A more realistic cost of wind energy

Various promoters maintain the cost of wind energy is competitive with other sources of energy. As shown below, this is not the case. They often point to power purchase agreements, PPAs, between wind turbine owners and utilities to sell at 5 to 6 c/kWh as proof of market price parity.

However, costs are not the same as prices. Energy costs have to do with the unsubsidized cost of producting energy. Pricing that energy is greatly influenced by the level of subsidies. If that were not the case, wind turbine owners would not be fighting so hard for various subsidies, such as extending the 2.3 c/kWh production tax credit; its pre-tax value is about 3.4 c/kWh, depending on tax rates. This credit is not trivial, as the US average grid price is about 5 c/kWh.

The EIA calculates the levelized cost of NEW onshore wind turbine plants place in service in 2018, capacity factor 0.34, 30-yr life, at $86.6/MWh, including transmission of $3.2/MWh. These costs include various subsidies not available, or partially available, to other sources of energy. As a result, comparison with other energy sources becomes partially invalid.

NOTE: CFs of 0.34, and greater, are obtainable only in windy areas, such as west of Chicago, and offshore. Elsewhere, CFs are significantly less, based on published wind turbine production data from various areas in the world. See URL.

http://www.eia.gov/forecasts/aeo/pdf/electricity_generation.pdf

http://theenergycollective.com/willem-post/169521/wind-turbine-energy-capacity-less-estimated 

 

Assuming a realistic 20-year life of a wind turbine increases the levelized cost to $93/MWh. 

After backing out the effect of accelerated depreciation for wind turbine plants, the levelized cost increases to $101/MWh.

Adding the cost of increased frequency of start/stop operation, AND keeping gas and coal plants available in cold standby or synchronous standby mode (in case of too little wind to turn the rotors, i.e., about 7.5 mph), AND operating more hours in inefficient, part-load-ramping mode (extra Btu/kWh, extra CO2/kWh) to balance the variable wind energy, is $17/MWh for natural gas, $55/MWh for coal. 

Extra balancing NG adds $6.00/MWh, extra balancing coal adds $9.00/MWh 

Transmission system investments to get wind energy to the grid adds $27/MWh. 

Thus, the total levelized cost of wind energy averages $151/MWh with NG back-up/balancing and $192/MWh with coal back-up/balancing. 

NOTE: Levelized costs are the net present value of the total cost of new construction (including finance charges during and after construction), maintenance, and operation of a generating plant over its lifetime, expressed in dollars per unit of output, i.e. dollars/MWh. They are used to compare various generating sources to see which sources are the most cost-effective when constructing new plants.

The source of the above data is the American Tradition Institute, The Hidden Costs of Wind Electricity, December 2012, 

http://www.atinstitute.org/wp-content/uploads/2012/12/Hidden-Cost.pdf

Grid Level Costs, per OECD Report

The historic cost data of wind turbine plants in various geographical areas are well known. This is not the case with grid level costs, except in countries that produce 10 to 20 percent of their annual wind energy with wind turbines.

In Europe, several countries, such as Denmark, Spain, Ireland, Portugal, etc., produced 10 to 20 percent of their energy with wind turbines at least 10 years ago. As their build-outs took place, more became known regarding grid level costs. It appears these grid level costs are significantly greater than claimed by various wind energy promoters.

The below Organisation of Economic Co-operation and Development, OECD, study quantified the levelized costs of the grid level effects of variable energy, such as wind and solar, on the grid. It includes the costs of:

- wind energy balancing, causing increased fuel consumption and increased wear and tear of equipment, PLUS 

- the costs of grid connection, reinforcement and extension, PLUS 

- the costs of back-up (adequacy), i.e., keeping almost all EXISTING generators fueled, staffed, and in good working order to provide energy when wind energy is minimal, about 30% of the hours of the year in NE, about 10-15% of the hours of the year west of Chicago.

