The Economic Advantages of Running A Wind Farm

Over the past few years, much misinformation has been distributed by fossil fuel interests wrongfully denigrating the value of wind and solar energy. Outrageous claims have included the notion that wind and solar energy contribute to global warming. That the energy sources are uneconomical and overly expensive. That they require fossil fuels to support them because they are intermittent. That they can never contribute more than marginal capacity to the grid. And that operators and owners cannot profit from these energy sources.

In this article, we will focus on wind energy, debunking these false claims and demonstrate that wind energy is far more valuable, flexible and resilient a resource than coal, oil, or natural gas.

Zero Cost Fuel

All energy sources require infrastructure to harness the fuel. Billions every year are spent on oil and gas rigs. Coal mining requires massive digging machines and processing equipment. And all forms of fossil fuel require generators to turn fossil resources into electricity or mechanical energy.

For wind energy, this process is simplified. Energy is generated at the source. In short, a turbine is a mining, transportation and generation operation all wrapped into one. From the point of view of a utility, this vastly simplifies the process of electricity generation by removing the fuel extraction and the fuel transportation operation in one step. Wind generators do not require a constant train of freight filled with coal or natural gas to keep their turbines spinning. All that is required is, well, wind.

The result is that wind facilities free themselves from the burden of having to manage fuel costs. And since fossil fuels can be very volatile, this liberation makes them much more stable economically. A wind facility that is competitive with fossil fuels today, will become ever more profitable over time. This is due to the fact that the sunk cost of construction and maintenance are the only two cost-sets wind operators need to worry about. And because these costs can be planned for and forecast, the potential for risk is drastically reduced.

In many cases, levelized costs for wind turbines assume a 20 year life expectancy. However, as an infrastructure, these turbines have the potential to last 30, 35, 40 years or more. Well constructed and maintained turbines may come close to tripling initial life expectancy. In these cases, wind power becomes vastly less expensive than fossil fuels. And all these benefits come from having zero-cost fuel available at point of source.

Rising Capacity Potentials

Fossil fuel-funded articles have often derided wind for its intermittency, noting that it would be unwise to have wind contribute more than 5 or 10 percent to any power grid. However, this flies in the face of current realities on the ground. Iowa, for example, now receives an average of 19 percent of its energy from wind generators. North Dakota receives 22 percent. This is not name-plate capacity, but electricity flowing to grid. Colorado and Oklahoma now also receive more than 10 percent of their electricity from wind.

Overseas, the potentials have also proven higher than warnings may have indicated. In Denmark, the entire country received more than 26 percent of its energy from wind in 2011. Portugal, Spain, and Ireland each produce over 18 percent of their electrical energy through wind.

Capacity factor, the difference between nameplate capacity and amount of energy generated has remained at around 30 percent. New turbines have also become more efficient. And systems using higher towers and larger blades are able to tap steadier winds at higher levels. But many regions without ideal wind patterns have seen new wind development. The fact that capacity has not fallen, however, shows that advances in technology can continue to expand the area in which turbines can operate economically while further enhancing returns in regions with more ideal wind resources. Capacity factor would certainly rise for the US should we begin to build more wind farms off-shore, where winds are both stronger and more reliable.

Because fears about limited capacity and intermittency haven’t risen to the level of hype, many countries are now exploring expanding wind production further. Denmark, for example, is pushing to have 50% of its energy provided by wind power before 2020. When one considers that 37% of US energy is currently provided by coal, a 50% contribution from wind to Denmark would render most concerns about the ability of this renewable source to overcome intermittency and capacity problems moot.

Intermittency: More Bark Than Bite

As alluded to in the paragraphs above, many states and countries have already been able to overcome intermittency challenges to establish wind generation contributions to total energy as high as 26%. Overbuild, diversification of the power grid, flexible grid management, multiple regions operating wind turbines, and improvements in turbine technology all aid in the management of wind energy. Some of these practices were already in place for traditional utilities, so the changes haven’t been as disruptive to operations as first expected. Other new practices increase the overall resiliency of the grid and the reliability of power sources as well.

A common claim by renewable energy detractors has been that wind power facilities require an ‘alarming level’ of stand-by fossil fuel generation capacity. Nothing could be further from the truth. In fact, there is not one documented case of a fossil fuel plant being idled for the single purpose of substituting for wind systems. Because of grid overbuild, idle sources often exist and these can be brought on line as need be for any emergency. The same is true with wind and solar resources as it is for fossil fuel resources.

Most utilities hold to the standard of planning for weather events and managing wind’s capacity factor. And this has served to make wind far more reliable than previously expected.

