Last week, Xcel Energy announced a multi-state wind capacity project, anticipated to be the largest in the United States. Spanning seven states, the project covers eleven new wind farms and would generate 3280 MWs at a cost of $3.5-4.4 billion. In its announcement, Xcel emphasized the cost-savings attached to wind power, arguing that it would save Xcel customers in the Midwest $7.9 billion over thirty years. This, rather than the environmental benefits of renewable energy, drove the company’s mission statement: wind was cheap, not just clean.
Increasingly, this is a line of argument companies involved in renewable energy are deploying, finding that it gets better traction from skeptical consumers and fidgety investors. Existing tax credits, most notably the production tax credit (PTC) that keeps costs low, as well as a tax rebate per kilowatt hour. These help wind compete with natural gas as a cheap source of electricity and has driven the surge of utility interest in harnessing wind power, despite the much-touted promises of President Donald Trump to bring back American coal.
Moody’s Investor Services now estimates that the falling costs of wind power directly threatens 56 GW of coal power, out of 87 GW surveyed. Moody’s report estimates the MW-hour cost of wind in the Great Plains region at around $20, while coal comes in at $30.
Total U.S. wind energy capacity grew 19 percent in 2016 and reached 5.5 percent of total generating capacity, outstripping hydroelectric as the nation’s largest source of renewable energy. Much of the surge in added capacity came from power companies and utilities eager to take advantage of the PTC before it is cut from 80 percent to 60 percent.
The author of the report noted that it was economic, not environmental logic that is driving utilities to adopt wind power, as Xcel plans to do. “Yes, it’s good for the environment and the consumers benefit from having cleaner power at a cheaper price, but at the end of the day, it is pursued by the utility because it is much more cost-effective.” Related: Self-Driving Cars May Just Be the Start
The PTC is already set to decline to 20 percent by 2019, and will be phased out after that. The decision to renew the credit in 2015 largely drove the current rush of investment. Those economic arguments tend to emphasize short-term gains, as the federal government has recently indicated it plans on eliminating many of the previous administration’s clean power regulations. That would threaten wind power’s cheap appeal and cause it to lose its competitive edge over natural gas.
But the surge of investment in wind power may spur on additional growth, especially if the price of natural gas increases (as the EIA predicts it will, by 2018). Berkshire Hathaway Energy Renewables, an energy developer owned by Warren Buffett, purchased a 400 MW project in Nebraska, while another Buffett company, MidAmerican Energy, bought 551 MW of wind online in Iowa, a state with the second-largest total wind capacity, 6,917 MW according to the American Wind Energy Association.
With these investments, Iowa expects $3.6 billion pumped into nearly 2000 MW of wind power capacity between 2017 and 2019. The interest of investor-owned utilities is matched by public utility companies in Iowa, Minnesota, North Dakota and elsewhere. Improving turbine technology is expected to further drive down costs, while innovation (such as new offshore projects in North Carolina and New York) will display wind power’s versatility.
It’s enough to make proponents of wind power optimistic, at least for now. There are reasons to believe that wind, even without the advantages of the PTC, can out-compete coal and even natural gas. Moody’s estimates that without the tax credit, wind costs increase to about $40 per MW hour. But further improvements in technology could drive that cost down.
Utilities like it because it protects customers from volatility in the fossil fuels markets. These arguments and the chance to add capacity at little cost in the short term, rather than the environmental advantages, are the main justifications for putting up new turbines nationwide. Related: Mexico Sees Its First International Offshore Drilling Success
For now, those justifications are enough to attract investors like Xcel and Buffett. But long-term, competition with natural gas for the utilities market will be fierce, particularly if gas prices remain low. The effects of federal regulation and legislation from Congress could shift advantages from renewable energy to coal. The EIA estimates that without tax credits, the costs of constructing and maintaining equal capacity wind power and natural gas power plants are nearly the same: $58.50 per MW-hour versus $56.40.
Right now, investing in wind power makes sense for utilities, allowing them to downplay the environmental arguments. But if the economic rationale for clean energy begins to wane, it’s possible that rhetoric around wind, as well as solar power, could shift once more.
