[Series header: On the Morning of October 15 the Institute for Energy Research in Washington DC released a report I’d written about the federal government’s wind power cost estimates. (Links available here.) Later that day Michael Goggin of the American Wind Energy Association, the lobbying organization in Washington DC that represents the wind energy industry, posted a response on the AWEA website: “Fact check: Fossil-funded think tank strikes out on cost of wind.” I’m considering points made by the AWEA response in a series of posts.]
Next in his response Goggin moves into a more detailed version of his claim my report “relies on old and theoretical data for the cost of wind, even though it had access to more recent real-world data.”
As I mentioned in an earlier post, I primarily draw on the Lawrence Berkeley National Lab’s 2012 Wind Technologies Market Report (WTMR), published in August 2013, and the National Renewable Energy Lab’s 2011 Cost of Wind Energy Review (CWER), published in March 2013. These two reports are the most recent publications in the federal government’s two long-standing research efforts examining the cost of wind energy. If this work isn’t current enough for Goggin, his complaint is with the national labs and not me.
The WTMR summarizes “real-world data,” while the CWER presents Levelized Cost of Energy (LCOE) estimates for wind power. The NREL’s LCOE estimate relies on data from the Berkeley Lab’s WTMR and is typically published a few months later. Since the Berkeley Lab’s 2012 report was published a little over two months ago, the NREL LCOE estimate update for 2012 likely won’t emerge for another few months.
My report focuses on these two recent government publications because they are the latest summaries from the two most thorough and complete research efforts on the developer’s cost of wind energy in the U.S., and because they are the source of the most frequently cited information on wind energy costs.
In the following I reply to remarks Goggin makes in the first half of his more detailed comments.
Goggin quotes from the WTMR, p. 50: “[T]he average levelized price of wind PPAs signed in 2011/2012—many of which were for projects built in 2012—fell to around $40/MWh nationwide…” Goggin wants this $40/MWh value to represent “all costs and benefits a utility faces with purchasing wind energy” and asserts it undermines the argument that wind power comes with hidden costs.
However, while the $40/MWh might represent the average contracted price of “all costs and benefits a utility faces,” (1) the WTMR clearly advises in the section of the report Goggin quotes from that the price data reported “do not directly represent wind energy generation costs,” and (2) to the extent government subsidies, regulations, and power market rules shift some wind power costs onto taxpayers, electric consumers, or other grid users, then there would be no reason to expect those costs to be reflected in the prices paid by utilities. As I pointed out before, “Cost and price are far from equivalent concepts.”
Goggin also cites wind power levelized cost of energy estimates produced by “Wall Street advisory firm Lazard,” which indicated unsubsidized wind power cost estimates ranging from $45 to $95 per MWh. The $45 per MWh represents a calculation for a wind resource having an impressive capacity factor of 52 percent–significantly higher than the current industry average near 33 percent and with similarly significant repercussions for estimated cost per MWh of power output. The $95 per MWh represents a wind resource with an anemic 20 percent capacity factor. An unweighted average of $45 and $95 would be $70 per MWh. I don’t see details in the Lazard report about accelerated depreciation, discount rate, or operating expenses, so it is hard to make a further comparison between it and my analysis.
Finally in this section of Goggin’s post, he quotes utility PR statements reporting that wind power is a low cost option for customers, and suggests wind power both brings average power prices down and helps utilities hedge against volatile fuel prices. With respect to utility PR, I’ll simply suggest public statements crafted by utility PR departments are probably not a reliable guide to recent research findings nor likely the best guide to public policy. Wind power can, as Goggin suggest, offer protection against fuel price volatility that fossil-fueled power plants will bring.
If, all things considered, wind power is a winner on a value-to-consumer basis, then great! I have nothing against wind power, it is just the bad policy I’m against. Let’s kill the bad policy and free the wind power industry from the uncertainty of Congressional budget politics.
Wind power is responsible from bringing down average prices in regional power markets, a consequence of subsidizing entry of generation with high capital costs but low marginal operating costs. I describe this effect in my report and note some of the consequences, but it is an important enough issue that I’ll address it in a separate post.
Coming next: In the second half of his detailed comments Goggin objects to my discussion of grid integration costs, indirect pollution effects, transmission expenses, and negative prices. I’ll do my best to respond.