or large areas, it just depends upon the grid in question. And if these grid operators, in their current state, only need to spend 0.5 cents per kWh of wind energy to accommodate up to (and perhaps even greater than) 40% penetration, then this is not really an issue right now. That 0.5 cents / kWh is what it takes to keep the system running, so it takes into account all the variability we’ve experienced using wind power. And right now, 0.5 cents / kWh is a lot cheaper than even the cheapest batteries or other form of energy storage. In the future, you may have a point, but the storage you insist on putting on the grid is not needed for another 10 – 20 years.

        • Gary

          Single region baseload wind penetration can get up to around 60% without storage and less than 5% spillage:

          http://sdrv.ms/14L24BV
          Storage is unlikely to be viable for wind – you would be lucky to get 100 cycles per year. It is far cheaper to use backup biogas to fill the gaps.

        • eveee

          Transmission costs are currently cheaper than storage. Thats a function of how much penetration there is and the decreases in storage costs. As EVs get used for storage and storage costs drop, the scenario you showed will become more evident. The developments of renewables will cause some of each to happen. Its hard to predict from region to region how this will unfold.

    • Roger Pham

      Good point, Marion, I’m on the same page with you, let’s consider the following:

      One way to speed up of RE market penetration is perhaps the use of micro-grid, initially in wealthy and new housing developments, in regions where there are adequate solar and wind, and long-range BEV’s with plug-outs to serve as extended grid energy storage.

      So, a group of houses will comprise a micro-grid, each house will have solar PV pre-built and pre-wired into the roof. THey will share one or many nearby wind turbines and share a common battery storage and also share a Nat Gas generator for winter power and heating. A DC micro-grid can be simpler and can better incorporate various inputs with DC-DC converter. Long-range BEV’s with plug-outs will be allowed to participate in further levelizing fluctuating RE’s output in order to minimize utilization of the Nat GAs generetor except for winter heat and power generation wherein efficiency of NG utilization approaches 100%, and to avoid wasting of RE in longer periods of RE excess, The long-range BEV’s will be able to sell off the excess of local RE power to at-work charging plug for commercial day-time usage.

      Whether this will be cheaper than grid electricity or not is debatable. However, affluent folks will prefer this due to the reliability and exclusivity…So, rich communities with long-range BEV’s will be early adopters, kinda like Tesla buyers…then when the Tesla Model 3 will come out, middle-income folks will follow. With high volume of adoption, price will come out. This is also analogous to the shunting of public transportation in favor of private transportation, or the use of micro PC to replace the mainframe dinosaurs!

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