More Economic Storage Becoming Available

A recent article in Wired Magazine highlighted a revolutionary new energy storage technology. Eccentric Genius Danielle Fong has invented a revolutionary compressed air energy storage device. The device is currently being produced and sold by Light Sail Energy. The Light Sail storage device overcomes the obstacles of previous compressed air devices by spraying a fine mist of water vapor into the compression chamber. Water stores far more energy than air, so the water/air medium allows for a much higher energy storage capacity by volume at much lower temperatures. And this drastically increases the efficiency of such energy storage while reducing costs. The result is the efficiency factor for Light Sail’s compressed air is 70 percent, roughly double previous compressed air storage systems ratings of 35 percent.

This storage technology advance provides utilities with a new tool to further erode the barriers posed by intermittency constraints.  It will also likely provide a basis for continued innovation in this area.

Costs Now Competitive With Fossil Fuels

Often, fossil fuel special interests will deride wind energy due to the fact that it receives a small degree of subsidy support from the US government. For these interests, this is the height of hypocrisy. For there are few interests within the United States as highly subsidized as the fossil fuel industry. Over the past decade, oil interests alone have received over $45 billion in subsidies. And despite record profits, the industry has deployed powerful lobbying groups to make certain they remain on the taxpayer’s dole year after year. Just last year alone, oil and gas interests received over $4 billion dollars in federal subsidies and incentives. This does not include the massive level of state and foreign interest support these industries receive.

On the other hand, wind energy does not enjoy similar support. Its subsidy program is reviewed most years and is sporadically included or excluded depending on political winds, economic pressure, and the whims of governing bodies. Last year, wind received $1.6 billion dollars in supports. But this year such funding may not materialize.

Despite the unevenness of federal support for wind energy, new wind installations for last year were 6.1 gigawatts, only second to natural gas installations. Furthermore, the cost of wind energy per kilowatt hour has fallen to levels putting it in the range of traditional power sources. Levelized costs for wind energy plants under construction are 96.8 dollars per megawatt hour. This is less than new coal, nuclear, and biomass. The only energy source that costs less for new installation is natural gas. However, natural gas includes a number of external costs including climate change, damage to water supplies via fracking, and through the burning of a resource that may have harmful health impacts (Marcellus Shale gas has been shown to be radioactive in a number of studies). And as mentioned above, these levelized costs assume turbine life-spans of 20 years, which with proper maintenance can be extended much longer.

Fossil Fuels’ High Risk of Volatility

One other point to consider is the fact that natural gas prices are now on the rise. Much drilling in gas basins has been put on hold as drilling companies struggle to maintain solvency. Just last week, ATP filed for bankruptcy after being unable to maintain operations under an ongoing regime of natural gas glut and low prices in the US. Drilling rigs have been shifted, instead, to oil. With so few rigs operating and with the depletion rates for the new fracked wells so high, it seems likely that prices will whip-saw back into a much higher range over the next few years. This volatility will likely reduce the profitability of natural gas generators and harm the prospects of any utility who is overly reliant on this resource.

Coal, now an international commodity, also suffers from similar problems. Sky-high demand has been cutting into profits for coal-burning facilities around the world. Further, requirements to reduce emissions of both carbon dioxide and the plethora of other toxic chemicals contained in coal are pushing prices even higher. The fact that new build wind is already less expensive than new-build coal should give a good idea as to trends in this area.

Electricity — Future Fuel for Ground Transport

One would not think that wind could compete directly with oil as a source of liquid fuel. But with the increasing availability of electric and hybrid electric vehicles, this is indeed the case. Utilities using wind energy can boast of the fact that they provide clean electricity to electric vehicles at a cost equaling about 70 cents per gallon. This is less than five times the cost of traditional gasoline, drastically belying the notion that oil is an economic fuel source. And with most electric and plug in hybrid electric vehicles able to make 99 miles or more on an equivalent gallon of electricity, the cost, in practice, is actually more than 15 times less even for a comparable ‘economy’ vehicle. Again, the removal of harmful externalities reduces climate change damage and health care costs as well.

Benefits For Stable Communities, Long-Term Growth

Overall, it is sad to see so much effort being spent in this country by interests bent on demonizing and destroying such a valuable new energy source. In short, these attacks harm not only those who would profit from this new energy source, but the health and well-being of the American people as a whole. Utilities, states, and municipalities falling prey to this harmful stream of misinformation will pay the price in increasing environmental and health costs to their communities and constituents. Increased costs for repairing electrical grids after major storm events. And increased costs for generating energy due to the inherently volatile and depleting nature of fossil fuels.

Links:

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

http://www.bloomberg.com/news/2012-01-26/u-s-wind-turbine-installations-rose-31-in-2011-awea-says.html

http://www.wired.com/wiredenterprise/2012/07/danielle-fong/

http://cleantechnica.com/world-wind-power/6/

http://arstechnica.com/science/2012/08/wind-accounts-for-one-third-of-new-energy-generating-capacity-in-us/

http://blog.ewea.org/2012/07/denmark-50-wind-powered-electricity-by-2020/

http://mediamatters.org/research/2012/05/25/myths-amp-facts-about-wind-power/183968

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