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Let’s calculate the true cost of wind power

Hat tip to Mary Kay Barton

Marc Brown — CT Mirror — October 5, 2013

It has been reported that Massachusetts’ utilities National Grid, Northeast Utilities and Unitil have negotiated power purchase agreements (PPAs) for 565 megawatts of electricity capacity from existing and proposed wind farms in New Hampshire and Maine that would provide electricity at wholesale rates of approximately 8 cents per kilowatt-hour.

These agreements were lauded by the Boston Globe, going as far as claiming that “wind power is now competitive with conventional sources.”  Eight cents per KWh is cheap for wind, especially when you consider that Cape Wind currently has PPAs with NStar and National Grid for 18.7 and 20.5 cents per kilowatt-hour (not including 3.5 percent annual escalators).

However, the average wholesale cost of electricity in New England for 2012 was less than 4 cents per KWh, according to the New England Independent System Operator (ISO-NE).  Furthermore, the 8 cents/KWh rate doesn’t reflect the costs of transmission upgrades necessary to integrate these projects into New England’s electricity grid.  At the request of all six New England governors, ISO-NE conducted a study which concluded “the cost of interconnecting 2,000mw to 12,000mw of wind power would be between $1.6 billion and $25 billion in transmission upgrades.”

Another problem with speciously declaring wind can compete with conventional power sources is the simple fact that wind has a number of hidden costs that aren’t reflected in the wholesale price. Wind generally receives one of two tax subsidies: (1) a $22 per MWh inflation-adjusted production tax credit (PTC) over the wind’s initial 10 years of operation, or (2) a 30 percent investment tax credit (ITC) against capital expenditures.  While these tax credits aren’t necessarily reflected in rates, they are borne by taxpayers as a way to subsidize ratepayers—or robbing Peter to pay Paul, except in this case Peter is Paul.

A 2012 study completed by the American Tradition Institute estimates the cost of onshore wind electricity to be between 15 and 19 cents per kilowatt-hour.  According to the report, wind’s principal benefit is to supply energy rather than capacity, which means that part of the cost of wind has to include the expense of maintaining and operating other generation to offset the intermittent nature of onshore wind farms.

The existing wind farms in Maine operate less than 25 percent of the time.  Basically, when it comes to wind and other intermittent resources like solar, ratepayers are paying for 100 percent of the wind PLUS 75 percent of the capacity in the form of backup generation.  Read full article, here….

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One Comment on “Let’s calculate the true cost of wind power”

  1. gds44 October 6, 2013 at 3:44 pm #

    Reblogged this on Gds44's Blog.

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