Important Note: While LCOE is widely used to compare various sources of energy, even not including the fact that it doesn’t account for health or environmental costs, it has its weaknesses. For example, LCOE for wind projects are often based on a 20-year lifetimes for wind turbines.

The oldest installed commercial wind turbines in the world, at Altamont Pass in California, were just replaced (or are in the process of being replaced) after 30 years of operation and the reason for it is a legal suit regarding endangered bird deaths — NextEra Energy Resources LLC, the company that owns the project, is replacing them with much more efficient turbines in order to reduce the number of turbines significantly.

The Department of Energy, which seems to use this 30-year assumption, found the price of electricity from new wind farm plants ranged from 4 to 9 cents per kilowatt-hour in 2009, which is competitive with other new power plants and essentially the same as AWEA reported above. However, if a 30- or 40-year lifespan were used for the projects, the costs would be much lower, as the huge majority of a wind project’s costs are from the initial investment (wind, the ‘fuel’, is free and there are minimal operating and maintenance costs).

Wind is MUCH Cheaper than Coal & Natural Gas (if You Know How to Add)

Now, as I hinted at the top, if you take the full health costs and environmental costs of various energy sources into account, wind comes out looking even better. A recent study out of Harvard found that if one adds in the hidden costs of coal then its actual price in the U.S. is more like 9-27 cents higher per kilowatt hour. The authors write:

Our comprehensive review finds that the best estimate for the total economically quantifiable costs, based on a conservative weighting of many of the study findings, amount to some $345.3 billion, adding close to 17.8¢/kWh of electricity generated from coal. The low estimate is $175 billion, or over 9¢/kWh, while the true monetizable costs could be as much as the upper bounds of $523.3 billion, adding close to 26.89¢/kWh. These and the more difficult to quantify externalities are borne by the general public.

This makes the true, “all-in” cost of coal electricity somewhere between 17 cents and 35 cents per kWh. You pay 8 cents or so per kWh on your electricity bill and then quite a bit more than that in healthcare costs, health insurance premiums, and with your tax dollars. Wind? It’s sticking to its original 4 to 9 cents per kWh.

As far as natural gas, I’m not aware of anyone doing a full cost accounting of it, or even counting in the health costs. It may not be as bad as coal when it comes to global warming emissions (though, some argue that), but it definitely emits more than wind. Additionally, water quality problems are a huge issue with natural gas, and since we are just discovering this (or it is just coming out into the open and the mainstream), I’m sure quantifying those costs is a huge task. However, again, you can be sure that there are significant costs and that there’s not the same issue with wind power.

Cost of Powering Our Cars with Wind

This is an interesting side note I thought I’d add. According to AWEA, based on the current cost of wind expressed in above sections, powering your electric vehicle with wind power would be several times cheaper than fueling up with gas now. “By powering our electric cars using wind, Americans can pay the equivalent of 70 cents a gallon at the pump,” AWEA stated. Interesting.

I don’t know how AWEA came to that conclusion — haven’t seen the calculations. If you have more info on this or want to try your hand at doing your own calculations, feel free to and shoot us your findings!

Google: Wind is Just a Good Investment, Cheap

While Google is known for its enthusiasm for clean, renewable energy now, something not often mentioned is that it is not only a clean energy leader because of its altruistic tendencies, but also because it just makes good financial sense. Catch this recent admission from one of Google’s higher-ups:

One of the main incentives for Google is financial returns. Rick Needham, Google’s green business operations manager, told me last year the North Dakota wind farms were an attractive deal for Google on the basis of the returns alone.

Wind power purchase agreements (wind is the cheapest utility-scale clean power out there) can set wind power rates around six cents a kilowatt hour for a 20-year contract, depending on location. It can sometimes cost even less with federal subsidies. As Lux Research analyst Ted Sullivan told me in an interview last year, “That’s pretty cheap.”

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

Photo via aja

Following up on the above, 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,” there’s more on that below.)

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:

• Wind Energy and Electricity Prices (EWEA)
• The cost of wind, the price of wind, the value of wind
• Wind’s latest problem: it … makes power too cheap

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!

• Intro to Wind Power
• Installed Wind Power Capacity (total and new in 2010; for the world as a whole and top countries; wind power per GDP; and wind power per capita)
• Offshore Wind Power
• Projected Wind Power Growth
• Why Wind Intermittency is Not a Big Deal