In the US, the costs of the 3 PLUSSES for onshore IWTs are minimal, about $5/MWh, or less, when the annual wind energy on the grid is only a few percent, because most grids have some spare capacity to absorb variable wind energy. Because they are minimal, and because there is so much “noise” in the data, various claims are made regarding costs that cannot be verified.

As the wind energy percentage nears 3 - 5%, the spare capacity of most grids is used up and the costs of the 3 PLUSSES are about $7.5/MWh at 5%, about $16.30/MWh at 10%, and about 19.84/MWh at 30%, according to the OECD study.

This is significantly greater than the about $5/MWh usually claimed by IWT promoters, but those claims are for when the wind energy percent is only a few percent, as is the case in most of the US. See page 8 of below URL. Corresponding costs for offshore wind turbine plants would be significantly greater.

These costs are a significant part of the US annual average grid price of about $50/MWh. Mostly, they are "socialized", i.e., charged to rate payers, not to wind turbine owners. As a result, wind turbine owners, with help of other subsidies, such as the $23/MWh production tax credit, and accelerated depreciation schedules just for wind turbines, can underbid other low-cost producers, causing them to sell less energy and become less viable over time, i.e., future investors would be less willing to invest in such producers, unless compensated with "capacity payments", that also will be charged to rate payers, not wind turbine owners; a free ride all-around.

http://www.oecd-nea.org/ndd/reports/2012/system-effects-exec-sum.pdf

  

The Production Tax Credit

Note that the effect of the PTC is not included in the above calculations. 

The PTC has been extended for one year by Congress and the President, but that one year extension means 10 years of PTC subsidies going to wind turbine plant owners who have begun construction of their turbines in calendar year 2013. 

The PTC provides owners with 2.3 c/kWh that the wind turbines generate over the next ten years, which is worth about 3.4 c/kWh in pre-tax income, as the PTC is applied after taxes. The Joint Committee on Taxation estimates that just the one year extension will cost American taxpayers over $12 billion over 10 years, for wind turbines with a construction start (not a service start) during 2013.

Integrating Wind Energy to the Grid

Various wind energy promoters, such as the AWEA, NREL, et al, maintain integrating variable wind energy to the grid is similar to the minute-by-minute demand variations grid operators have had to deal with for decades. It is clear from the below report, this is not the case.

The report, dd November 2013, was jointly prepared by the North American Electric Reliability Corporation and the California Independent System Operator Corporation.

http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC-CAISO_VG_Assessment_Final.pdf 

Comparison to Other Technology Costs

According to the EIA, the levelized cost of energy from an:

- advanced NG combined cycle plant is $65.6/MWh

- advanced coal plant is $123/MWh

- nuclear plant is $108.4/MWh

http://www.eia.gov/forecasts/aeo/electricity_generation.cfm 

The assertion made by the AWEA wind energy is becoming cost competitive with energy from other sources is not the case, based on these more-inclusive levelized cost estimates.

Wind Turbine Plant Energy Densities; W/m2

Wind turbine plant energy densities are less than 2 W/m2, as measured at the wind turbine, less energy losses to transmit the energy to the user. Here is an offshore example.

Offshore Example: The Anholt offshore wind power plant has 111 Siemens wind turbines, 3.6 MW each, for a total of about 400 MW, on 88 km2, 14 meter deep water, capital cost $1.65 billion; inaugurated on September 3, 2013; energy density = 400 MW x CF 0.40/88 km2 = about 1.82 W/m2; the CF of 0.40 as measured at the wind turbine is assumed, less energy losses to transmit energy to the user.

http://www.pennenergy.com/articles/pennenergy/2013/09/denmarks-largest-offshore-wind-power-farm-is-inaugurated.html

Onshore Example West of Chicago: Onshore wind plants west of Chicago have an average CF of about 0.38, as measured at the wind turbine i.e., about 0.38/0.40 x 1.82 = 1.73 W/m2, or 1.55 W/m2 at a CF of 0.34.

