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  • Why Wind Power Has Low Economic Value

    Michael Goggin, manager of transmission policy at the American Wind Energy Association (AWEA), posted a second response to my report “Wind Intermittency and the Production Tax Credit: A High Cost Subsidy for Low Value Power.” As before, Goggin does not respond to my analysis, leaving my main point unanswered.

    In my report, I analyzed four years’ of hourly production and load data and found that wind generation followed an uneconomic pattern, producing the most electricity when least needed and the least electricity when demand and market prices were highest.

    Each megawatt-hour (MWh) of volatile and intermittent wind generation costs more to “integrate” into the electric grid than traditional fossil-generating and nuclear-generating resources, whose output is not subject to the vagaries of the weather. Thus, in addition to the wind production tax credit (PTC), consumers and taxpayers are also paying other hidden costs to support wind.

    Goggin states that integration costs for traditional resources are far higher than wind. That may be true in total: In 2011, wind generation accounted for about 3 percent of total generation in the U.S., whereas fossil and nuclear generation accounted for 87 percent. But on a per-MWh basis, wind is far more expensive to integrate onto the power grid.

    There is no disagreement that the cost to integrate wind power increases as the amount of wind capacity increases. Goggin cites the 2011 Wind Technologies Report, which reports that integration costs are based on installed wind capacity, not energy production, as pictured in the chart on page 64. That same chart also shows estimates of wind-integration costs between $1/MWh and $12/MWh. Goggin uses the lowest estimate, which is based on data that is almost a decade old, when wind capacity was far lower and therefore with less integration expense.

    This report estimated average integration costs for all resources at $2/MWh. Thus, Goggin asserts that it costs half as much to integrate intermittent wind on a per-MWh basis than conventional generation. But this defies logic and current experience.

    Integrating resources whose output is volatile is more costly than integrating resources whose output can be scheduled as needed. Page 27 of the 2011 Eastern Wind Integration Study states that “with large amounts of wind generation, additional operating reserves…are needed to support interconnection frequency and maintain balance between generation and load.”

    Goggin ignores the main point of my analysis when he states that wind’s geographic dispersion “makes their aggregate electricity production less variable and more predictable.” But not according to an analysis of wind forecasting errors published in the April 2012 Electricity Journal, which I referenced.

    Moreover, the alleged benefits of geographic dispersal of wind that Goggin trumpets come with a huge cost from the additional transmission lines needed to deliver geographically dispersed wind to load centers.

    So my question still remains: Why should U.S. taxpayers be forced to spend billions on subsidies for such a low-value generation resource that has already been heavily subsidized for 35 years? It began with the 1978 Public Utilities Regulatory Policy Act and has continued for 20 years with the PTC and mandated purchase requirements under state renewable portfolio standards. Today, the value of the wind PTC alone is greater than the average wholesale price of power in many markets.

    If wind is as beneficial and low-cost as Goggin and AWEA claim, why does AWEA insist that wind continue to be subsidized through the PTC? Goggin does not say.

    Posted in Featured [slideshow_deploy]

    7 Responses to Why Wind Power Has Low Economic Value

    1. Johnny says:

      follow the money, T Boone Pickens is invested in wind energy, that us why gas prices r high so to insure that he makes a profit. even thou wind is not and never will be a dependable souse of energy.

    2. edwardgallagher says:

      If I chose to use wind to charge batteries that would keep livestock water defrosted that would be an efficient use, or for charging batteries on boats at marinas. Attempting to use intermittent power from windmills to feed the grid is so transparently idiotic that it is hard to understand how its proponents can do so with a straight face.

    3. Spiritof76 says:

      The problem here is lack of basic understanding of wind power production and demand. Constantly quoting the installed power as available power in the case of wind is ludicrous. Wind energy production is at about 15 % of the name plate rating because of inability to control the source. At the same time, the demand for power follows a life pattern and has nothing to do with when the wind blows. The stability of power available at the grid requires readily available and reliable fossil power plants to satisfy the demand. That scenario can not be altered how many studies are done or how many data points are obtained. Subsidizing and promoting wind energy will not make it a winner. It is a loser. The best thing is to remove all subsidies. Wind energy will disppear just like those so many calm days we experience. I bet this guy Goggins is making a pretty good living promoting that which is a loser just like the snake-oil salesman in a carnival.

    4. pete says:

      Should have spent the money on security for the state department in libya.

    5. Why can a wind farm in WV kill hundreds of migratory birds repeatedly and face no fines, but an oil production facility in the mid-west is fined $30,000 for killing a few dozen birds?

    6. Jimmy Glotfelty says:

      I think Jonathan Lesser missed the point on the value of a PTC and wind.

      First of all, a PRODUCTION tax credit (PTC) only provides a credit when electrons are PRODUCED…as long as the cost of producing wind electrons is less than other forms of energy, then there is value to consumers.

      Secondly, the PTC actually reduces the cost of energy paid for by consumers…under the industry norm, a 20 year Purchase Power Agreement with the PTC reduces the actual cost paid for by the load serving entity..this is good for the consumer…and as Alabama Power found.."wind from the plains states puts
      downward pressure on retail rates" cite: alabama power rate case

      Third, it seems that everybody has forgotten about the integration cost for nuclear plants back in the hey day…almost every nuclear plant that was built also had to build a pumped storage facility with it to increase load at night…OK…pump water uphill as a load…this was a stretch then..but not the flexibility provided by pumped storage is great to the system.

      Finally, a good economist can find an economic reason to blast any resource in this day and age. We need begin a chorus that supports all domestic energy resources as s system to lower the costs of energy for all Americans.

      Jimmy Glotfelty

      PS: I am still eagerly awaiting the Heritage blog piece that calls for and end to the PTC for Clean Coal…when can we expect that one…

    7. jmdesp says:

      Also his "fact" 2 is a complete display of ignorance about how national electric grids actually works.

      The way this is truly handled in all countries is extremely far from being as expensive as he described, and can be described by asking all power plant to run at most at 95% of their max power, so that when one goes out, you can almost immediately ask 20 others to go from 95 to 100 power to compensate the loss, which is extremely fast as it's only a minor relative variation of their power.
      And next you start an off-line, more expensive unit to get your initial margin back again.

      Nuclear plants don't have as high load factor in all countries as in the US, *but* that is almost only due to more frequent and longer planned maintenance period. Unplanned shutdowns almost never happens more than 2% of the time, which tends to be a bit better than both CCGT and coal. I don't have really reliable info about that, but I've seen some anecdotal data that suggests the reliability of the CCGT's that are supposed to assist wind power is not always very good.

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