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Wind power now CHEAPER for US retail consumers

by Jerome a Paris Sun Dec 11th, 2005 at 08:59:26 AM EST

Via World Changing, this great tidbit noted by the Dept. of Energy's Green Power Network:

Green Pricing

November 2005 - Utility customers participating in green pricing programs that offer some form of protection from fossil-fuel price changes are finding that their green power premiums are shrinking or even turning negative. For example, as of November 1, Colorado customers participating in Xcel Energy's Windsource program are paying 0.66¢/kWh less for wind energy than for "regular" electricity because of an increase in the utility's energy cost adjustment (ECA). Since the ECA announcement, Xcel has sold out of its remaining available wind energy supply and has established a waiting list for new program signups.

(Go to original article for links to all the individual utilities and their programmes)

In Oklahoma, OG&E Electric Services customers purchasing the OG&E Wind Power product now pay 0.13¢/kWh less for wind energy than for traditional electricity and customers of Edmond Electric's pure&simple wind power program now pay 0.33¢/kWh less. Both utilities adjust their fuel charge monthly. Finally, in September, Austin Energy announced an increase in its fuel charge, which will bring the rate for its most recent GreenChoice product offering to near parity with the standard electric rate.

The great advantage of wind is that its cost of production is VERY predictable. You need to spend a significant chunk of money upfront, but after this, the production costs are very low and extremely predictable (technical maintenance, replacement of some part after a number of years, full stop).

You cost over the long term thus depends on the financing terms you can get to cover that initial investment and "spread" it over a number of years. Typically, it is possible today to get 15-year financing for that upfront investment.

With current prices for turbines and ancillary equipement (about $1m for 1MW as a rule of thumb, a bit more currently because of the ongoing boom in demand in the USA), and depending on the wind available at your site, your initial investment will cost about 3-4 c/kWh in debt repayment. Add to that approx. 0.5c/kWh in operatiing costs (increasing over the years to 1c/kWh), and you get power that will cost you 3.5-5c/kWhwith absolute certainty over the next 15 years, and much less after that (turbines are considered to have at least a 20-year life).

Coal-fired plants generate 2-3c/kWh power in today's conditions, but they are sensitive to coal prices (which doubled in the past year), and they could (and should) be hit by carbon taxes which will increase their price.

Natural gas-fired plants, the great new thing of the industry in the late 90s, used to have 3c/kWh costs as well, but that was predicated on 3$/mbtu gas. With natural gas currently at 14$/mbtu, and not currently expected to go below 7$/mbtu in the next 5 years, gas-fired plants are currently providing 6-8c/kWh power.

As I explained in an earlier diary, gas-fired plants usually being the marginal producers, they effectively set the level of wholesale prices for electricity, which have thus increased, slowly bringing retail prices up with them.

Until recently, the expectation of long term wholesale electricity prices arouns 3c/kWh made wind power uncompetitive, thus requiring a support mechanism, the PTC, to make it possible for investords and lenders to put long term money in that sector. And the 1.8c/kWh for 10 years provided by that taw mechanism have been enough (when available, which it was with irregularity in recent years) for the industry to be financed and to develop. Despite current high prices, banks are not yet willing to bet on such prices remaining high for 15 years, and thus still requite the support of the PTC to provide finance, and it would still kill the industry to do without it for now. (Disclaimer - yes, I work in banking and I finance wind farms, so this may sound self-interested, but (i) I don't work in the USA and (ii) it's still true). But eventually it may become unnecessary - basically as soon as utilities decide that they are willing to take that risk and sign fixed price purchase agreements with wind farms at high enough prices - like 5c/kWh - prices which, being fixed, will end up being very cheap for the utilities if the alternative is 8c/kWh gas-fired.

The gist of all this is that there is no rational reason today not to promote wind power today - it will be the most economic source of power in the long term - it already is in the short term.

And I have an additional bit of good news. The International Energy Agency, hardly a loony green outfit, has just published a new report (Variability of Wind Power and Other Renewables (pdf), which basically says that the impact of the  intermittent nature of wind power on grids has been overestimated and can be managed reasonably well with well-known technical solutions.

That means that investing in wind power will NOT require additional investment in gas-fired or coal-fired standby capacity to cover times of low production - these can easily be managed by the grid.

As the issue of birds inevitable pops up each time I write about wind power, I will refer you to previous discussions of this topic:

Wind Power - Impacts on Wildlife and Government Responsibilities for Regulating Development and Protecting Wildlife (pdf)  from the GAO.

This diary summarises a few scientific studies and quotes the Royal Society for the Protection of Birds on the topic:

Wind power: birds, landscapes and availability (I)

Other discussions on birds, with various sources:





The conclusion is that, while the wind farm in Altamont, Ca has killed a number of raptors, and care should be taken in all cases to site windfarms away from migratory pathes and other potentially hazardous locations for birds, the overall impact of wind farms on bird is extremely low.

Overall, wind power is cheap, reliable, and mostly harmless. These things cannot all be said of all the alternatives, so wind deserves to be promoted a lot more than it currently is - and it will actually be profitable!

Great diary! I have one question:

Typically, it is possible today to get 15-year financing for that upfront investment.

As just the expert to ask, could you tell more about this? The figures I read about were only 5 to 10 year credits for wind power as typical - tough, these were numbers in Central Europe, and years ago.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Dec 11th, 2005 at 09:12:13 AM EST
Yes, 15 year is typical; some deals now even go further. The main risk is a change of the regulatory framework, so it's easier to do such loans in stable countries with strong political support for subsidies to renewable energies, or with a strong legal framework for the feed-in tariffs /contracts. Before the accession, I am actually amazed that anyone would offer 10 year finance to anyone in Central Europe - the framework was simply too unpredictable.

