Economics - Wind Energy: Renewable Energy and the Environment - page 258

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FIGURE 12.5 Estimated cost of energy for new power plants for generation of electricity.
farms has risen to $0.07-0.09/kWh in 2008. New power generation from other energy sources will
have similar cost increases for the same reasons.
Wind is also cheaper than other renewable sources of energy for producing electricity
(Figure 12.5) and is competitive with new fossil fuel plants. Wind is even cheaper than combined-
cycle gas turbines with natural gas at $6/mcf. The wind farm business is much like the oil and gas
business, except it is much easier to prospect for wind energy and the resource is nondepletable. As
externalities are added to fossil fuel costs, wind energy becomes the cheapest energy for generation
of electricity. Of course, wind cannot provide all the electricity because of the variability of the
resource. If cheap storage becomes available, that changes the market for all the different types of
new power plants.
From economics, mandates (legislation or regulation), or on a voluntary basis, there will be more
use of renewable energy. Traditional energy sources have an advantage in that fuel costs are not
taxed, while for renewable energy the fuel costs are free. The problem is the high initial costs for
renewable energy, and most people would rather pay as they go for the fuel.
In 2008, small wind turbines, 10 kW and smaller, in general, are not cost-competitive with elec-
tricity from the grid. However, if life cycle costs are used or if rebates are available, then they are
competitive in many situations.
Green pricing is now available from many utilities. The premium was around $0.03/kWh for a block
of 100 kWh/month; however, rate premiums continue to drop. In the United States, 2007 utility green
power sales exceeded 4.5 * 10 9 kWh, about a 20% increase from the previous year. Approximately
600,000 customers are participating in utility programs for green power.
Another major driving force for renewable energy is economic development and jobs at the local
or state level. That is because renewable energy is local: it does not have to be shipped from another
state or country.
The capacity of existing transmission lines and the curtailment of wind farms are major prob-
lems. The other major problem is that the wind resource is generally quite distance from major loads
and new transmission lines will have to be built. The questions with deregulation are: Who will
finance the construction and who will overcome the right-of-way problems?
The values of externalities range from zero (past and present value assigned by many utilities)
to as high as $0.10/kWh for steam plants fired with dirty coal. Again, values are being assigned by
legislation and regulation (public utility commissions). As always, there is and will be litigation by
both sides on external costs and who should pay for them.