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By Gregory Brew for Oilprice.com
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Conversely, make sure you have those wind subsidies in the bag, before you start building. But that seems to be much more straightforward - especially as the built period is the capital intensive time of any wind project.
Of course the other piece for consideration is, that the EIA has traditionally underestimated renewables and their growth including the cost reductions they experienced to date. So if we are at parity today, tomorrow wind might be plan cheaper.
That's especially true for solar (and also for wind) whereas coal can only get more expensive going forward as CCS and other "clean coal" shenanigans will not be for free.
Overseas data seem to indicate wind turbines have lifetimes of about 15 years. Then you have a piece of toxic junk to contend with. A 1 MW wind turbine may only generate 40,000 MW-hrs. over its lifetime. If the cost of the turbine is $2000 per kw, the cost of the electricity is $50 per MW-hr. This is not competitive with coal or natural gas.
Eliminate the subsidies for wind and solar and let them compete on the same basis as fossil fuels. The subsidies cause electricity rates to increase every year, far more than they would without them.
The comment about natural gas prices rising over the coming years isn't indicated in the futures prices, which show zero increase over the next 20 years.
If an Obama type pours oceans of money on wind gen and sends the bill to the taxpayer, not the guy who pays the light bill, then utilities are rational to buy wind mills. In 2015, when the gravy train was ending, it was estimated that 97% of the wind gen industry would vanish. But Voila! The give-aways continued, until next time. If Trump kills them, wind gen dies. If he pours gravy on coal, and gets it through a dysfunctional Congress, wind gen dies.
The secret of choosing a power plant today is to build it out of paper mache. Anything that lasts more than a few years is a loser. Investors, interested in energy, should play the ponies. Each has one horse power.
This is called picking winners and losers.
The certain loser is the taxpayer; a head of household owes about $250,000 due to this level of governance.
While it is almost an inexhaustible source it has real limitations. If the wind blows too little no energy is produced, blows too much it over speeds the bearings the windings etc and if there is no immediate demand they don't produce as it waste the life of the equipment. So far storage, transmission lines and people are the key to maximizing renewable energy. A few years back Texas which is close to being power neutral (doesn't import or export power) had a month without sufficient wind to operate, consequently had to buy power on the spot market at a huge loss.
Many thoughts for storage include using exhausted natural gas caverns to store wind energy as compressed air then use it to turn turbines later when electricity is needed. Caverns are already proven to be airtight and didn't have to be built. A theory is to heat the compressed air and produce 3-4 times initial value as well as some are trying to produce anhydrous ammonia with wind power.
As far as useful life, we ( power company owns the towers )have 8 units on 1 of my families farms in the large Minnesota wind farm. After just 7 years of a 20 year project the utility company is replacing original units with a unit 8% more productive but keeping the same base. Almost the same cost as roads for construction, crane removes and replaces the power unit and blades. Power companies are responsible to remove the complete system including 150-250 cubic yards of concrete anchored in the ground after 20 years.
Drawbacks are makes planting more difficult as large row planters, cultivators and combines have to negotiate around them. We also have Ethanol and BioDiesel plants here in the midwest where fossil fuel transports seeds, plants, fertilizes, harvests, transports, processes, and transports to the final location. It costs money and BTU's to convert natural gas to liquid and convert back to gas. The greenest way to trans port fuel is by pipeline which is how most of the fuel and water are moved on the east and west coasts, 100's of pipelines. Millions of people are at risk on the west coast as the earthquakes happen frequently breaking lines and polluting. None of the politicians seem to worry bout millions of people with that exposure.
Some people don't like the looks of them and the do gooder Kennedy's bunch don't want them off the east coast as Muffy's view will be obstructed. We can harness the ocean's current as well. Renewable has be located where the best source is located. For the foreseeable future fossil fuel be the power of choice and on standby when needed. Some super wealthily people such as Warren Buffett, Kennedy family and George Soros will buy all the fossil fuel plants at pennies on the dollar just as a backup power. When the masses need the power will sell it to us "it not about want it costs, its how much you got$$$$?"