Published on May 2nd, 2011 | by Zachary Shahan14
Wind Power is Making Electricity Cheaper (Exxon: Wind to be Cheapest Source of Electricity)
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:
- 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
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
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.
- World Wind Power
- Offshore Wind Energy Cheaper than Nuclear Energy, EU Climate Chief Says
- Installed Wind Power Capacity per Capita (Country Comparisons)
Top Image via aja