 

Comparison of Areas Required; Nuclear Plants vs. Wind Turbine Plants 

According to Forbes, a power company in South Carolina is investing about $11 billion to construct two 1,100 megawatt nuclear reactors on about 1,000 acres. Production = 2 x 1,100 MW x 8,760 hr/yr x CF 0.9 = 17,344,800 MWh/yr.

Wind turbine capacity, MW, required to produce the same quantity of energy: 17,344,800 MWh/yr/(8,760 hr/yr x  CF 0.34) = 5,824 MW, say 6,000 MW to account for units being out of service for scheduled and unscheduled outages.

About 2,000 wind turbines, 3 MW each, 459-ft tall, 373-ft diameter rotors, CF 0.34, properly spaced to minimize airflow interference, would be required to produce the same quantity of energy, but it would be VARIABLE energy requiring OTHER generators to be more hours in inefficient part-load-ramping mode for back-up/balancing the wind energy, using more fuel/kWh and emitting more CO2/kWh, thereby partially offsetting what wind energy was meant to reduce.

Land area required = 6,000,000,000 W/(1.55 W/m2) x 1 acre/4047 m2 = 956,503 acres, or 1,495 square miles. The land can be used for agriculture, but any people living within 1.25 miles, or 2 km, from such wind turbines will find their quality of life, health, and property values adversely impacted. Animals, especially birds and bats, will also be adversely impacted.

Conclusions

According to the American Tradition Institute, there are numerous hidden costs to wind power, including the cost of back-up power, the cost of extra transmission, and the cost of favorable tax benefits. And, the assumption of a 30-year life used in government calculations for wind power is optimistic, based on reports from European countries regarding the useful service lives of their wind turbines.

Including these hidden costs in calculating the cost of wind energy increases its cost by a factor of 1.5 or 2, depending on the power system that is used as back-up. The Institute calculates that ratepayers are paying an extra $8.5 to $10 billion a year for wind energy compared to natural gas-fired generation, and this will only increase as more capacity is added. Add to this the more than $12 billion that the American taxpayer is paying for the ‘one-year’ extension for the PTC, and one can see that the wind industry is a boondoggle at the expense of taxpayers and ratepayers, that is making the US economy less competitive.

References:

Wall Street Journal, Renewable-Energy Tax Breaks Pass Despite Headwind, January 1, 2013, http://professional.wsj.com/article/SB1000142412788732363550457821579005...

American Tradition Institute, The Hidden Costs of Wind Electricity, December 2012, 

http://www.atinstitute.org/wp-content/uploads/2012/12/Hidden-Cost.pdf

Energy Information Administration, Levelized Cost of New Generation Resources in the Annual Energy Outlook 2012, July 12, 2012, 

http://www.eia.gov/forecasts/aeo/electricity_generation.cfm

The Hill, Issa takes aim at revised wind credit, January 2, 2013, 

http://thehill.com/blogs/e2-wire/e2-wire/275301-issa-wind-power-credit-of-serious-interest

Forbes, Why It’s the End of the Line for Wind Power, December 21, 2012, http://www.forbes.com/sites/christopherhelman/2012/12/21/why-its-the-end...

Energy Tribune, Wind Turbines ‘Only Lasting For Half As Long As Previously Thought’, January 2, 2013, http://www.energytribune.com/69566/wind-turbines-lasting-for-half-as-long

OECD Report on Wind Energy Costs

http://www.oecd-nea.org/ndd/reports/2012/system-effects-exec-sum.pdf

Energy From Wind Turbines Actually Less Than Estimated?

http://theenergycollective.com/willem-post/169521/wind-turbine-energy-capacity-less-estimated

Wind Energy CO2 Emission Reduction Less than Claimed

http://theenergycollective.com/willem-post/89476/wind-energy-co2-emissions-are-overstated

http://theenergycollective.com/willem-post/310631/more-realistic-cost-wind-energy