Now it's likely to happen as legislation for renewable energy is put in place.

In countries where you have market mechanisms (selling power on the market, plus "green certificates" for renewable power that can be sold to conventional power producers that need to buy predefined quotas), financings will usually be shorter because the price risk is much higher, and much more difficult to assess with these nascent and untested markets (for green certificates, I mean)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Dec 11th, 2005 at 09:48:21 AM EST
[ Parent ]
Finally, as each renewable energy technology fluctuates over a different time-scale, important gains from the complementarity of these cycles can be achieved.

Wow, now even the IEA recognises this!

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Dec 11th, 2005 at 09:18:50 AM EST
There is still a lot of NIMBY (not in my back yard) resistance in the US. There have been fights in upstate NY where the only thing in the area has been failing dairy farms. There is the big fight over placement off the coast of Cape Cod as well as Long Island, even though the windmills will be several miles out to sea and will appear quite small on the horizon. Even noted environmentalist lawyer Bobby Kennedy Jr. has fought this since it will be seen from his family's compound.

It seems that in Europe this is not such an issue. Perhaps someone has some opinions on why this is?

The few wind farms I've seen in the UK and in the Appalachian Mountains in the US have seemed restful to the eye rather than intrusive. So I don't understand the resistance. Perhaps the local developers just aren't offering enough in the way of financial incentives to the localities (ground rents, etc)?

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sun Dec 11th, 2005 at 10:05:34 AM EST
The funny thing is that NYMBY people should ask just the people who already have wind farms in their backyards.

Back in 2003, this was done in a Mori poll in Scotland. See the press report or the quastionnaire (pdf!). A small sampling of the result:

A total of 1,810 adults aged 18+ were interviewed by telephone between February 27 and March 18 this year. All respondents lived within a 20 km zone of the windfarms. The survey obtained results that are representative of people living within three zones (up to 5 km of a windfarm, 5-10 km and 10-20 km), and are representative of people living within 20 km of each of the ten windfarms...

  • Just five people (0.3%) spontaneously mention windfarms as a negative aspect of their area.

  • Three times the number of residents say that their local windfarm has had a broadly positive impact on the area (20%) as say that it has had a negative impact (7%). Most people feel that it has had neither a positive nor a negative impact.

  • People who lived in their homes before the windfarm was developed say that, in advance of the windfarm development, they thought that problems might be caused by its impact on the landscape (27%), traffic during construction (19%) and noise during construction (15%). By comparison, since the windfarm development, only 12% are concerned about the impact on the landscape,, 6% say that during construction there were problems with additional traffic, and 4% say there was noise or disturbance during construction .

  • There is substantial support for the idea of enlarging existing windfarm sites among those who live close to them, particularly if the increase in the number of turbines involves the addition of no more than 50% of the existing number. A majority (54%) would support an expansion of their local windfarm by half the number of turbines again, while one in eleven is opposed (9%). Support drops somewhat if the proposal is to double the number of turbines. In this case, four in ten would be in favour (42%) and one in five (21%) would be opposed.

  • People living closest to the windfarms tend to be most positive about them (44% of those living within 5km say the windfarm has had a positive impact, compared with 16% of those living 10-20km away). They are also most supportive of expansion of the sites (65% of those in the 5km zone support 50% expansion, compared with 53% of those in the 10-20km zone).

  • Similarly, those who most frequently see the windfarms in their day-to-day lives tend to be most favourable towards them (33% of those who see the turbines all the time or frequently say the windfarms have had a positive impact on the area, while 18% of those who only see them occasionally say the same).

  • While many say that they feel that nuclear, coal and oil generation should be reduced, clear majorities favour increasing the proportion of electricity generated through wave (69%) and wind energy (82%).

  • ...few are dissatisfied with the consultation by the developer (11%), with most expressing neutral views.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Dec 11th, 2005 at 11:26:36 AM EST
[ Parent ]
There is the big fight over placement off the coast of Cape Cod as well as Long Island, even though the windmills will be several miles out to sea and will appear quite small on the horizon.

Yeah, this is how small:

...and this is in sunny weather with a teleobjective. (This is the Horns Rev off-shore park in Denmark.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Dec 11th, 2005 at 11:31:31 AM EST
[ Parent ]
I realize that is taken with a teleobjective, but I could certainly see why someone might object to having their previously pristine ocean view changed to that. I do find a certain appeal in the sight of the turbines, but it is a clearly industrial landscape and my liking for it isn't really different from my fond memories of sitting in my undergrad library carrel staring out at the silhouette of a mothballed old power plant along a bay shore.
by MarekNYC on Sun Dec 11th, 2005 at 04:00:28 PM EST
[ Parent ]
NIMBY has been amazingly strong in France as well, and people have been using the most specious arguments against wind farms (it's "industrial". The promoters will make money. It's not enough to stop nuclear, so why bother? The mayor has bee nbought by promises of a few thousand euros of rent or taxes. It's ugly. etc...)

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Dec 11th, 2005 at 12:30:21 PM EST
[ Parent ]
This is great news.  Thanks for the heads-up, Jerome.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sun Dec 11th, 2005 at 03:08:04 PM EST
Why can't they build huge wind farms so far out to see that they are invisible from the land. Cost? Violation of international waters? Anyway I assume its not feasible.

In the UK the anti-windfarm lobby dresses up its opposition as 'environmentalism' in a clever piece fo framing (the farmer-protection lobby uses the same trick). The noise is also raised as an objection.

Perhaps one way around this is micro-generation, can a small wind turbine and solar panel fuel my house - I watch TV alot and like listening to loud music.

by lemon on Mon Dec 12th, 2005 at 09:55:27 AM EST

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